Law:

Section:

Section 194L of the Income-tax Act, 1961 - Deduction of tax at source - Payment of compensation on acquisition of capital asset - Land Acquisition Officer acquired property of assessee and paid him entire amount of compensation without withholding 10 per cent of above compensation as required by section 194L - Subsequently, Land Acquisition Officer issued a notice dated 12-8-2003 directing assessee to refund 10 per cent of said amount and also surcharge on that - Whether in view of proviso added to section 194L with effect from 1-6-2000 providing that no deduction need be made from amount with effect from 1-6-2000, Land Acquisition Officer was not competent to demand return of amount already disbursed - Held, yes - Whether it would be option of income-tax department to recover amount towards income-tax - Held, yes FACTS The assessee's property was acquired and an award was passed on 24-11-1999 fixing the compensation at certain amount. As per section 194L, 10 per cent of the above compensation amount should have been withheld by the Land Acquisition Officer towards income-tax and only the rest of the amount should have been disbursed. By inadvertence, the entire compensation amount had been disbursed to the assessee. Thereafter, the Land Acquisition Officer issued a notice dated 12-8-2003 directing the assessee to refund 10 per cent of the amount and also surcharge on the said amount. HELD Section 194L was in the Act for a period from 1-6-1999 till 1-6-2000. In view of the proviso added to section 194L, no deduction need be made from the amount with effect from 1-6-2000. Admittedly no amount was withheld in pursuance of the provisions of section 194L and the entire amount was disbursed. When the notice was issued for return of the amount, in view of the proviso to section 194L, which had come into effect from 1-6-2000, the amount need not be recovered. Therefore, the Land Acquisition Officer was not competent to demand return of the amount already disbursed, but it could be the option of the income-tax department to recover the amount towards income-tax. Hence, the notice was quashed reserving the right of the income-tax department to proceed against the…

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