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SCA/11051/2008 3/ 5 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 11051 of 2008
with
SPECIAL
CIVIL APPLICATION No. 11052 of 2008
==========================================
PATEL
SHAMBHUBHAI RAOJIBHAI - Petitioner(s)
Versus
STATE
OF GUJARAT & 2 - Respondent(s)
=========================================
Appearance :
MR
SHITAL PATEL for MR AJ PATEL for Petitioner(s) :
1,
MR APURVA DAVE, ASSTT. GOVT PLEADER for Respondent(s) : 1 -
3.
RULE NOT RECD BACK for Respondent(s) : 1 -
3.
==========================================
CORAM
:
HONOURABLE
MR. JUSTICE MOHIT S. SHAH
and
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: 15/10/2008
ORAL ORDER
(Per
: HONOURABLE MR. JUSTICE MOHIT S. SHAH)
Mr.Shital
Patel, learned counsel for the petitioners in both these petitions
submits that when small parcels of the petitioners’ lands were
acquired, after the possession was handed over by the petitioners,
the amounts of compensation were deposited after a long time, but the
income tax was deducted at source from amount of compensation with
interest in an illegal manner.
[2] The
particulars of the relevant amounts are as under:
S.C.A. No.
Claimant with LAR No.
Date of taking possession
Interest payable upto
Total interest payable from date of taking
possession
Income tax @ 10.3% [TDS]
1
2
3
4
5
6
11051/08
Patel Shambhubhai Raojibhai
LAR No.3811/99
28.10.1997
31.3.2008
64,534/-
6,647/-
11052/08
Merubhai Khumansinh & few
others
LAR No.619/93
26.11.1990
31.12.2004
13,745/-
1,473/-
[3]. Mr.Patel
relies on the decision of the Hon’ble Supreme Court in the case of
Rama Bai v. Commissioner of Income Tax, A.P., (1990)
181 ITR 400 = 1990 Supp. SCC 699, in support of his contention that
while applying the provisions of Section 194A of the Income Tax Act,
the interest amount is required to be spread over the
entire period for which the interest is calculated;
but respondent No.2 Officer has deducted income tax at source being
amounts of Rs.1,375/- and Rs.6,647/-, without considering either the
provisions of Section 194A of the Income Tax Act, 1961 and the
aforesaid binding judgement of the Hon’ble Supreme Court. In Rama
Bai v. Commissioner of Income Tax, A.P. (supra),
the Apex Court has held that, interest on enhanced
compensation for land compulsorily acquired under the Land
Acquisition Act, 1894, awarded by the Court on a reference under
Section 18 of the Act or on further appeal has to be taken to have
accrued not on the date of the order of the Court granting enhanced
compensation but as having accrued year after year from the date of
delivery of possession of the land till the date of such order, and
that such interest cannot be assessed to income-tax in only lump sum
in the year in which the order is made.
(emphasis
supplied)
[4]. It
is submitted that the deduction of income tax at source is to be made
under the provisions of Section 194A of the Income Tax Act, 1961, but
under the said provisions, the tax is to be deducted at source only
where the amount of interest payable to the claimant for any
financial year exceeds Rs.5,000/-. Section 194A of the Income Tax
Act, 1961 reads as under :
?S194A ?
Interest other than `interest on securities’-
[1] Any person not
being an individual or a Hindu undivided family, who is responsible
for paying to a resident any income by way of interest other than
income by way of interest on securities, shall, at the time of credit
of such income to the account of payee or at the time of payment
thereof in cash, or by issue of a cheque or draft or by any other
mode, whichever is earlier, deduct income-tax thereon at the rates in
force.
Provided that …
… …
[Explanation – …
… …
[2] xxx xxx xxx
[3] The provisions
of sub-section (1) shall not apply –
[i] where the amount
of such income or, as the case may be, the aggregate of the amounts
of such income credited or paid or likely to be credited or paid
during the financial year by the person referred to in sub-section
(1) to the account of, or to, the payee, [does not exceed –
[a] … … …
[b] … … …
[c] … … …
[d] five thousand
rupees in any other case]:
Provided that …
… …
[a] … … …
[b] … … …
[c] … … … ?S
Hence,
income tax could have been deducted at source only for that year in
which the interest on compensation exceeded Rs.5,000/-. In the facts
of neither case, interest exceeded Rs.5,000/- in any year.
[5] Mr
Shital Patel submits that in case of Merubhai Khmansinh (SCA No.11052
of 2008) the interest amount of Rs.13,745/- was required to be spread
over for a period of 14 years from 26.11.1990 to 31.12.2004 and,
therefore, per year the interest amount was hardly about Rs.1,000/-
that is much below the limit of Rs.5,000/-. It is only when the
interest amount of Rs.5,000/- exceeds Rs.5,000/- in any given year
that income-tax is required to be deducted at source under Section
194A of the Income-tax Act, 1961. Similarly, it is submitted that in
case of Shambhubhai Raojibhai (SCA No.11051 of 2008) interest amount
of Rs.64,534/- was paid to five co-owners including Patel Shambhubhai
and, therefore, Shambhubhai’s share comes to hardly Rs.13,000/- and
the said interest amount of Rs.13,000/- was required to be spread
over for a period of 11 years from 28.10.1997 to 31.3.2008 and
interest in each year would, therefore, come to hardly about
Rs.1200/- that is much below the limit of Rs.5,000/-.
[6]. On the other
hand, Ms.Nisha Parikh, learned Assistant Government Pleader appearing
for the respondents submits that the respondent No.2 Officer has
relied on Order No.F.275/109/92 – ITCB dated 21st
September, 1994 requiring the paying authority to deduct tax at
source in prescribed Form No.16A. Ms.Parikh further states that the
amount of tax deducted at source has already been deposited on 2nd
December, 2006, being the amount of Rs.1,473/- in case of Merubhai
Khumansinh (Special Civil Application No.11052 of 2008).
[7]. Having heard the
learned counsel for the parties, it is apparent that respondent No.2
Officer did not take any competent legal advice before deducting the
tax at source. It is true the persons on whose behalf the tax was so
paid by the Land Acquisition Officer to the Income-tax Department can
claim the refund of such tax deducted at source but when no such tax
was required to be deducted at source, the persons who lost their
land, and who appear to be small farmers, should not be put to such
harassment, hardship and inconvenience. Unnecessary time, energy and
monies will be required to be spent by them for claiming refund of
such small amounts.
[8]. In view of the
above, we are of the view that the State of Gujarat in the Revenue
Department must consider this matter seriously and issue necessary
instructions to all the authorities under the State Government, and
particularly, the authorities concerned with acquisition of land, to
ensure that before deducting the income tax at source, the binding
judgement of the Hon’ble Supreme Court and the relevant statutory
provisions are taken into consideration.
[9]. If such
instructions are not issued by 15th November, 2008, a
responsible officer of the Revenue Department, not below the rank of
Joint Secretary, shall remain personally present before this Court on
17th November, 2008.
A copy of this order
shall be made available to the learned Assistant Government Pleader
for timely compliance.
[M.S.SHAH,
J.]
[HARSHA
DEVANI, J.]
parmar*
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