Whether Assessee should deduct TDS on Compensation paid to evacuate slum dwellers ?
To implement road widening scheme of Government, assessee evacuated illegal/unauthorised persons in form of squatters/hutments for which assessee paid certain compensation, provisions of sections 194L/194LA would not apply
Detailed Analysis of full Judgement on the subject : TDS on Compensation paid to evacuate slum dwellers :-
IN THE ITAT MUMBAI BENCH ‘B’
Income-tax Officer (TDS)
v.
Mumbai Metropolitan Regional Development Authority
AND N.K. BILLAIYA, ACCOUNTANT MEMBER
IT APPEAL NOS. 496 TO 502 (MUM.) OF 2013
[ASSESSMENT YEARS 2000-01 TO 2009-10]
APRIL 10, 2015
S.J. Singh for the Appellant. J.P. Bairagra for the Respondent.
ORDER
1. These seven appeals by the Revenue are for the assessment years 2000-01 to 2009-10 and has common grievance for the assessment years 2000-01 to 2007-08. The grievance for the assessment years 2008-09 and 2009-10 are also similar with some additional grievance, therefore this bunch of appeals have been heard together and disposed of by this common order for the sake of convenience.
TDS on Compensation
2. The common issue for the assessment years 2000-01 to 2009-10 relates to the applicability or otherwise of the provisions of section 194L/194LA of the Income-tax Act, 1961.
Assessing Officer treated the assessee in default for non deduction of TDS on Compensation paid to evacuate slum dwellers :-
3. The impugned order of assessment is made under section 201(1)/ 201(1A) of the Act. The Assessing Officer was of the firm belief that there has been acquisition of immovable property for various projects by the assessee for which the project affected persons have been compensated as per the Land Acquisition Act of 1894 and since the assessee has not deducted tax at source as per the provisions of section 194L/194LA, the Assessing Officer treated the assessee as the assessee-in-default and computed the demand of tax under section 201(1) and that of interest under section 201(1A) of the Act.
Assessee believed No TDS on Compensation paid to evacuate slum dwellers as squatters/hutments were not owners of the land :-
4. Aggrieved, the assessee carried the matter before the learned Commissioner of Income-tax (Appeals). It was explained to the learned Commissioner of Income-tax (Appeals) that the assessee has only implemented the scheme of resettlement of the squatters/hutments who were coming in the way of road widening and within the safety zone of the railway tracks without any legal ownership of the land. It was explained that these squatters/hutments were not owners of the land but illegal occupants of the Government land therefore it cannot be said that the assessee has acquired the land and paid compensation to the squatters/hutments therefore there is no question of applicability of the provisions of section 194L/194LA of the Act.
Commissioner Appeal held No TDS on Compensation paid to evacuate slum dwellers :-
5. After considering the facts and the submissions and the terms of agreement, the learned Commissioner of Income-tax (Appeals) was convinced that there was no payment of compensation for acquisition of any land or immovable property and accordingly deleted the demand raised by the Assessing Officer under section 201(1)/201(1A) of the Act.
6. The second issue which is common for the assessment years 2008-09 and 2009-10 only relates to the application of section 194J or 194C of the Act where the assessee has deducted tax at source under section 194C of the Act and the Assessing Officer was of the opinion that tax should have been deducted at source as per the provisions of section 194J of the Act. The Assessing Officer has levied interest under section 201(1A) of the Act which has been deleted by the learned Commissioner of Income-tax (Appeals).
7. While scrutinising the return, the Assessing Officer noticed that the assessee has made payment towards annual maintenance contract of AC and lift on which TDS has been made under section 194C of the Act whereas the Assessing Officer was of the opinion that these services fell under the category of technical services subject to TDS under section 194J of the Act and since the assessee has deducted tax under section 194C, the Assessing Officer proceeded with consequential liability under section 201(1) of the Act at Rs. 73,79,004 and also liable for interest under section 201(1A) of the Act at Rs. 32,46,761.
8. The assessee carried the matter before the learned Commissioner of Income-tax (Appeals). After considering the facts and the submission, the learned Commissioner of Income-tax (Appeals) observed that annual maintenance contracts are contracts for periodical inspection and routine maintenance work along with supply of spare parts. The learned Commissioner of Income-tax (Appeals) was of the firm belief that such services do not constitute technical services. Further, the repairs of gadgets like ACs and lifts are also in the nature of normal repairs. To support his views, the learned Commissioner of Income-tax (Appeals) drew support from the decision of the Tribunal Ahmedabad Bench in the case ofGujarat State Electricity Corpn. Ltd. v. ITO [2004] 3 SOT 468 and also on the decision of the Ahmedabad Tribunal in the case of Nuclear Power Corpn. Ltd. in I.T.A. Nos. 3059 to 3061 and 3081/Ahd/2009 and deleted the demands of tax under section 201(1) and of interest under section 201(1A) of the Act.
9. Aggrieved by these two decisions of the learned Commissioner of Income-tax (Appeals) on the above mentioned two issues, the Revenue is in appeal before us.
10. The learned Departmental representative supported the findings of the Assessing Officer.
11. Learned counsel for the assessee reiterated what has been submitted during the course of the assessment proceedings and also before the first appellate authority.
ITAT also agreed with No TDS on Compensation paid to evacuate slum dwellers as these occupants were unauthorised and illegal, land always belonged to the State :-
12. We have carefully perused the orders of the authorities below. In so far as the first issue of payment of compensation vis-a-vis TDS under section 194L/194LA of the Act is concerned, the facts on the record show that to implement the scheme of the Government relating to the road widening near the railway tracks, the assessee evacuated the illegal/unauthorised persons in the form of squatters/hutments for which the assessee paid certain compensation to these persons. The fact of the matter is that these occupants were unauthorised and illegal, they were not the real owners of the land, therefore, there is no question of acquiring the land. The land always belonged to the State. It was only the encumbrance which was removed by the assessee by making payment of certain compensation. Therefore, we agree with the learned Commissioner of Income-tax (Appeals) that provisions of section 194L/194LA do not apply to the facts of the case. We confirm the findings of the learned Commissioner of Income-tax (Appeals) on this issue. The appeal filed by the Revenue on this issue is accordingly dismissed.
13. The second issue relates to the assessment years 2008-09 and 2009-10 wherein the Assessing Officer has applied the provisions of section 194J whereas the assessee has deducted tax under section 194C of the Act. We find that the payments have been made by the assessee only in respect of annual maintenance contract which relates to minor repairs, replacement of some spare parts, oiling and greasing of the machinery. In our understanding of the fact, these services do not require any technical expertise and therefore cannot be categorised under the head “Technical services”. We, therefore, decline to interfere with the findings of the learned Commissioner of Income-tax (Appeals). The appeal filed by the Revenue for this issue is also dismissed.
14. In the result, the appeals filed by the Revenue are dismissed.