NHSRCL told to refund TDS deducted from compensation

MUMBAI: The Bombay high court held that as the National High Speed Rail Corporation Limited (NHSRCL) is not a person as contemplated under the Income Tax Act, the tax deducted at source by it while remitting the award amount to the petitioner, whose plot of land was acquired by the corporation for the project, was not legally tenable.

The court directed the corporation to prepare a correction statement mentioning that the award amount was not liable for TDS deduction and to submit the same to the Income Tax department. The HC then directed the parties to refund the deducted TDS amount to the petitioner as per the IT Rules.

The division bench of justices S V Gangapurwala and M G Sewlikar while hearing the petition of a Thane resident was informed by advocate Devendra Jain that his client owned plots of land at Bhiwandi and the NHSRCL had acquired them for the project and an agreement was reached between them. As per the agreement, NHSRCL had paid compensation to the petitioner but after deducting 10% of the award amount towards TDS. When the petitioner sought reversal of the TDS amount, the corporation informed that exemption from tax was not applicable in the case of the land acquired and the corporation had already deposited the amount with the IT department.

Jain further submitted that under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, land acquired for public projects was exempted from income tax.

However, advocate Akshaye Puthran for the NHSRCL submitted that the land was acquired after proper negotiations and did not fall under compulsory acquisition and hence the compensation amount was taxable. Similarly, advocate Suresh Kumar for the Income Tax department submitted that the tax deducted by NHSRCL was proper as the two had entered into a sale deed. The counsel further submitted that the refund could not be claimed by the petitioner rather the petitioner would have to file returns as per the amended Finance Act 2019 to apply for a refund.

After hearing the submissions, the bench observed that as per the Income Tax Act, the corporation was not a specified person nor was it a government body, a government company or trust or society as registered under the Societies Act which would be liable for a tax deduction. Hence in light of this, the bench held that the corporation had erred in deducting tax from the compensation amount and should prepare a correction statement and send it to the IT department, after which the department should initiate the procedure for refunding the amount as per the IT Rules.