Srinivasaiah and Govindaiah and Vittalaiah and Naganna and Prema V. Income Tax Officer TDS, Income Tax Department and Special Land Acquisition Officer Karnataka Industrial Area Development Board

WA/192/2007

AI Insights

The case involves a dispute where the Karnataka Industrial Area Development Board (KIADB) acquired land from the appellants for a specific project and deducted 10% from the compensation awarded towards income tax. The appellants, being aggrieved by this deduction, filed a writ petition which was initially dismissed, leading to the current appeal. The main legal contention was whether the deduction of 10% TDS from the compensation for agricultural land acquisition was permissible under the Income Tax Act, 1961, particularly focusing on Section 194LA and its applicability to agricultural land within certain urban limits.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 794310 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 09-10-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND; BASAVARAJ V SABARAD
• Assessee Lawyers: P S MANJUNATH
• Keywords: Agricultural Land; Compensation; Income tax deduction; Land Acquisition; TDS
• Section: 194LA; 2(14)(iii)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 09TH DAY OF OCTOBER, 2012 PRESENT THE HON’BLE MR.JUSTICE K. SREEDHAR RAO AND THE HON’BLE MR.JUSTICE B.V.PINTO WA NO.192 OF 2007 BETWEEN 1. SRINIVASAIAH AGED ABOUT 65 YEARS S/O CHIKKAHYDAIAH @ CHUBINAIAH 2. GOVINDAIAH AGED ABOUT 70 YEARS S/O CHIKKAHYDAIAH @ CHUBINAIAH 3. VITTALAIAH AGED ABOUT 60 YEARS S/O CHIKKAHYDAIAH @ CHUBINAIAH 4. NAGANNA AGED ABOUT 43 YEARS S/O VENKATESHAIAH AND GRANDSON OF CHIKKAHYDAIAH @ CHUBINAIAH 5. PREMA AGED ABOUT 55 YEARS D/O CHIKKAHYDAIAH @ CHUBINAIAH ALL ARE R/O BELAGOLA VILLAGE 2 SRIRANGAPATNA TALUK MANDYA DISTRICT ... APPELLANTS (BY SRI. P S MANJUNATH, ADV.) AND 1. INCOME TAX OFFICER TDS, INCOME TAX DEPARTMENT SHILPASHREE NO.55/1 OPP STERLING TALKIES MYSORE 2. SPECIAL LAND ACQUISITION OFFICER KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD, ZONAL OFFICE, METAGALLI INDUSTRIAL AREA,NEAR VIKRANTH TYRES, KST ROAD MYSORE –570 016 ... RESPONDENTS (BY SRI K.V.ARAVIND, ADV. FOR R1 AND SRI BASAVARAJ V SABARAD, ADV. FOR R2) THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN THE WRIT PETITION No.16240/2006 DATED 15/12/2006. THIS APPEAL IS COMING ON FOR FINAL HEARING THIS DAY, SREEDHAR RAO J., DELIVERED THE FOLLOWING:- J U D G M E N T The appellants are the land owners, whose land is acquired by KIADB for a specific project and the compensation is awarded by the KIADB. The KIADB deducted 10% of the compensation towards income tax. 3 The appellants – land owners aggrieved by the said order, filed the writ petition. The learned single Judge has found that if there is no tax liability on the landowner, he can seek refund by filing the returns. The appellants being aggrieved by the said order has filed this appeal. 2. The provisions of Section 2(14)(iii) and Section 194 LA of the Income Tax Act, reads thus:- Section 2(14)(iii) – Agricultural land in India, not being land situate – (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that 4 area and other relevant considerations, specify in this behalf by notification in the Official Gazette. Section 194LA of Income Tax Act :- 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 case or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten percent 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 items (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. 5 The provision of Section 194LA of the I.T.Act, 1961 declares that any compensation paid on acquisition, except in case of agricultural land, 10% of the compensation has to be deducted towards income tax. The explanation (i) of the Section 194LA defines that agricultural land includes the agricultural land as referred to in Clause 14 of Section 2. The above said provision of law makes it clear, whether the agricultural land situated within the municipal or corporation limits or otherwise when acquired, there is no need to deduct 10% from the compensation amount towards TDS. Therefore, any deduction of the amount from the compensation would be illegal and contrary to Section 194LA of Income Tax Act, 1961. The Circular issued by the Income Tax Department vide Annexure R4 is in respect of the agricultural land situated within the municipal and municipal corporation or notified areas within specified distance. A deduction should be effected U/s.194LA of Income Tax Act, is untenable 6 as per expressed provision of law. In that view of the matter, this writ appeal is allowed. Sd/- JUDGE Sd/- JUDGE nvj "