2005 (3) TMI 27 - HC - Income Tax

A perusal of the order impugned in this civil revision petition shows that it is not a speaking order. The learned sub-judge had simply accepted the statements filed by the decree holder and passed orders. So, I am of the view that the entire matter requires reconsideration. In the result, the civil revision petition is allowed. The impugned orders passed by the executing court dated October 19, 2002, quantifying the amount due to the claimant-decree holder and also the order proclaiming the property for sale are hereby set aside. The E.P. is remanded to the executing court. The learned sub-judge shall calculate the amount in accordance with law and pass appropriate orders

Issues Involved:
1. Calculation of amounts due to a decree holder in a land acquisition case.
2. Deduction of income tax by the Land Acquisition Officer.
3. Method of calculating interest awardable under different heads.
4. Principles for adjusting part payments by the judgment-debtor.
5. Applicability of Order XXI, Rule 1 of the Code of Civil Procedure.
6. Execution of the decree and attachment of property for sale.
7. Res judicata concerning interim orders.
8. Legal provisions under the Land Acquisition Act and Income-tax Act.

Detailed Analysis:

1. Calculation of Amounts Due to a Decree Holder:
The court initially calculated the amount due to the claimant under section 23(1A) of the Land Acquisition Act and the interest payable on such amount. However, it was later identified that the court's findings on these points were against the principles laid down by the Supreme Court. The High Court decided to review and correct its records, focusing on paragraphs 10, 11, 13, and 32 of the order.

2. Deduction of Income Tax by the Land Acquisition Officer:
The court acknowledged the statutory duty of the Land Acquisition Officer to deduct income-tax from the compensation amounts as per the Income-tax Act. It was emphasized that the Land Acquisition Officer is obligated to deduct tax at source without requiring a specific provision in the decree. The relevant sections of the Income-tax Act (194A, 194L, and 194LA) were cited, indicating the conditions under which tax deductions are mandatory.

3. Method of Calculating Interest Awardable:
The court clarified that only simple interest is payable on the various amounts under the Land Acquisition Act, as per the Supreme Court's ruling in Priya Vart v. Union of India. It was noted that compound interest is not contemplated under sections 28 and 34 of the Act. The court also referred to the decision in Sunder v. Union of India, which established that interest is payable on the additional amount under section 23(1A) and solatium under section 23(2).

4. Principles for Adjusting Part Payments:
The court discussed the proper method for adjusting amounts deposited by the judgment-debtor. It was held that the amounts should first be adjusted towards the principal components (market value, additional amount, and solatium) before considering interest. This principle was derived from the Supreme Court's ruling in Prem Nath Kapur v. National Fertilizers Corporation of India Ltd., which stated that the provisions of Order XXI, Rule 1, CPC, do not apply to land acquisition cases.

5. Applicability of Order XXI, Rule 1, CPC:
The court reiterated that the principles of Order XXI, Rule 1, CPC, which prioritize the adjustment of amounts towards interest and costs before the principal, are not applicable in land acquisition cases. This was based on the Supreme Court's interpretation in Prem Nath Kapur's case.

6. Execution of the Decree and Attachment of Property:
The civil revision petition challenged the executing court's order proclaiming the sale of 50 cents of property. The High Court found that the executing court had not provided a speaking order and had simply accepted the statements filed by the decree holder. The case was remanded for fresh consideration, with instructions to calculate the amounts in accordance with the law.

7. Res Judicata Concerning Interim Orders:
The court addressed the preliminary objection raised by the decree holder regarding the finality of the order dated October 19, 2002, which quantified the amount due. It was held that this order was only an interlocutory order and could be challenged in the civil revision petition. The principle of res judicata did not apply, allowing the State to contest the quantum of the amount found due.

8. Legal Provisions under the Land Acquisition Act and Income-tax Act:
The court provided a detailed explanation of the relevant sections of the Land Acquisition Act (sections 23(1), 23(1A), 23(2), and 28) and the Income-tax Act (sections 194A, 194L, and 194LA). It outlined the components of compensation, the obligation to deduct tax at source, and the method for calculating and adjusting the amounts due under the decree.

Conclusion:
The High Court allowed the civil revision petition, set aside the impugned orders, and remanded the execution petition to the executing court for fresh consideration. The executing court was directed to calculate the amounts due in accordance with the clarified legal principles and statutory provisions. The court emphasized the need for compliance with the Income-tax Act regarding tax deductions and the proper adjustment of deposited amounts.

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