The Bombay High Court has held that Section 194LA of the Income Tax Act, 1961 would not apply when TDR Certificates are issued in lieu of compensation.
The bench of Justice B. P. Colabawalla and Justice Amit S. Jamsandekar has observed that Section 194B as well as Section 194R, contemplate as to what is to be done when payment is to be made entirely in kind or partly in cash and partly in kind. Those provisions are conspicuously absent in Section 194LA of the Income Tax Act.
The Petitioner, Pimpri Chinchwad Municipal Corporation has been held as an Assessee in default because the Petitioner has not deducted TDS under Section 194LA for issuing TDR in lieu of compensation for lands acquired for public purposes from the original owners as contemplated under Section 126 of the MRTP Act, 1966.
The petitioner submitted that Section 194LA of the IT Act deals with the deduction of tax for payment of compensation of acquisition of immovable property.
Section 194LA stipulates that any person responsible for paying any sum in the nature of compensation on account of compulsory acquisition, under any law, of an immovable property, to any resident, shall, at the time of credit of such sum to the account of the compensation recipient, or at the time of payment thereof in cash or by issue of a cheque or draft or any other mode, deduct an amount equal to the percentage.
According to the Petitioner, the words “or by any other mode” appearing in Section 194LA would have to be read ejusdem generis to the word “payment thereof, in cash or by issue of a cheque or draft”. In other words, Section 194LA does not contemplate deduction of TDS when payment is made by issuing TDR Certificates, was the submission.
“We find that the Petitioner has made out a strong prima facie case for grant of interim relief. We accordingly order that pending the hearing and final disposal of the above Petition, implementation and operation of the impugned Order dated 31st March 2025 passed under Sections 201 and 201(1A) of the Income Tax Act, 1961 is hereby stayed. Consequently, even the Demand Notice dated 31st March 2025 and the Penalty Order under Section 274 read with Section 271C and the Demand Notice emanating therefrom, both dated 30th September 2025, are hereby stayed,” the court said.
Case Details
Case Title: Pimpri Chinchwad Municipal Corporation Versus ITO
Case No.: Writ Petition No. 13190 Of 2025
Date: 14/10/2025
Counsel For Petitioner: Percy Pardiwala, Senior Advocate, al/w Sanket Bora
Counsel For Respondent: A. K. Saxena, Advocate
