NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
REVISION PETITION No.2244 of 1999
(From the order dated 5.8.1999 & 8.9.99 in Ex. No.07/SC/97-98 the State Commission, Uttar Pradesh)
Dr. N.K. Gupta Respondent
HONBLE MR. JUSTICE D.P. WADHWA, PRESIDENT
HONBLE MR. JUSTICE J.K. MEHRA, MEMBER
MRS. RAJYALAKSHMI RAO, MEMBER
MR. B.K. TAIMNI, MEMBER
Taxation - Deduction of TDS by GDA on the award of interest by way of compensation. Held - Section 194A of the Income-tax Act not applicable. Award of interest by way of compensation not interest as defined in Section 2(28A) of the Income-tax Act.
For the Petitioner : Mr. Sudhi Kulshreshtra, Advocate
For the Respondent : N E M O
Dated the 18th September, 2002
D.P.WADHWA, J. PRESIDENT
Ghaziabad Development Authority (G.D.A.) is aggrieved by the order dated 5.8.1999 of the U.P. State Consumer Disputes Redressal Commission. By this order the State Commission in effect held that it was wrong on the part of the GDA to deduct TDS (Tax Deduction at Source) from the amounts payable to the Respondent/Complainant. It was the case of the GDA that while paying the interest amounting to Rs.46,711/- as ordered by the State Commission, in a complaint filed by the Respondent, it deducted Rs.8,656/- towards TDS which amount it deposited in the account of the Central Government. Certificate showing deduction of tax and the deposit to this to the account of the Central Government, have been filed. State Commission was, however, of the view that there was no order passed by it to deduct the TDS and when there was no such order, no deduction towards TDS could have been made. State Commission,
therefore, directed that the amount which had been deducted by the GDA towards the TDS be refunded to the Complainant with interest at the rate of 18% p.a.
This order of the State Commission has been challenged by the GDA on the ground that it was a statutory duty imposed on it under Sec. 194-A of the Income Tax Act, 1961 to deduct the tax and when it has deposited the tax to the account of the Central Government and has also given a certificate for the tax so deducted to the Complainant, it could not be said that there was any deficiency in service on its part or it had contravened the order of the State Commission passed in the complaint filed by the Respondent/Complainant. Basing reliance on the case of Rama Bai and Ors. Vs. Commissioner of Income Tax, A.P., Hyderabad & Ors., reported as 1990 (Supp) SCC 699, 'where interest was paid on an enhanced compensation and tax was deducted at source', it was contended that it was rightful on the part of the GDA to deduct the tax. In the present case, it may however, be noticed that Rama Bai's case arose out of the interest paid under Sections 28 and 34 of the Land Acquisition Act, 1894 for the enhanced compensation as awarded in a reference made under Sec.18 of that Act, and, further appeal to the High Court and the Supreme Court, under the provisions of that very Act.
To understand the controversy raised in the present case, it will be appropriate at this stage to set out certain facts relevant of this case.
Complainant, Dr.N.K.Gupta, applied to the GDA for allotment of the plot of land in a scheme known as 'Kaushambi Housing Scheme'. Dr. Gupta deposited a sum of Rs.35,010/- through a demand draft on 2.1.1986 with the GDA. However, GDA unilaterally changed the scheme in February, 1998 and instead of offering the plot, it offered a self-built up house and flats to the aspirants of the plots. Dr.Gupta says he had no option, and therefore, he applied for a two-room flat with a plinth area of 912 sq. ft. for which he was told the cost was Rs.3,65,000/-. Since Dr.Gupta had already applied for a plot in the year 1985 and had paid Rs.35,010/-, he was required to pay a further sum of Rs.3,30,000/-. This total amount was paid by him in five instalments. He also paid Rs.2,766/- as interest at the rate of 18% p.a. as one of the instalments was delayed. Under the scheme, possession of the house was to be given within two years, i.e. by the end of February, 1990. GDA, however, did not give possession of the flat to Dr.Gupta. Rather it was on 15.11.11991 that revised price of the house in the scheme was indicated by giving notice to all concerned. Complainant was informed that he was to pay a further sum of Rs.37,000/-. However, subsequently, the total cost of the flat was reduced from Rs.4,02,000/- to Rs.3,95,000/-. Complainant states that when he visited the flat to obtain possession on 3.6.1992, it was in the 10th floor. He found that there was no approach road to the building in which the flat was situated nor were any lifts installed therein which could be used to reach his flat. Also, there was no electric connection in the entire building, though it was advertised that 'star infrastructural facilities' would be available. The scheme was to provide facilities including the following infrastructural facilities:
- purchase on instalments
- two double lifts in each block
- telephone line in every flat
- marble flooring in bathroom/kitchen and kota stone in all public areas
- geyser connection in all bathroom/kitchen
- independent water supply system
- 24 hours electricity supply
- multi-channel antenna with two close circuit TV channels
- provision for centralised air-conditioning in four room apartments
- space for car parking.
And., Star infrastructural facilities, as
- badminton court
- medical aid
- swimming pool
- health club
- community centre
- primary school
- security arrangements
- indoor games and children play area in each block.
Admittedly, the star infrastructural facilities were not available when the possession of the flat was offered to Dr.Gupta and also most of other facilities.
State Commission held that representation by the public authority like the GDA to the intending purchasers that a scheme under which they were to purchase the flats contained a provision for certain specific facilities which were not provided and this failure squarely amounted to deficiency in service on its part. State Commission held that the intending purchasers were fully justified in refusing to make the additional amounts as demanded from them and also they were justified in refusing to take possession of the property so allotted till all the facilities assured by the builder were provided. In such circumstances, the Complainant demanded refund of the amounts paid by him with interest. He also demanded compensation at the rate of Rs.5,000/- p.m. being the amount of rent he would have earned if the possession could have been given to him as planned. The State Commission considering the whole aspect of the matter and after appreciation of the evidence came to the conclusion that the complaint of Dr. Gupta was fully justified and directed the GDA to refund of the amount paid by the Complainant with interest at the rate of 18% p.a. from the dates of various deposits of instalments till the date of payment. State Commission also awarded costs amounting to Rs.2,000/-. State Commission further directed that the payments shall be made within a month from the date of the order failing which GDA shall be liable to pay further interest at 18% on the entire amount due from it from the due date of payment till the date of the actual payment to Dr.Gupta. This order of the State Commission achieved finality and in terms thereof, the amount was to be paid to the Complainant. From the amount as calculated by way of interest in terms of this order, the GDA, as noticed above, deducted TDS which lead to the present controversy.
Mr. Sudhir Kulshreshta, learned Counsel for the GDA referred to Section 194-A of the Income Tax Act to contend that it was requirement of law for GDA who is responsible for paying to the allottee any income by way of interest shall, at the time of crediting of such income to the account of the allottee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode to deduct income tax thereon at the rates in force. This Section 194-A, in relevant part, reads as under:
"194A. Interest other than "Interest on securities"
(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income (by way of interest on securities), shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force".
Reference was also made to a decision of the Supreme Court in the case of Rama Bai and Ors. Vs. Commissioner of Income Tax, A.P., Hyderabad & Ors., 1990 (Supp) SCC 699, wherein the question before the Supreme Court was regarding the point of time at which the interest payable under Sections 28 and 34 of the Land Acquisition Act, 1894 accrues or arises, where such interest is payable on enhanced compensation awarded on a reference under Section 18 of that Act or further appeal to the High Court and/or Supreme Court. It is not clear to us as to how this judgment has any relevance to the issue before us. Perhaps, argument is sought to be built is that where interest is paid under the aforesaid provisions of Land Acquisition Act, 1894, TDS has to be deducted under Section 194A of the Income Tax Act. We do not think there can be any dispute on this. Further, in Sections 28 and 34 of the Land Acquisition Act the word 'interest' is specified. We may quote one of the Sections. Section 34 which reads as under:
"When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of six per centum per annum from the time of so taking possession until it shall have been so paid or deposited".
This section was considered in a decision of the Supreme Court in the case of Dr.Shyamlal Narula Vs. Commissioner of Income Tax (1964) 53 ITR 151 (SC). The question before the Supreme Court was whether interest paid under Section 34 of the Land Acquisition Act was of the nature of capital receipt or of revenue receipt. Of course, it was a revenue receipt. Sec.194-A of the Income Tax Act would be applicable. Supreme Court said that Section 34 itself makes a distinction between amount awarded as compensation and the interest payable on the amount so awarded. The interest shall be paid on the amount awarded from the time the Collector takes possession until the amount is paid or deposited. There are two provisions in the Land Acquisition Act whereunder possession of the land is taken after making of the award and in the other, even before making the award. In either case, some time may lapse between the taking of the possession of the acquired land by the Collector and the payment or deposit of the compensation to a person interested in the land acquired. We may quote in extenso from the decision Supreme Court on the question of interest as appearing in Section 34 of the Land Acquisition Act. This is how the Supreme Court proceeds in the matter:
"As the land acquired vests absolutely in the Government only after the Collector has taken possession of it, no interest therein will be outstanding in the claimant after the taking of such possession : he is divested of his title to the land and hisw right to possession thereof, and both of them vest thereafter in the Government. Thereafter he will be entitled only to be paid compensation that has been or will be awarded to him. He will be entitled to compensation, though the ascertainment thereof may be postponed, from the date his title to the land and the right to possession thereof have been divested and vested in the Government. It is as it were that from the date the Government withheld the compensation amount which the claimant would be entitled to under the provisions of the Act. Therefore, a statutory liability has been imposed upon the Collector of the Act. Therefore, a statutory liability has been imposed upon the Collector to pay interest on the amount awarded from the time of his taking possession until the amount is paid or deposited. This amount is not, therefore, compensation for the land acquired or for depriving the claimant of his right to possession, but is that paid to the claimant for the use of his money by the State. In this view there cannot be any difference in the legal position between a case where possession has been taken before and that where possession has been taken after the award, for in either case the title vests in the Government only after the possession has been taken.
The Legislature expressly used the word "interest" with its well known connotation under Section 34 of the Act. It is, therefore, reasonable to give that expression the natural meaning it bears. There is an illuminating exposition of the expression "interest" by the House of Lords in Westminister Bank Ltd. Vs. Riches. The question there was whether, wherein an action for recovery of any debt or damages the court exercises its discretionary power under a statute and orders that there shall be included in the sum for which the judgment is given interest on the debt or damages, the sum of interest so included is taxable under the Income Tax Acts. If the said amount was "interest of money" within Schedule D and General Rule 21 of the All Schedules Rules of the Income Tax Act, 1918, income tax was payable thereon. In that context it was contended that money awarded as damages for the detention of money was not interest and had not the quality of interest. Lord Wright observed:
"The general idea is that he is entitled to compensation for the deprivation. From that point of view it would seem immaterial whether the money was due to him under a contract express or implied, or a statute, or whether the money was due for any other reason in law. In either case the money was due to him and was not paid or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation, whether the compensation was liquidated under an agreement or statute, as for instance under Section 57 of the Bills of Exchange Act, 1882, or was unliquidated and claimable under the Act as in the present case. The essential quality of the claim for compensation is the same, and the compensation is properly described as interest".
This passage indicates that interest, whether it is statutory or contractual, represents the profit the creditor might have made if he had the use of the money or the loss he usffered because he had not that use. It is something in addition to the capital amount, though it arises out of it. Under Section 34 of the Act when the Legislature designedly used the word "interest" in contradistinction to the amount awarded, we do not see any reason why the expression should not be given the natural meaning it bears.
The scheme of the Act and the express provisions thereof establish that the statutory interest payable under Section 34 is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the deprivation of the use of the money representing the compensation for the land acquired". (Emphasis supplied)
Finally, the Supreme Court observed as under:
"But in case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss suffered because he had not that use. In no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income-Tax Act."
Interest has been defined in sub-section (28A) and interest on securities under sub-section (28B) of the Income Tax Act. These two sub-sections are reproduced as under:
"2(28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised".
"2(28B) "interest on securities" means.---
(i) interest on any security of the Central Government or a State Government.
(ii) Interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act."
It would, therefore, appear to us that the provisions of the Land Acquisition Act where interest is payable under Sections 28 and 34 and tax is deducted at source under Section 194-A of the Income Tax Act would not apply in the present case where GDA has been asked to pay interest on the amount refunded to the Complainant because of its failure to construct the promised flat and to provide necessary facilities. The amounts which were paid to the GDA by the Complainant were not paid by way of any deposit or GDA had not borrowed that money. And, as a matter of fact, interest as defined in sub-section (28) of Section 2 of the Income Tax Act is not that interest as was directed to be paid to the Complainant by the GDA. Interest to the Complainant (here Dr.Gupta) has not been awarded on the basis of any deposit made by the Complainant or GDA being the borrower of any money of the Complainant. Here interest payment is by way of damages. Merely describing the damages as by way of interest do not make them as interest under the Income Tax Act.
A similar question arose before the Income Tax Appellate Tribunal in the case of Delhi Development Authority Vs. Income Tax Officer (1995) Vol. 53 Income Tax Tribunal Decisions, page 90 and the Appellate Tribunal held that amounts credited in the accounts of the allottees were not in the nature of interest within the meaning of Section 2(28A) of the Income Tax Act and the Appellate Tribunal quashed the orders of those authorities and directed that what is recovered by the DDA be refunded. The Appellate Tribunal also hoped that DDA will be equally quick in paying back the amounts if recovered from the allottees. It appears to us that the revenue authorities did not challenge this order of the Appellant Tribunal by making reference to the High Court under Section 256 of the Income Tax Act. The Appellate Tribunal held that the amounts paid/credited to allottees by the DDA under SFS (Self Finance Scheme) did not fall under any category in Section 2(28A) of the Income Tax Act, but represented measure for quantifying compensation for delay in construction and handing over possession of dwelling unit which was in nature of non-taxable capital income. In coming to this conclusion the Appellate Tribunal relied on various judgments including that of the Supreme Court in the case of Dr.Shamlal Narula Vs. Commissioner of Income Tax.
It will be interesting to note that DDA filed a writ petition in the Delhi High Court arising out of the aforesaid judgment of the Appellate Tribunal wherein it demanded interest with reference to Sec.244(1A) and 244A of the Income Tax Act. This was on account of the revenue authorities not refunding the amounts in terms of the order of the Appellate Tribunal. The Division Bench of the Delhi High Court consisting of Hon'ble Mr. Justice R.C.Lahoti (as his Lordship then was) and Hon'ble Mr. Justice J.K.Mehra, held in favour of the DDA that Sections 244 and 244A are applicable and directed refund of the amount with interest in view of the order of the Appellate Tribunal.
The word interest used in the order of the State Commission is not what interest is as defined in Section 2(28-A). There in the order of the State Commission interest means compensation or damages for delay in construction of the house or handing over possession of the same causing consequential loss to the Complainant by way of escalation in the price of the property and also on account of distress, disappointment faced by him. Interest in the order has been used merely as a convenient method to calculate the amount of compensation in order to standardise it. Otherwise, each case of the allottee will have to be dealt with differently. Nomenclature does not decide the issue.
In our view, therefore, considering the definition of 'interest' as contained in Section 2(28-A) of the Income Tax Act, provisions of Section 194-A were not applicable and the GDA was clearly wrong in deducting the TDS from the interest payable to the Complainant. Accordingly, the order of the State Commission is upheld and this Revision Petition is dismissed.
( D.P. WADHWA )
( J.K. MEHRA )
( RAJYALASHMI RAO )
( B.K. TAIMNI )