2004 (11) TMI 594 - HC - Income Tax

Summary

Issues Involved:
1. Maintainability of the Civil Revision Petition.
2. Calculation and adjustment of the amounts deposited by the State.
3. Deduction of income-tax from the decree debt.
4. Execution of the decree and proclamation of property for sale.

Issue-Wise Detailed Analysis:

1. Maintainability of the Civil Revision Petition:
The respondent-decree holder raised a preliminary objection questioning the maintainability of the Civil Revision Petition, arguing that the order dated 19th October 2002, fixing the amount due, had already become final and conclusive, and hence, the State's challenge to that order in this petition was barred by res judicata. However, it was countered that the order was only an interim order in a pending execution petition and could be challenged in the revision petition. The court held that the contention of the State was not barred by res judicata and allowed the challenge.

2. Calculation and Adjustment of the Amounts Deposited by the State:
The court referred to the provisions of the Land Acquisition Act, particularly Sections 23 and 28, for determining compensation, solatium, and interest. It was emphasized that the compensation determined by the reference Court consists of distinct components: market value, 12% interest, solatium, and interest on enhanced compensation. The court clarified that the Land Acquisition Officer must deduct income tax at source as per the Income Tax Act. The court also discussed the adjustment of deposited amounts, stating that the amounts should first be adjusted towards land value and solatium, followed by interest under Section 23(1A) and then Section 28. The court held that the principle laid down in Prem Nath Kapur's case, which states that the amount deposited should be adjusted towards additional compensation first, was applicable.

3. Deduction of Income-Tax from the Decree Debt:
The court discussed the statutory obligation under the Income Tax Act to deduct tax at source from amounts payable as compensation and interest. It was held that the Land Acquisition Officer was correct in deducting income tax from the amounts due under the decree, and the claimant's remedy was to seek a refund from the Income Tax Department if they were not liable to pay such tax. The court referred to several Supreme Court decisions, including Smt. Rama Bai vs. CIT and Bikram Singh & Ors. vs. Land Acquisition Collector & Ors., which held that interest on enhanced compensation is taxable. The court also noted the relevant circulars and statutory provisions, including Sections 194A, 194L, and 194LA of the Income Tax Act, which mandate the deduction of tax at source.

4. Execution of the Decree and Proclamation of Property for Sale:
The court found that the executing Court's order proclaiming the property for sale was not a speaking order and had simply accepted the statements filed by the decree holder. The court set aside the impugned orders and remanded the execution petition to the executing Court for reconsideration. The executing Court was directed to calculate the amount in accordance with law and pass appropriate orders.

Conclusion:
The Civil Revision Petition was allowed, and the impugned orders were set aside. The execution petition was remanded to the executing Court for recalculating the amounts due in accordance with the law. The parties were directed to bear their own costs. The registry was instructed to forward copies of the order to all Subordinate Judges' Courts for information and compliance.