CIT vs. Bruhat Bangalore Mahanagar Palike (Karnataka High Court)

DATE: September 29, 2015 (Date of pronouncement)
DATE: November 17, 2015 (Date of publication)
AY: -
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S. 194LA: TDS provisions apply only when payment is made by cash, cheques etc and not to a case of exchange such as of land for Certificate of Development Rights (CDR/ TDR)

(i) A bare reading of the said Section would make it clear that it would be applicable only in case of payment of any sum of money as consideration on account of compulsory acquisition of any immovable property, for which payment is made in cash, cheque, demand draft or any other mode. In the present case, neither there is compulsory acquisition of the land, nor there is any process adopted for quantification or determination of value of land acquired by BBMP which is voluntarily surrendered by the land owner, for which CDRs were given to the land owner. As such, provisions of Section 194LA of I.T. Act would not be attracted in the present case.

(ii) Even otherwise, the Tribunal has rightly observed that the provisions of deducting tax at source and paying it over to the Government on behalf of the recipient of payment, is in the nature of vicarious liability. When there is neither quantification of the sum payable in terms of money nor any actual payment is made in monetary terms, it would not be fair to burden a person with the obligation of deducting tax at source and exposing him to the consequence of such default;

(iii) The concept of tax deduction at source (TDS) and depositing the same with the Revenue is where payment is made by cash, cheque, demand draft or any other similar mode. When such payment in terms of money is made, the deduction is to be made by the person responsible to pay, and is to deposit the same with the Income Tax Department, which would be adjusted and credited to the account of the person on whose behalf such amount is paid to the Income Tax Department, and in such a case, such person, who would then be an assessee before the Department, would be entitled to adjustment of the amount so deducted as TDS on behalf of the said assessee. When no payment is made by BBMP to the land owner in terms of money, such deduction is neither possible nor is conceived under Section 194LA.

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