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2023 (9) TMI 1443 - HC - Income TaxQuantum of compensation and deduction of income tax at source on the compensation without granting any exemption from payment of income tax - compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - compensation received pursuant to acquisition by the State/KIADB Karnataka Industrial Areas Development Board - Entitlement to refund the tax deducted at source together with applicable interest from the date of deposit till the date of refund - compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Whether the petitioners are entitled to compensation under the Land Acquisition Act, 1894 or under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act ,2013, in respect of lands acquired pursuant to preliminary notification issued after 01.01.2014 u/s 28(1) of the Karnataka Industrial Area Development Act, 1966? HELD THAT - The claim of the petitioners is for grant of compensation under the Act, 2013. Though respondent authorities and the appellant herein do not seriously dispute grant of compensation under the Act, 2013, except stating that the package compensation offered by the appellant herein applying provisions of Act, 2013 is only for the limited purpose of passing consent award and if it was not accepted the compensation would be awarded in accordance provisions of KIAD Act, 1966, it is necessary at this juncture to refer to the very notification dated 15.10.2015 issued under Section 28(1) of the KIAD Act, 1966 seeking to acquire the subject property in that it is stated that compensation for acquisition would be paid in terms of Act, 2013. When a representation to pay the compensation is under Act, 2013 is made in the very notification, respondent-authorities cannot be allowed to contend the contrary. In that view of the matter the contention of the respondent-authorities that grant of compensation in the cases referred to and relied upon by the respondents/ writ petitioners was on the basis of the fact the land acquired was not for BMRCL and the contention of the appellant herein that the calculation of package compensation that was made under Act, 2013 is only for the limited purpose of passing consent award cannot be countenanced. It is also necessary to note that no appeal has been filed by the respondents 5, 6, 7 and 8 on the question of validity or otherwise of the resolution of the KIADB passed in its 343rd meeting dated 27.08.2016 which is heavily relied upon by the respondents/petitioners and accepted by learned Single Judge. State Government by its letter dated 08.08.2019 bearing No. CI 176 SPA 2019 had reiterated and reaffirmed the resolution of the KIADB to pay the compensation under the Act, 2013. The contention of the appellant that KIADB under the scheme of Act, 1966 is not having any power or authority in the matter of determination and payment of compensation which power and authority is vested exclusively in the State Government though appears to be tenable, however, in view of the fact that the resolution of the KIADB passed in its 343rd meeting referred to hereinabove has apart from being given effect to has been accepted and reiterated by the State Government in its communication referred to above, the said contention pales into insignificance. That apart KIADB in the aforesaid proceedings namely Puttalakshmma and Jalaja has relied upon said resolution enabling this Court to accept the contentions of the land losers of their entitlement for compensation under Act, 2013. As already noted above, there has been no challenge to the validity or otherwise of the said resolution of KIADB by the State Government and the same has attained finality. As regards the contentions of the appellant that it being a joint venture entity consisting of Central Government and State Government as their share holders and being liable to pay the compensation is entitled to maintain the challenge to the impugned order, and though referring to the certain clauses of the memorandum of understanding in terms of which the Appellate entity has been brought into existence, submission was made on behalf of the appellant that since payment of compensation, repayment of debt is the responsibility of the appellant- BMRCL it has locus standi to question the payment of compensation under Act, 2013, even before the amendment brought in to Section 30 of KIAD Act, 1966, it is necessary to refer to Annexure-H a communication dated 21.10.2016 addressed by BMRCL to the Special Land Acquisition Officer- respondent No. 7 with respect to providing package compensation. In that taking into consideration of the Notification dated 21.10.2016 and the value of land, solatium of 100% and the interest at 12% as provided under Section Act, 2013 has been calculated. Based on the said compensation package notices under Section 29(2) of KIADB Act, 1966 has been issued by KIADB and in furtherance thereof, general award as per Annexure-H1 has been passed by KIADB on 29.05.2018 though rejected by the petitioners. Appellant has made out a case for maintainability of the writ appeal, cannot be heard to say that the respondents/petitioners are not entitled to payment of compensation under Act, 2013. Similarly, though no appeal is preferred by the State and the KIADB, a feeble attempt is made by them to contend that the payment of compensation under Act, 2013 was made in the cases of Puttalakshmamma, Jalaja, Mahesh and Jemcy Ponnappa as the said cases were not concerned with the acquisition of land of BMRCL, the said submissions cannot be countenanced in view of the law laid down by the Apex Court in the case of Nagpur Improvement Trust 1972 (12) TMI 82 - SUPREME COURT wherein the Apex Court has held that if the existence of two acts enables the State to give one owner different treatment from another equally situated, the owner who is discriminated against can claim protection of Article 14. That it is immaterial under which Act and for what purpose the land is acquired as far as land looses or concerned the differential standard of compensation cannot be applied. Respondents/petitioners, as rightly held and declared by learned Single Judge, are entitled for the compensation under Act, 2013.
Issues Involved:
1. Maintainability of the writ petitions. 2. Entitlement to compensation under the Land Acquisition Act, 1894 or the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. 3. Exemption from payment of income tax and deduction of tax at source on compensation. Summary: Issue 1: Maintainability of the Writ Petitions The court considered whether the writ petitions were maintainable given the alternative remedy of seeking enhancement of compensation before the Reference Court. The learned Single Judge concluded that the writ petitions were maintainable, as the respondents/petitioners had already sought such a reference. Issue 2: Entitlement to Compensation under Act, 1894 or Act, 2013 The respondents/petitioners contended they were entitled to compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (Act, 2013) rather than the Land Acquisition Act, 1894 (Act, 1894). The learned Single Judge ruled in favor of the respondents/petitioners, holding that all awards passed and compensation payable for land acquisitions pursuant to notifications issued after 01.01.2014 must be under Act, 2013, not Act, 1894. This was supported by the resolution of the Karnataka Industrial Areas Development Board (KIADB) passed in its 343rd meeting held on 27.08.2016, which stated that compensation for acquisitions under the KIAD Act, 1966 where preliminary notifications were issued on or after 01.01.2014 should be paid as per Act, 2013. Issue 3: Exemption from Payment of Income Tax and Deduction of Tax at Source The respondents/petitioners argued that the compensation payable was exempt from income tax under Section 96 of Act, 2013 and the CBDT Circular dated 25.10.2016. The learned Single Judge agreed, stating that compensation awarded under Act, 2013 is exempt from income tax and from deduction of tax at source. This was further supported by the amendment to the Income Tax Act, 1961, specifically Section 194-LA, and the CBDT Circular, which clarified that compensation received under Act, 2013 is not taxable. Appeals and Conclusion The appeals filed by the Bangalore Metro Rail Corporation Limited and the Central Board of Direct Taxes were dismissed. The court upheld the learned Single Judge's decision that the respondents/petitioners are entitled to compensation under Act, 2013 and that such compensation is exempt from income tax and deduction of tax at source. The court also noted that there was no challenge to the validity of the KIADB resolution, which had been accepted and reiterated by the State Government. The court directed the Registry to delink CCC No. 1047/2022 to be tried and adjudicated separately.
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