2023 (9) TMI 1444 - HC - Income Tax

Payment of Income tax on the compensation under the provisions of Right to Fair Compensation and Transparency in Land Acquisition Act, 2013 - Quantum of compensation and deduction of income tax at source on the said compensation without granting any exemption from payment of income tax - As contended that the compensation was required to be awarded under Act, 1894 and not under Act, 2013 as the same is not applicable in respect to the acquisition made by KIADB. That the deduction of tax at source was in accordance with provisions of law as no exemption is provided from payment of income tax on the compensation. HELD THAT - As rightly taken note of by the learned Single Judge that in the background of upholding the contention of the respondents/writ petitioners of their entitlement of compensation under the provisions of Act, 2013, the entire benefit including the benefit under Section 96 of the said Act, 2013 has to be extended in its entirety. More so, as already noted even BMRCL, which is the appellant in the connected matter challenging the relief granted in favour of respondent/writ petitioners for determination of their claim for compensation under Act, 2013, itself has issued package compensation as per Annexure-H and General Compensation has been awarded as per Annexure-H1 taking into consideration the provisions of Act, 2013. Therefore, contention of appellant cannot be accepted, to say that since the exemption of payment of Income Tax Act and deduction of income tax at source on the compensation payable against the acquisition of land only if it is made under Act, 2013 and not under KIADB Act, 1966. Learned Single Judge in his discussion on point No.3 has taken into consideration the provisions of law, the Circular and also the exemption granted from payment of income tax and deduction of tax at source in the awards and also the precedence in the nature of judgments passed in the case of Viswanathan M. vs The Chief Commissioner and Others 2020 (5) TMI 465 - KERALA HIGH COURT wherein it has been held that compensation payable to the land losers would be exempt from payment of income tax, we do not see any reasons to deviate and hold contrary to the said view more particularly, for the reason of respondent/writ petitioners having held to be entitled for determination of their claim for compensation under Act, 2013. Since the only contention raised by the appellant that the exemption is provided under the new Act, 2013 and that having been held in favour of the respondents/writ petitioners, no grounds are made out warranting interference with the impugned order.

Summary

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 tax deduction at source and income tax on compensation.

Summary:

1. Maintainability of the Writ Petitions:
The court examined whether the writ petitions were maintainable given the availability of an 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.

2. Entitlement to Compensation under Act, 1894 or Act, 2013:
The core issue was whether the compensation should be determined under the Land Acquisition Act, 1894 or the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 for lands acquired after 01.01.2014. The learned Single Judge held that all awards passed and compensation payable/paid in favor of land losers pursuant to notifications issued subsequent to 01.01.2014 would have to be under Act, 2013 and not under Act, 1894. The judgment emphasized that the resolution passed by the KIADB in its 343rd meeting on 27.08.2016, which decided that compensation for acquisitions under the KIAD Act, 1966 after 01.01.2014 would be paid as per Act, 2013, was binding and had been consistently applied in previous cases.

3. Exemption from Tax Deduction at Source and Income Tax:
The court addressed whether the compensation payable to the petitioners was exempt from tax deduction at source and income tax under Section 96 of Act, 2013 and Section 194-LA of the Income Tax Act, 1961, as amended by the Finance Act, 2017. The learned Single Judge ruled that since the compensation was to be determined under Act, 2013, it was exempt from income tax and tax deduction at source as per the provisions of Section 96 of Act, 2013 and the CBDT Circular dated 25.10.2016.

Conclusion:
The appeals were dismissed, upholding the learned Single Judge's order that the respondents/petitioners are entitled to compensation under Act, 2013 and that such compensation is exempt from income tax and tax deduction at source. The court directed the appellants and respondent-authorities to pass fresh/modified awards and disburse/pay the compensation in accordance with Act, 2013 within three months. The registry was instructed to delink the contempt petition (CCC No.1047/2022) for separate adjudication.