Section 194L and 194LA – TDS – State Metropolitan Development Authority – Acquisition of land for projects paying sums to illegal squatters for their rehabilitation – Not a case of compulsory acquisition from owners of land for which compensation paid – No liability to deduct tax at source on payments to illegal squatters

39. 
CIT vs. MMRDA; 408 ITR 111(Bom):  Date of order: 6^th September,
2018 A. Ys. 2000-01 to 2009-10

Section 194L and  194LA – TDS – State Metropolitan Development
Authority – Acquisition of land for projects paying sums to illegal squatters
for their rehabilitation – Not a case of compulsory acquisition from owners of
land for which compensation paid – No liability to deduct tax at source on
payments to illegal squatters

For the purpose of
implementing the scheme of the Government relating to road widening near the
railway track, the assessee, the Mumbai Metropolitan Regional Development
Authority, evacuated illegal and unauthorised persons who were squatters and
hutment dwellers. The Assessing Officer was of the opinion that there was
acquisition of immovable property for various projects by the assessee, for
which the project affected persons were compensated under the Land Acquisition
Act, 1894, He treated the assessee as the assessee-in-default u/s. 201(1) of
the Act and liable to pay interest u/s. 201(1A) since the assessee had not
deducted tax at source u/s. 194L/194LA. Accordingly, he computed the payment of
tax u/s. 201(1) and interest u/s. 201(1A)

The Commissioner
(Appeals) allowed the appeal and deleted the demand. The Tribunal upheld the
order of the Commissioner (Appeals).

On appeal by the
Revenue the Bombay High Court upheld the decision of the Tribunal and held as
under:

“i)    The possession of those persons was
unauthorized and illegal and they were not the owners of the land on which they
had squatted or built their illegal hutments and were trespassers. Therefore,
there was no question of the land being acquired by the assessee.

ii)    The Tribunal correctly came to the
conclusion that the land had always belonged to the State and it was encroached
upon, which encroachment was removed by the assessee and the encroaching
squatters or hutment dwellers were rehabilitated. There was no question of
there being any compulsory acquisition from them under any law either under the
1894 Act or any other enactments which permitted compulsory acquisition of
land. Hence section 194L or section 194LA had no application.”