The respondent Special Land Acquisition Officer, represents the State Government as an assessee. For the assessment year 2008-2009, the question of requirement of depositing tax at source under section 194LA arose in the backdrop of land acquisition proceedings instituted by the State Government for acquiring certain parcels of lands for and on behalf of M/s. E, a public limited company. The Special Land Acquisition Officer passed a common judgement and separate awards concerning different landowners whose lands were under acquisition. In one such award he awarded compensation to different landowners which basically included three elements. (1) compensation for land; (2) compensation for buildings situated on the land; (3) compensation for trees. All lands were divided into non irrigated agricultural lands and Kharaba lands. Agricultural lands were compensated at a uniform rate of Rs.300 per sq. mtrs., Kharaba lands received compensation at the rate of Rs.1 per Are. On such compensation, the Land Acquisition Officer awarded 30% solatium, additional compensation at the rate of 12% under section 23(1A). According to the Revenue, majority of these lands under acquisition were not agricultural lands. Compensation towards such lands therefore, invited capital gains. The compensation for the building and trees also likewise invited taxes in the hands of the recipients. In terms of section 194LA of the Act, therefore, the Land Acquisition Officer was required to deduct tax at source at the prescribed rate. Since he failed to do so, the Assessing Officer instituted proceedings against the Special Land Acquisition Officer under section 201 of the Act. Assessing Officer passed an order in which he held that the assessee, though required, had failed to deduct tax under section 194LA of the Act. He was therefore, to be treated as an assessee in default. The CIT (Appeals) confirmed the view of the Assessing Officer. ITAT held that the compensation was paid by the Land Acquisition Officer for the lands along with the houses as a composite asset and houses cannot be separated from the lands, which was agricultural land.
Having heard the parties, the Court held that,
+ the fact that a particular land is treated as an agricultural land in the revenue records and so treated since long and continues to invite land revenue seems to be strong prima facie factors to suggest that the land was agricultural land. The Courts have of course held that this would be a rebuttal presumption and if in a given case, it is shown that the land was never put to or was capable of being put to agricultural use, the same may still be considered as non agricultural land;
++ mere award by the Land Acquisition Officer would not be conclusive. This is so for two reasons. Firstly, the aim and object of passing an award under the Land Acquisition Act, 1894, is to arrive at a just compensation for compulsory acquisition of the property of a citizen. The paramount consideration before the Special Land Acquisition officer at that stage is to ascertain the market value of the land under acquisition as on the relevant date i.e. date of publication of section 4 notification. Quite apart from the very character of the land being agricultural or otherwise, range of other factors would be relevant for such purpose including the non agricultural use potential of the land. On the other hand, the applicability of section 194LA of the Act would depend on whether the compensation which is being paid is for an immovable property which is in the nature of an agricultural land or otherwise. Such question when so needed can be decided only by the Assessing Officer and the view of the Land Acquisition Officer expressed in acquisition award would not be final, binding or conclusive;
++ Revenue authority placed heavy reliance on two factors, One was the personal visit by the Assessing Officer and the other was the certificate issued by the District Agricultural Officer dated 16.6.2004. The visit, as correctly pointed out by the counsel for the respondent, would have taken place few years after the acquisition was completed and possession of the land was handed over to the company for whose benefit the acquisition was carried out. The character of the land also would have undergone major changes. It would be highly unsafe to rely on a spot visit by the Assessing Officer of such circumstances to overrule the initial presumption available from the revenue records that the lands were agricultural lands. Likewise, the certificate of the Agricultural Officer was also general in nature and did not pinpoint whether and what portion of the land was totally uncultivable. The award does segregate the Kharaba land for compensation at a much lower rate of Rs.1 per Are as against the Jirayat land which were compensated at the rate of Rs.300 per sq. mtrs. The observations of the Assessing Officer that there was no facility of irrigation and that part of the land, suffered from ingress of saline water, would not indicate that the entire parcel of land or at any rate substantial portion thereof was either not put to agricultural use or was not capable of so using;
++ coming to the question of acquisition of trees, total compensation of Rs.55.68 lacs was paid under the award dated 21.1.2008 against the compensation for land at Rs.36.95 crores. Similar figures appear in other award also. Section 194LA applies when the compensation for acquisition of immovable property is being disbursed. Term 'immovable property' has been explained in clause(ii) of the Explanation to section 194LA as to mean any land (other than agricultural land) or any building or part of a building. If the trees are seen separate from the agricultural land, it would not form part of this immovable property. If on the other hand, such trees are seen as part of the land under acquisition, the same would form compensation for acquisition of agricultural land. Many of these trees are fruit bearing trees. Any compensation for loss of fruit bearing trees must necessarily be part of the compensation for agricultural land. The Land Acquisition Officer while awarding the compensation would determine the market value of the land and in cases where such land also has fruit bearing trees, would separately compensate for loss of such trees. In view of such factors, Court does not see any applicability of section 194LA for compensation to the trees;
++ the Land Acquisition Officer bifurcated his award by awarding separate compensation for the land, for the building and for the trees. The compensation for the building comprised substantial portion of total compensation so worked out;
++ there is nothing on record to suggest that the buildings in question were only small residential units of the farmers who were cultivating the land or that they were in the nature of godown for storing the agricultural implements or agricultural produce. Even if therefore, the lands were in the nature of agricultural lands, for the purpose of deducting tax under section 194LA of the Act, the question of deducting tax on the compensation for buildings would certainly arise. The buildings do not form part of the agricultural lands or at any rate have not been shown to be in the nature of small farm houses or godowns for agricultural operations. The ITAT therefore, committed an error in reversing the orders of the revenue authorities with respect to the applicability of section 194LA qua the compensation for the buildings.
(See 2016-TIOL-1598-HC-AHM-IT)
