Section 194LA is applicable for TDS on payments for Compulsory acquisition of immovable property exceeding Rs. 2,50,000 p.a. @ 10% . However u/s 194-IA TDS @ 1% is applicable on transfer of immovable property (other than compulsory acquisition) for consideration more than 50 lacs.
Agricultural land is outside the TDS purview of both section 194LA as well as S.194-IA. But while for S.194-IA, urban agricultural land [i.e. land in municipal limits or specified limits depending upon population] is subject to TDS , there is, however, no TDS in case of compulsory acquisition of Urban Agricultural land.
In one such case before Gujrat High Court, Compensation was awarded to different landowners which basically included three elements. (1) compensation for land; (2) compensation for buildings situated on the land; (3) compensation for trees. All lands were divided into non irrigated agricultural lands and Kharaba lands.
Land had been specified as agricultural land in revenue records, but, not found to be so used for agricultural purposes, held by Gujrat High Court :
“The fact that a particular land is treated as an agricultural land in the revenue records and so treated since long and continues to invite land revenue seems to be strong prima facie factors to suggest that the land was agricultural land” [Para 21]
The visit, would have taken place few years after the acquisition was completed and possession of the land was handed over to the company for whose benefit the acquisition was carried out. The character of the land also would have undergone major changes.
It would be highly unsafe to rely on a spot visit by the Assessing Officer of such circumstances to overrule the initial presumption available from the revenue records that the lands were agricultural lands.
[Para 24]
Also held that If the owner of the land had not taken any step, which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land will have to be regarded as agricultural even though it is included within the municipal limits or it is sold on a per square yard basis and not acreage basis
Any compensation for loss of fruit bearing trees must necessarily be part of the compensation for agricultural land.[Para 26]
If compensation for building on agricultural land is for building in nature of Small residential units of the farmers who were cultivating the land or in the nature of go-down for storing the agricultural implements or agricultural produce, it shall also be part of agricultural land [Para 30]
However compensation for farmer houses not in nature aforementioned shall be liable to TDS