KOCHI METRO RAIL LIMITED V. UNION OF INDIA

WA/2396/2015

AI Insights

The case revolves around the Kochi Metro Rail Limited's appeal concerning the taxability of compensation paid for land acquisition under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The primary legal question was whether the compensation received under the agreements for land acquisition for the Kochi Metro project was exempt from income tax as per Section 96 of the Compensation Act. The court examined previous decisions and the specific provisions of the Compensation Act, along with the state policy that offered higher compensation than the statutory minimum. The Central Board of Direct Taxes (CBDT) circular further clarified that such compensation would not be taxable under the Income Tax Act, 1961, even in the absence of a specific exemption.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 678306 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 04-11-2016
• Assessment Year: misc
• Other Referred Cases: W.P.(C)No.20873 of 2015, W.A.No.1536 of 2016, W.P.(C)No.27207 of 2016
• Laws Referred To: Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: N NAGRESH; MATHEW K; DOMSON VATTAKUZHY; K M V PANDALAI; CHRISTOPHER ABRAHAM
• Assessee Lawyers: V M KURIAN; MATHEW KURIAN; K T THOMAS; ISAC PAUL
• Keywords: Compensation; Income tax exemption; Kochi Metro Rail Project; Land Acquisition
• Section: 108; 96

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN FRIDAY, THE 4TH DAY OF NOVEMBER 2016/13TH KARTHIKA, 1938 WA.No. 2396 of 2015 IN WP(C).21478/2015 -------------------------------------------- AGAINST THE JUDGMENT IN WP(C) 21478/2015 of HIGH COURT OF KERALA DATED 9.9.2015 APPELLANT/PETITIONER: ----------------------- KOCHI METRO RAIL LIMITED, 8TH FLOOR,REVENUE TOWER,PARK AVENUE, ERNAKULAM, PIN-682011, REPRESENTED BY ITS DIRECTOR(PROJECTS),SHRI MAHESH KUMAR. BY ADVS.SRI.V.M.KURIAN SRI.MATHEW B. KURIAN SRI.K.T.THOMAS SRI.ISAC T.PAUL RESPONDENTS/RESPONDENTS: ------------------------- 1. UNION OF INDIA, NIRMAN BHAVAN,NEW DELHI,PIN-110011, REPRESENTED BY SECRETARY,MINISTRY OF URBAN DEVELOPMENT. 2. STATE OF KERALA, SECRETARIAT,M.G.ROAD,THIRUVANANTHAPURAM,PIN-695001. 3. THE DISTRICT COLLECTOR, CIVIL STATION,KAKKANAD,ERNAKULAM DISTRICT,PIN-682030. 4. THE COMMISSIONER OF INCOME TAX, CENTRAL REVENUE BUILDING, I.S.PRESS ROAD,ERNAKULAM,PIN-682018. ADDL.5. Dr.JOJI CHERIYAN, S/O.K.J.CHERIYAN, 8/487, LIBRARY ROAD, ALUVA-683 102. ADDL.6. GEORGE XAVIER, S/O.LATE XAVIER PARACKAT, PARACKAT HOUSE, DESOM POST, ALUVA-683 102. (ADDL.RESPONDENTS 5 AND 6 ARE IMPLEADED AS PER ORDER DTD.17.2.2016 IN IA 1512/15) R1 BY ADV. SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL (ADDL-R5 & R-R6) BY ADV. SRI.MATHEW JOHN (K) (ADDL-R5 & R-R6) BY ADV. SRI.DOMSON J VATTAKKUZHY BY SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT BY SRI.CHRISTOPHER ABRAHAM, SC, IT DEPARTMENT THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 04-11-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA.No. 2396 of 2015 IN WP(C).21478/2015 APPENDIX RESPONDENTS' ANNEXURES : ANNEXURE-R5(a) : A TRUE COPY OF THE AGREEMENT FOR SALE OF LAND EXECUTED BETWEEN THE 1st PETITIONER AND THE DISTRICT COLLECTOR DATED 20.10.2014. ANNEXURE-R5(b) : A TRUE COPY OF THE AGREEMENT FOR SALE OF LAND EXECUTED BETWEEN THE 2nd PETITIONER AND HIS BROTHER AND THE DISTRICT COLLECTOR DATED 23.3.2015. //TRUE COPY// P.A.TO JUDGE ami/ THOTTATHIL B.RADHAKRISHNAN & DEVAN RAMACHANDRAN, JJ. ----------------------------------------------- W.A.No.2396 of 2015 ----------------------------------------------- Dated this the 4th day of November, 2016 J U D G M E N T Thottathil B.Radhakrishnan, J. 1. This writ appeal, by the Kochi Metro Rail Ltd., arises from a writ petition filed by it, raising an issue as to the availability of exemption from income tax in terms of the provisions of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, (hereinafter referred to as 'the Compensation Act'), though pointedly the issue relating to Section 96 is pithily raised and argued in this appeal. Apparently, the issue relatable to Section 96 qua the provisions of the Income Tax Act, 1961 stands covered by the decisions of this Court in W.P.(C)No.20873 of 2015, W.A.No.1536 of 2016 and W.P.(C)No.27207 of 2016. The only issue that remains for decision is as to whether Section 96 of the Compensation Act applies only to compulsory acquisition or to awards and agreements in terms of the provisions of the Act or to agreements which do not fall within the canopy of the Act. The learned counsel for the Revenue pointed out that in terms of Section 96 and having regard to the nature of transaction, it W.A.No.2396/15 :-2-: can be seen that the acquisitions made by the appellant from different land holders are essentially contracts which resulted out of negotiations and concluded in inter partes transfers. However, Section 108 of the Compensation Act contains a provision under which the State may make a law or a policy which can provide a higher compensation than calculated under the Compensation Act and it would be optional for the land owners to accept such a scheme of settlement. The Government of Kerala has brought out G.O.(Ms)No.485/2015/RD dated 23.9.2015 specifically under Section 108 of the Compensation Act and approving a State Policy for compensation. In terms of that, the State has brought a policy in place and has provided through Clause 17, the manner in which a sale deed can be arrived at, at the control and regulation of the Collector. With this in view, we also immediately notice the clarification given by the CBDT through Circular No.36/2016 dated 25.10.2016, in which it has been specifically stated that after examination by the Board, it is clarified that compensation received in respect of award or agreement, which has been exempted from levy of income tax vide Section 96 of the Compensation Act, shall also not be taxable under the provisions of the Income Tax Act, 1961, even if there is no specific provision of exemption for such W.A.No.2396/15 :-3-: compensation in the Income Tax Act, 1961. 2.In the light of the aforesaid, this writ appeal succeeds and resultantly, the impugned judgment is vacated. Consequentially, this writ appeal is allowed and it is declared that no tax is payable in terms of the provisions of the Income Tax Act, 1961 on amounts paid for acquisition of lands for the Kochi Metro Rail project, which will be governed by the State Government's order, G.O.(Ms)No.485/2015/RD and it is further ordered that there will be no such tax deductible at source or otherwise on amounts paid as compensation for such land acquisition. Writ appeal is ordered accordingly. All pending interlocutory applications are closed. Sd/- THOTTATHIL B.RADHAKRISHNAN JUDGE Sd/- DEVAN RAMACHANDRAN JUDGE ami/5.11.16 //True copy// P.A.to Judge "