SHARANAPPA V. THE DEPUTY COMMISSIONER AND ORS

WP/201497/2023

AI Insights

The case revolves around a dispute concerning the deduction of tax at source from compensation awarded for land acquisition under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013. The petitioner, Sharanappa, challenged the order of the Principal District and Sessions Judge, Raichur, which directed a deduction of 30% from the accrued interest on the compensation amount. The petitioner argued that the compensation was exempt from tax under Section 96 of the Act of 2013 and the second proviso to Section 194LA of the Income Tax Act, 1961. The court found that the compensation awarded under the Act of 2013 is indeed exempt from income tax, and thus, no tax deduction at source was permissible.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 692400 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 31-05-2023
• Assessment Year: misc
• Laws Referred To: Constitution of India, Land Acquisition Act, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SHIVAKUMAR TENGLI
• Assessee Lawyers: MAHANTESH PATIL
• Keywords: Certiorari; Certiorari; Compensation; Land Acquisition; Tax Deduction; Writ petition
• Section: 194LA; 4(1); 46; 96; 64(1); 226; 227

Judgement Text

" - 1 - WP No. 201497 of 2023 IN THE HIGH COURT OF KARNATAKA KALABURAGI BENCH DATED THIS THE 31ST DAY OF MAY, 2023 BEFORE THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ WRIT PETITION NO. 201497 OF 2023 (LA-RES) BETWEEN: SHARANAPPA S/O HAMPAYYA, AGE: 53 YEARS, OCCUPATION: AGRICULTURE, R/O. CHIKKABERIGI VILLAGE, TQ: SINDHANUR, DIST: RAICHUR-584132. …PETITIONER (BY SRI MAHANTESH PATIL, ADVOCATE) AND: 1. THE DEPUTY COMMISSIONER RAICHUR, DIST: RAICHUR.-584101 2. THE LAND ACQUISITION OFFICER, ASSISTANT COMMISSIONER LINGASUGUR, DIST: RAICHUR-584122. 3. THE EXECUTIVE ENGINEER MINOR IRRIGATION DIVISION WATER RESOURCES DEPARTMENT, DIVISION OFFICE, KUSHTAGI, TQ: KUSHTAGI, DIST: KOPPAL-583277, NOW AT KINNAL ROAD, KOPPAL TOWN, DIST: KOPPAL. …RESPONDENTS (BY SRI SHIVAKUMAR R. TENGLI, AGA) R Digitally signed by VARSHA N RASALKAR Location: HIGH COURT OF KARNATAKA - 2 - WP No. 201497 of 2023 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT IN THE NATURE OF CERTIORARI TO QUASH THE ORDER DATED 21.04.2023 IN EP NO.610/2018 PASSED BY THE LEARNED PRL.DISTRICT AND SESSIONS JUDGE, RAICHUR VIDE ANNEXURE- J AND ETC. THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER 1. Learned Additional Government Advocate accepts notice for respondents. 2. The petitioner is before this Court seeking for the following reliefs: a. \"Issue a Writ in the nature of Certiorari to quash the order dated 21.04.2023 in EP No. 610/2018 passed by the learned Prl. District and Sessions Judge, Raichur, vide Annexure-J, in the interest of justice and equity. b. Issue such other writ or order or direction as this Hon'ble Court deems just and proper in circumstances of the case and allow this Writ Petition, in the interest of justice and equity.\" 3. The petitioner claims to be the owner of the land in Sy.No.152/*B measuring 8 acres situated at Chikkaberagi village, Sindhanur Taluk, Raichur District. The said land was proposed to be acquired by the respondent No.2 by issuing a notification - 3 - WP No. 201497 of 2023 under Section 4(1) of the Land Acquisition Act on 05.12.2011. 4. Out of 8 acres of land, the possession of six acres was taken over prior to such notification for construction of percolation tank. Since acquisition was not completed and in the meanwhile, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (for short hereinafter referred to as the ‘Act of 2013’) came into force, a reference was made under Section 64(1) of the Act of 2013, as regards compensation, which came to be numbered as LAC No.6/2017 before the First Additional District and Sessions Judge, Raichur. 5. The said Court fixed the compensation of Rs.2,99,435/- per acre, additional market value at 12% per annum and 12% solatium on compensation and awarded 9% interest per annum for a period of - 4 - WP No. 201497 of 2023 one year from the date of preliminary notification and thereafter interest at the rate of 15% per annum. 6. Since the amounts were not paid by the State, Execution Petition came to be filed by the petitioner in Execution Petition No.610/2018 before the First Additional District Judge, Raichur. The State continued to default on the payment to be made, the petitioner filed I.A.No.III under Order 21 Rule 46B read with Section 151 CPC for garnishee order to be passed as regards the bank where the account of the State is held which also came to be allowed. 7. Finally, the Additional District Judge, Raichur directed payment of necessary amount to the petitioner by way of e-payment. However, before such payment, the said Court by its letter on 17.04.2023 addressed to the Special Land Acquisition Officer, Raichur, sought for information as regards whether the amount of compensation is taxable or not and what - 5 - WP No. 201497 of 2023 is the percentage of Tax to be Deducted at Source on the compensation amount. 8. Shockingly, the Special Land Acquisition Officer (for short hereinafter referred to as ‘SLAO’) furnished the information stating that in terms of Section 194LA of Income Tax Act, 1961 (for short, hereinafter referred to as ‘IT Act’), 10% would be deductible on interest on the compensation, in the event of PAN card details are furnished and in case PAN Card details are not furnished 20% would have to be deducted. 9. The Income Tax Ward Officer, Raichur replied to the letter of the First Additional District Judge, Raichur by extracting Section 194LA of the Act without replying to the queries raised by the Court. 10. Shockingly, the Principal District and Sessions Judge, Raichur, vide order dated 21.04.2023, directed withholding of 30% of the amount on the accrued interest and to make payment of the balance amount - 6 - WP No. 201497 of 2023 to the petitioner and deposit the deducted amount to the income tax department. It is challenging the said order that the petitioner is before this Court. 11. Sri Mahantesh Patil, learned counsel for the petitioner would submit that what has been ordered is compensation on account of land being acquired by the State, the compensation amount not being covered under Section 194LA of the IT Act, more so, in terms of second proviso thereof wherein it has been categorically stated that no deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income tax under Section 96 of the Act of 2013, no such deduction could have been ordered. 12. The SLAO mislead the Court resulting in injustice being caused to the petitioner. Inasmuch as when no tax is payable on the compensation amount, no deduction is required to be made on the amount - 7 - WP No. 201497 of 2023 payable to the petitioner. Deduction made reduces the compensation amount and forces the petitioner to file his returns and thereafter seek for refund from the income tax authorities which causes inconvenience to the petitioner apart from being violative of Section 194LA of the IT Act. 13. Sri Shivakumar R. Tengli, learned Additional Government Advocate would submit that the exemption under Section 194LA of the Income Tax Act is only as regards agricultural land and in the event of non–agricultural land and or buildings are acquired and compensation paid, the same would attract deduction of tax at source. 14. Heard Sri Mahantesh Patil, learned counsel for the petitioner, Sri Shivakumar R. Tengli, learned Additional Government Advocate for respondents and perused the records. - 8 - WP No. 201497 of 2023 15. The Short point that would arise for consideration in the present matter is whether tax is required to be deducted at source on compensation amount paid on account of acquisition of land? 16. Section 194LA of the Income Tax Act, 1961, is reproduced hereunder for easy reference. ‘194LA. Payment of compensation on acquisition of certain immovable property.—Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon: Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed two hundred thousand rupees. Explanation:--For the purposes of this section- (i) \"agricultural land\" means agricultural land in India including land situate in any area referred to in terms (a) and (b) of sub-clause (iii) of clause (14) of section 2; (ii) \"immovable property\" means any land (other than agricultural land) or any building or part of a building.] - 9 - WP No. 201497 of 2023 17. A perusal of the above provisions would indicate that any person responsible for paying to the resident any sum being in the nature of compensation or enhanced compensation, or consideration or enhanced consideration on account of compulsory acquisition of immovable property other than agricultural land at the time of payment of such sum, has to deduct an amount equivalent to 10% as income tax and deposit the same with the concerned authority to the account of the assessee. 18. The second proviso clearly makes out an exemption or exception as regards payment made in respect of award or agreement which has been exempted from levying of income tax. The proviso does not make any difference between agricultural or non- agricultural land. The exemption in terms of second proviso applies in its entirety when the land has been acquired and compensation is covered under Section 96 of the Act of 2013. - 10 - WP No. 201497 of 2023 19. Section 96 of the Act of 2013 reads as under: \"Section 96: No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same.\" 20. A perusal of Section 96 of the Act of 2013 would make it abundantly clear that no income tax or stamp duty shall be levied on any award or agreement made under the Act except under Section 46. 21. Section 46 of the Act of 2013 reads as under: \"46. Provisions relating to rehabilitation and resettlement to apply in case of certain persons other than specified persons. (1) Where any person other than a specified person is purchasing land through private negotiations for an area equal to or more than such limits, as may be notified by the appropriate Government, considering the relevant State specific factors and circumstances, for which the payment of Rehabilitation and Resettlement Costs under this Act is required, he shall file an application with the District Collector notifying him of-- (a) intent to purchase; (b) purpose for which such purchase is being made; (c) particulars of lands to be purchased. - 11 - WP No. 201497 of 2023 (2) It shall be the duty of the Collector to refer the matter to the Commissioner for the satisfaction of all relevant provisions under this Act related to rehabilitation and resettlement. (3) Based upon the Rehabilitation and Resettlement Scheme approved by the Commissioner as per the provisions of this Act, the Collector shall pass individual awards covering Rehabilitation and Resettlement entitlements as per the provisions of this Act. (4) No land use change shall be permitted if rehabilitation and resettlement is not complied with in full. (5) Any purchase of land by a person other than specified persons without complying with the provisions of Rehabilitation and Resettlement Scheme shall be void ab initio: Provided that the appropriate Government may provide for rehabilitation and resettlement provisions on sale or purchase of land in its State and shall also fix the limits or ceiling for the said purpose. (6) If any land has been purchased through private negotiations by a person on or after the 5th day of September, 2011, which is more than such limits referred to in sub-section (1) and, if the same land is acquired within three years from the date of commencement of this Act, then, forty per cent. of the compensation paid for such land acquired shall be shared with the original land owners.\" 22. A reading of Section 46 of the Act of 2013 would indicate that it relates to purchase of land through private negotiations, which necessarily means otherwise than through acquisition. This being so since the purchase price is fixed as per private - 12 - WP No. 201497 of 2023 negotiation and not by fixing of compensation under an award to be passed by following the parameters laid down under the Act of 2013. 23. Thus, any land acquired and compensation paid in terms of an award passed under the Act of 2013, in terms of Section 96 of the Act of 2013, the compensation payable thereunder would not attract any income tax or stamp duty in terms of Section 96 of the Act of 2013 which is reinforced by the second proviso to Section 194LA of the IT Act. 24. Sri Shivakumar R. Tengli, learned Additional Government Advocate seeks to distinguish acquisition of agricultural land and non-agricultural land. In the light of Section 96 of the Act of 2013 read with Second proviso to Section 194LA of the IT Act would categorically indicate that no such distinction could be made and that all lands which are acquired and the award passed in terms of the Act of 2013, is exempted from payment of income tax. - 13 - WP No. 201497 of 2023 When the compensation itself is exempted from income tax, the question of deducting tax at source on such exempted income would also not arise. Hence, looked at from any angle, as long as the award is made under the Act of 2013, the compensation paid would not be liable for any tax. It is not in dispute in the present matter that the an Award has been passed under the Act of 2013. This aspect has been completely missed out by the SLAO in his letter to the court, and the court, without looking into the provisions and appreciating the import thereof, has passed the impugned order, requiring this court to intercede and correct the injustice caused. 25. In that view of the matter, I pass the following: ORDER i. The Writ Petition is allowed. ii. A certiorari is issued, the order dated 21.04.2023, in EP No.610/2018 passed by the Principal District - 14 - WP No. 201497 of 2023 and Sessions Judge, Raichur vide Annexure-J is hereby quashed. iii. The entire compensation amount payable to the petitioner is directed to be paid to the petitioner without deduction of any tax at source. iv. The Additional Registrar General of this Court is directed to forward a copy of this order to all the Courts which are handling land acquisition matters including the compensation thereto for necessary compliance. v. The Principal Secretary, Revenue Department is also directed to forward a copy of this order to all the Special Land Acquisition Officers in the State for necessary compliance. Sd/- JUDGE VNR List No.: 1 Sl No.: 17 "