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2022 (4) TMI 1598 - HC - Indian LawsMaintainability of petition - remedy of seeking enhancement of compensation before the reference court being available to the petitioners - entitlement 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 - lands acquired pursuant to preliminary notification issued after 01.01.2014 under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966 - compensation payable in favour of the petitioners is exempt from payment of tax deduction at source(TDS) and also from payment of income tax in view of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and Section 194-LA of the Income Tax Act amended vide Finance Act 67 of 2017 w.e.f 01.04.2017 as well as the CBDT Circular dated 25.10.2016 or not. Whether the writ petitions are maintainable in view of the remedy of seeking enhancement of compensation before the reference court being available to the petitioners, who have already sought for such reference? - HELD THAT - Merely because the remedy to seek enhancement before the reference court is available to the petitioners and they have sought for reference, there is no bar/prohibition for the petitioners to contend that they are entitled to compensation under the said Act of 2013 and not under the said Act of 1894; in other words, the right to seek compensation under the said Act of 2013 on the ground that the same was applicable and not the said Act of 1894 is completely different, distinct and mutually exclusive and independent from the right to seek reference on the ground that the compensation awarded under either of the enactments is meager and inadequate and deserves to be enhanced - notwithstanding the availability of the remedy in favour of the petitioners to seek enhancement before the reference court which they had already sought for, the present petitions seeking awarding of compensation under the said Act of 2013 and not under the said of 1894 under which the impugned awards have been passed are maintainable - question answered in favour of the petitioners by holding that the present petitions are maintainable. 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 their lands acquired pursuant to preliminary notification issued after 01.01.2014 under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966? - HELD THAT - Not only the respondents have unequivocally and unambiguously decided, resolved, accepted and acquiesced to the fact that the land losers were entitled to payment of compensation under the said Act of 2013 in respect of KIADB acquisitions initiated pursuant to notification issued under Section 28(1) of the KIAD Act after 01.01.2014, but the respondents have also passed awards and paid compensation to such land losers under the said Act of 2013. Further, as stated supra, the entitlement of the land losers to receive compensation under the said Act of 2013 and the liability of the respondents to pass awards and pay the same has same has been recognised, accepted, confirmed and affirmed by this Court in the aforesaid litigations which have has attained finality and become conclusive and binding upon the State and KIADB - the subject lands of the petitioners have been acquired pursuant to notification issued under Section 28(1) of the KIAD Act after 01.01.2014 when the said Act of 2013 came into force, petitioners would be entitled to compensation under the said Act of 2013 and not under the said Act of 1894 which was clearly not applicable for the purpose of payment of compensation in favour of the petitioners. Question answered in favour of the petitioners by holding that they are entitled to compensation under the said Act of 2013 and not under the said Act of 1894 and consequently, the impugned awards, endorsements, orders, communications, official memorandums etc., issued/passed by the respondents deserve to be quashed and the respondents are to be directed to pass fresh awards and do all such necessary acts, deeds and things etc., for the purpose of paying compensation to the petitioners towards acquisition of the subject lands under the said Act of 2013. Whether the compensation payable in favour of the petitioners is exempt from payment of tax deduction at source(TDS) and also from payment of income tax in view of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and Section 194-LA of the Income Tax Act amended vide Finance Act 67 of 2017 w.e.f 01.04.2017 as well as the CBDT Circular dated 25.10.2016? - HELD THAT - A conjoint reading and the cumulative effect of Section 96 of the said Act of 2013, the CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T.Act make it abundantly clear that compensation payable in respect of the awards passed subsequent to 01.01.2014 when the said Act of 2013 came into force would be exempt from payment of income tax as well from deduction of tax deduction at source(TDS). In the instant case, the subject lands were acquired pursuant to preliminary notifications issued under Section 28(1) of the KIAD Act subsequent to 01.01.2014 which were followed by the impugned awards as well as the impugned endorsements, official memorandums, communications, orders, actions, etc., also undisputedly issued after 01.01.2014. Compensation payable in favour of the petitioners, whose lands were notified for acquisition subsequent to 01.01.2014 would be exempt from payment of income tax as well as exempt from deduction of tax deduction at source(TDS) and the impugned endorsements, communications, orders, actions, etc., issued/passed by the revenue are illegal, arbitrary and without jurisdiction or authority of law and liable to be quashed. Though the question as to whether the said amendment to Section 30 is prospective or retrospective has not been gone into in the present order and the same is left open to be decided in an appropriate case, in the light of the undisputed fact that the respondents would necessarily have to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013, Section 96 of the said Act of 2013, CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T.Act would become applicable to the petitioners who would be entitled to the benefit of exemption from payment of income tax and from tax deduction at source(TDS) in respect of the awards and compensation in their favour. This question is also answered in favour of the petitioners by holding that the impugned awards, endorsements, orders, communications, actions etc., of the respondents directing payment of income tax and tax deduction at source(TDS) on the subject compensation amounts are illegal, arbitrary and without jurisdiction or authority of law and that the same deserve to be quashed and the respondents are to be directed to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013 by exempting the petitioners from payment of income tax and tax deduction at source(TDS) on the compensation amounts paid/payable in their favour. Petition allowed.
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 of compensation from tax deduction at source (TDS) and income tax under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. Detailed Analysis: Re. Point No.1: Maintainability of the Writ Petitions The respondents argued that the writ petitions were not maintainable because the petitioners had an alternative remedy of seeking enhancement of compensation before the reference court, which they had already sought. However, the court held that the claim for compensation under the 2013 Act and the claim for enhancement of compensation are distinct and mutually exclusive. The right to seek compensation under the 2013 Act is independent of the right to seek enhancement before the reference court. Therefore, the writ petitions were maintainable. Re. Point No.2: Entitlement to Compensation Under the 2013 Act The petitioners contended that they were entitled to compensation under the 2013 Act, as the acquisition proceedings were initiated after 01.01.2014. The court noted that the Karnataka Industrial Areas Development Board (KIADB) had resolved in its 343rd Board meeting that compensation for lands acquired after 01.01.2014 would be determined as per the 2013 Act. This resolution was recognized and affirmed by the court in various litigations. The court also observed that the KIADB had paid compensation under the 2013 Act in other cases. Consequently, the court held that the petitioners were entitled to compensation under the 2013 Act and not under the 1894 Act. The impugned awards and endorsements were quashed, and the respondents were directed to pass fresh awards under the 2013 Act. Re. Point No.3: Exemption from TDS and Income Tax The petitioners argued that the compensation payable was exempt from TDS and income tax under Section 96 of the 2013 Act. The court referred to Section 96, the CBDT Circular dated 25.10.2016, and the amended Section 194-LA of the Income Tax Act, which confirmed the exemption. The court held that compensation payable under the 2013 Act was exempt from income tax and TDS. The respondents' actions of deducting TDS and demanding income tax were deemed illegal and without jurisdiction. The court directed the respondents to refund the TDS amount deducted and to pass fresh awards exempting the petitioners from income tax and TDS. Conclusion: The court summarized the legal principles as follows: 1. Compensation for lands acquired after 01.01.2014 under the KIAD Act must be determined under the 2013 Act. 2. Such compensation is exempt from income tax. 3. Such compensation is also exempt from TDS. Order: 1. The writ petitions were allowed. 2. The impugned awards and endorsements were quashed. 3. The respondents were directed to refund the TDS amount with interest. 4. It was declared that the petitioners are entitled to compensation under the 2013 Act. 5. The compensation payable is exempt from income tax and TDS. 6. The respondents were directed to pass fresh/modified awards under the 2013 Act within three months. 7. The respondents were directed to disburse the compensation already deposited. 8. The amounts deposited before the court were to be released to the petitioners.
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