D. Manmohan, Vice-President - Order passed by the AO under s. 201(1) of the Act by treating the assessee as in default for non-deduction of tax at source under s. 194LA of the IT Act, 1961 is the subject-matter of challenge before us, since the learned CIT(A) confirmed the order of the AO.
2. Facts necessary for the disposal of the appeal are stated in brief. Naya Raipur Development Authority, in its status as 'local authority', purchased certain lands in the upcoming capital area. The assessee did not deduct tax at source on payment of the sale consideration to the respective landowners. The Government of Chhattisgarh, through the Department of ' Nagariya Prashashan and Vikas declared in its Official Gazette that 41 villages situated in Raipur, Abhanpur and Aurang Tehsils as notified areas for development of the capital city of the State. As per the draft plan published on 30th March, 2007 the area is divided into three parts. The first part is with regard to housing projects. The assessee herein was authorized to purchase the land from the landholders on a mutually agreed price and if the local authorities are not successful in purchase of the land through mutual settlements, the land has to be compulsorily acquired by following the due process of law i.e., the assessee herein may request the State Government to acquire land under the Land Acquisition Act, 1894. It is necessary to mention herein that assessee, on its own, cannot undertake compulsory acquisition.
3. As per the information collected by the AO it is seen that the assessee acquired land for development of new capital city of the State from various landowners and paid compensation to them without deducting tax on the compensation paid to the landowners and hence, it is in violation of the provisions of s. 194LA of the Act which, in turn, mandates that 'any person responsible for paying to a resident any sum, being in the nature of compensation, shall at the time of payment of such sum, deduct an amount equal to 10 per cent of such sum as income-tax thereon.' Therefore, the AO called upon the assessee to furnish complete information regarding deduction of TDS as per the provisions of s. 194LA of the Act on the compensation paid on acquisition of immovable properties during the financial years 2005-06 to 2007-08. Vide reply dt. 21st Nov., 2007 the assessee denied the applicability of provisions of s. 194LA of the Act. The case of the assessee was that it purchased agricultural land from farmers by making a request in prescribed form and after obtaining the willingness from the farmers the agricultural land was purchased. It was also submitted that land purchased through mutual agreement cannot be treated as "compulsory acquisition of land". Sec. 194LA of the Act envisages TDS on "compulsory acquisition" of any land, for the time being in force. The law governing compulsory acquisition of the land is the Land Acquisition Act, 1894 whereas, the assessee purchased the lands under the provisions of M.P/C.G. Nagar Tatha Gram Nivesh Adhinayam, 1973 (hereinafter called as the "Act") and therefore, it cannot be equated to compulsory acquisition envisaged under the Land Acquisition Act, 1894. It was also highlighted that there is a distinction between a seller willing to sell the property on a mutually agreed price and a compulsory acquisition. For compulsory acquisition of land District Collector of the place is authorized whereas, the assessee, which is a local authority, has no power under the Act to compulsorily acquire the land except referring the matter to the District Collector in all the cases where the land owners are not willing to sell the agriculture land. It was also contended that even otherwise the purchase was only with regard to agricultural land and hence, the provisions of s. 194LA are not applicable. As per the provisions of s. 2(14)(iii)(a) and (b) of the Act, the land purchased by the assessee falls within the meaning of the expression "agriculture land" since it is situated at those places which are beyond the distance notified by the Central Government under the aforementioned section. It was also contended that there is no basis in issuing a show-cause notice by the AO since it is a clear case of purchase of land by mutual agreement and it does not amount to compulsory acquisition within the meaning of s. 194LA of the Act.
4. The AO rejected the contention of the assessee. The case of the AO is that the so-called purchase of land is nothing but acquisition of land compulsorily in the light of provisions of s. 69 r/w s. 56 of the Town and Country Planning Act, 1973 as well as s. 69 of the Act. The AO laid emphasis on the language used in s. 69 of the Act to highlight that the special area development authority can exercise certain powers "for the purpose of acquisition of the land" and there are various methods/procedures involved in such acquisition and one of the methods was by mutual agreement but by virtue of the expression "acquisition of the land" even the so-called purchase by mutual agreement is nothing but acquisition of land compulsorily. The basic ingredients of compulsory acquisition of land lies in the modus operandi adopted for transfer of the properties whereby the sale of the land was barred by the State authorities in notified area and the land owners are not free to sell their land in the open market. They are also not allowed to use the land as per their wishes. The scheme mandates that the land has to be utilized for a particular way and rest is only a formality. The landowners have to vacate the lands, whether they like it or not. Merely because some written agreements were entered into with the land owners it does not amount to a normal purchase of land but going by the underlying object it has to be treated as compulsory acquisition of land. Further, the Town and Country Planning Act, 1973 empowers the authority to acquire the land through agreement, in normal circumstances and if required, through the District Collector. He thus, concluded that the land which was acquired by the assessee in its capacity as a local authority is virtually in the form of a compulsory acquisition of land and hence, attracted the provisions of s. 194LA of the Act.
5. He further observed that the exemption from deduction of tax at source is applicable in the case of compulsory acquisition of agricultural land, as defined in s. 2(14) of the Act whereas, in the instant case, soon after issue of notice in the Official Gazette to the effect that this area is selected for development of capital project and urbanization, the nature of the land is automatically altered and it no more remains as "agricultural land" in which event, the so-called purchase/acquisition cannot be treated as acquisition of agricultural land. He also noticed that some land is situated within 8 kms. of the existing Municipal limits. He therefore, concluded that the transaction cannot be considered as purchase of land but it amounts to compulsory acquisition as per the provisions of s. 194LA of the Act and it cannot also be treated as agricultural land and hence, the assessee-local authority is deemed to be in default as per the provisions of s. 201(1) of the Act.
6. Aggrieved, the assessee contended before the first appellate authority that for the purpose of considering as to whether the land purchased by the assessee would amount to compulsory acquisition of land or not one has to go by the plain language used in the Act and unless the law, under which the assessee acquired/purchased the land, enables the local authority to acquire the land (such power is vested with the District Collector under the Land Acquisition Act), the tax authorities were not justified in assuming that the assessee has defaulted in not deducting tax under s. 194LA of the Act by assuming that the transaction would amount to compulsory acquisition of land. In other words, unless the transaction falls within the strict letter of law, s. 194LA cannot be invoked.
7. Learned CIT(A) rejected the contention of the assessee by observing that the totality of the circumstances have to be taken into consideration in order to appreciate as to whether it amounts to acquisition of land or purchase of land with the consent of the seller. The ban on transfer of properties without permission of the District Collector, denial of rights for personal use by land owners independently etc., would highlight that the parties are compelled to sell the land and hence it amounts to compulsory acquisition of land. In other words, by applying the principle of 'substance prevailing over form' it cannot be termed as 'sale of land' since sale connotes normal transfer of title over the goods or property and any purchase by using arm twisting technique cannot be considered as voluntary transfer. He further observed that the assessee did not produce copy of the relevant land revenue records and therefore, the AO had to collect the information from the concerned Tahsildars to reasonably segregate the barren and unirrigated land from the agricultural land and he further observed that the land acquired by the assessee cannot be treated as agricultural land and hence, liable to TDS under s. 194LA of the Act, which transaction has to be treated as 'land acquisition', is for the IT authorities to decide and not by the Land Acquisition Court. He thus, upheld the order of the AO.
8. Further aggrieved, assessee is in appeal before us. Learned counsel, appearing on behalf of the assessee, submitted that the assessee is a body corporate constituted under s. 66 of the CGTGNA, 1973. The assessee has limited power and it cannot be equated to State, Government. In fact, the assessee is assessed to tax as a separate person in the status of 'local authority'. The ban on sale of land etc., are the prerogative of the State Government and not of the assessee local authority. State Government controls the development and use of the land developed in its territory and the assessee is not empowered to compulsorily acquire land, and its power is limited to referring the matter to the land acquisition authority and thus the plain language of the provisions of the Act, under which the assessee had come into existence, would highlight that it has no powers to compulsorily acquire the land. Therefore, purchase of property under mutual agreement cannot be termed as compulsory acquisition by assuming that it is a deemed acquisition. Learned counsel, appearing on behalf of the assessee, has taken us through the paper book to highlight that through a paper publication the local authority invited objections from public for purchase of agricultural land and in fact, owners of land filed their applications offering their agricultural land for sale under mutual consent agreement. Page 30 of the paper book is an affidavit of one of the sellers wherein he has affirmed that he has also entered into an agreement with mutual consent to sell the agricultural land to Naya Raipur Development Authority under its scheme. Learned counsel has also taken us through a sale deed to show that even as per the sale deed, duly signed by the sellers, transaction was treated as sale of agricultural land by the owners voluntarily since they are offered best price. Learned counsel laid emphasis on the fact that the assessee being a local authority, created under the CGNTGNA, 1973, it can act only within the confines of the Act whereas, compulsory acquisition falls outside the ambit of the said legislation. The assessee, being a local authority, could not acquire the land compulsorily whereas, s. 194LA of the Act refers to compulsory acquisition of land which, in turn, comes into play only in a case where the land is acquired by any Government authority by exercising the powers conferred under the LA Act. It was also highlighted that under compulsory acquisition of land, Authority generally awards compensation which can be challenged in a Court of law for enhancement etc., and if one applies the principle of ejusdem generis s. 194LA having been couched in such a manner which takes into consideration not only the compensation but also enhanced compensation, if any, it would clearly show that s. 194LA would get attracted only in the case of compulsory acquisitions i.e., where the State or Central authority have acquired land under Land Acquisition Act, 1894 whereas, such provisions are absent herein and the assessee has no power and even the sellers have no right to seek higher sale once it is mutually agreed upon and thus, it cannot be treated as compulsory acquisition. Learned counsel has also taken us through the provisions of ss. 69 and 56 of the Act to submit that wherever there is no machinery or power given to an assessee, under any law for the time being in force, to make compulsory acquisition of land, any purchase made by such authority cannot be brought within the ambit of compulsory acquisition. Learned counsel relied upon the following case law (1) Ukhra Estate Zamindaries (P.) Ltd. v. CIT [1979] 120 ITR 549/2 Taxman 402 (SC), R.L. Jain v. DDA [2004] 4 SCC 79 and Sanjya Gandhi Grah Nirman Sahakari Sanstha Maryadit v. State of M.P. AIR 1991 MP 72 in support of his contention that the CGNTGNA cannot be used for compulsory acquisition of land and thus, wherever land is requisitioned by voluntary agreements cannot be equated as compulsory acquisition of land. He has also made detailed submissions with regard to the alternative contention i.e., the land purchased by the assessee should be treated as agricultural land since it was recorded in the land records as agricultural land, without making any distinction as to whether they are irrigated or not irrigated.
9. On the other hand, learned Departmental Representative strongly relied upon the orders passed by the tax authorities. The main contention of the learned Departmental Representative is that substance has to be looked into rather than giving importance to the form. Though the assessee i.e., Naya Raipur Development Authority has no power to compulsorily acquire the land but the steps taken by the State Government in the form of banning transfer of properties in the specified area and also not giving permission to the landowners for any other use would clearly indicate that the land owners are compelled to sell the land to the specified authority and thus the land which was stated to have been purchased by the assessee, though captioned as 'sale at mutually agreed price' it would amount to compulsory acquisition of land and hence, the tax authorities were justified in invoking the provisions of s. 194LA of the Act. Consequently, the tax authorities were justified in treating the assessee in default under s. 201(1) of the Act.
10. We have carefully considered the rival submissions and perused the record. It is well-settled that the provisions concerning collection or levy of tax has to be construed strictly and there is no room for assumptions. The IT Act is a self-contained Code and wherever the legislature, in its wisdom, sought to assume the state of affairs contrary to the plain meaning of the provisions the same is achieved by inserting a sub-clause/provision/Explanation. If the legislature has not brought any amendment to the statute one has to go by the plain language of the Act. In the instant case, it is not in dispute that the CGNTGNA, 1973 has no power to compulsorily acquire the land and in fact, the ban on transfers in the specified zone is not a directive given by the assessee herein but it is the act of the State Government and the assessee has no role to play. In such an event of the matter, it may be inappropriate to assume that the transaction in question amounts to compulsory acquisition of land. As rightly pointed out by the learned counsel, appearing on behalf of the assessee, compulsory acquisition of land is permitted only under the specific enactment whereas, the assessee herein has no power to acquire the land under any law for the time being in force. If the power of acquisition is vested in the District Collector the assessee cannot be indirectly assumed to have been vested with such powers inasmuch as the District Collector, in his capacity as a State representative, cannot be assessed to tax under the IT Act whereas, the assessee in its status as 'local authority' can suffer tax. Having regard to the distinction created between the two sets of 'persons', it has to be taken into its logical conclusion to hold that the assessee has no power to acquire the land; its duty is limited to entering into mutual settlements which cannot be equated to compulsory acquisition of land. Under these circumstances, we hold that the AO as well as the CIT(A) were not justified in holding that provisions of s. 194LA are applicable in the instant case. Consequently, the assessee local authority cannot be treated to be in default under s. 201(1) of the IT Act, 1961. We, therefore, direct the AO accordingly. Since the provisions of s. 194LA are held to be not applicable to the impugned transactions on the ground that the transactions cannot be equated to compulsory acquisition of land, the alternative submissions made before us need not be gone into since they are academic in nature.
11. In the result, appeal filed by the assessee is allowed.