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TMI Blog2008 (10) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... ch divesting of the title of the land owner, and amounts were paid either as compensation or as enhanced compensation, could it be said that there is compulsory acquisition under the law for the time being in force. It may be true that when the notification under Section 4 was issued, the choice of action of the land owners became limited. Faced with the notification under Section 4 of the Land Acquisition Act, there are three courses of action, which can be contemplated. Land owner may prefer writ petition challenging the notification itself. Instead if he is so advised, he may decide to transfer his right to the Government. If neither of the two happens and the Government does not decide to withdraw from the notification, the proceedings may be continued under the Land Acquisition Act where it reaches the stage where an award is passed determining the compensation and unless possession is taken under the urgency clause earlier possession is taken and Government becomes the owner of the property. The title passed to the petitioner only on the strength of the sale deeds executed by the land owners concerned. A perusal of the sale deeds also would appear to clearly support the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensation on acquisition of certain immovable property Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten percent of such sum as income-tax thereon. Petitioner seeks to quash Ext.P4. Ext.P4 is issued to the CEO of the petitioner advising the petitioner to take immediate steps to ensure compliance with the statutory provisions for deduction of tax at source and remittance of the same to the Government account. 2. Petitioner is a Society established under the Travancore Cochin Societies Registration Act, 1955. It is managed by a Board nominated by the Government of Kerala and it is set up with the objective of development of Information Technology Parks. Briefly put the case of the petitioner is as follows: As and when the land is identified, which is suitable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the Act, that is where possession has not been taken. Ext.P1 is produced as the guidelines issued by the Government. Ext.P2 is produced as copy of the notification under Section 4 of the Land Acquisition Act and Section 6 of the Survey and Boundaries Act. Ext.P3 is copy of the sale deed executed by the land owner. It is while so Ext.P4 is issued. Therein, Section 194 LA of the Income Tax Act is referred to and it is inter alia stated as follows: From the enquiries conducted by this office, I am given to understand that acquisition of land for Infopark (Smart City Project) is being done on the strength of the notification issued by the Government. The mode of execution may have been through sale deeds after reaching a negotiated agreement on the amount to be paid as compensation, but the proceedings are carried out as a consequence of notification issued under the Land Acquisition Act, 1894, to acquire the specified land area. Once a particular area has been notified by Government for acquisition for a specified purpose, there is no option for the owners but to sell. The only difference in this case is that it has been brought under Fast Track Procedure to expedite the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed as a threat but as a statutory proceeding as provided in Section 201(1) and 201(1A) of the Income Tax Act. Had there been no notification and invoking of land acquisition proceedings, the sale deed would not have been executed. The execution of sale deed expedites the process of land acquisition but since its very genesis is in the notification for acquisition, it cannot be termed a completely voluntary act on the part of the seller. The provisions of Section 194 LA apply to all cases of compulsory acquisition of immovable property regardless of the instrument used to transfer the property. There would be no hardship to the petitioner to deduct tax at source. The fact that the project is of prime importance does not absolve the concerned authorities from dispensing their duty to deduct tax at source from payments covered by Section 194 LA. Respondents have also produced an annexure to the counter affidavit. 4. Reply affidavit is also filed, wherein it is inter alia stated as follows: Sale deeds satisfied the requirements of a contract distinct from a compulsory acquisition. The price is agreed on the basis of negotiation. There is negotiation and the price is final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Rajasthan (AIR 1977 Rajasthan 150), The Special Tahsildar v. Sri.Pethavanallur Mayuranathasami Temple (AIR 1978 Madras 406), Special Land Acquisition Officer v. M.s. Godrej and Boyce (AIR 1987 SC 2421) and Abdul Majeed Sahib v. District Collector, Kollam (AIR 1994 Kerala 171). 8. Per contra, learned counsel appearing on behalf of the respondents 1 and 2 reiterated his contentions and pointed out that once a notification is issued under the Land Acquisition Act, there is no choice for the land owner, whose lands are covered by the notification. His lands are frozen. If he does not negotiate and sell the land by way of transfer, certainly his lands would come to be acquired under the Land Acquisition Act. To call a transaction sale, there must be a real choice available to the owner of the land in the first place as to whether he wishes to sell the land to anyone. He submits that in a case as the present, where a notification is issued under the Land Acquisition Act, the land owners may have entered into sale deeds in the shadow and the threat of the land acquisition proceedings being taken to their logical conclusion. Even if the land owner may have had the freedom in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-section (1) of section 4. Coming to the terms of Section 194LA, the heading of the section itself refers to payment of compensation on acquisition of certain immovable property. 12. The crucial words in Section 194LA are any person responsible , any sum being in the nature of compensation or the enhanced compensation, or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force. No doubt, the words 'any person' supports the case of the Department that Section 194 LA would apply even to the petitioner at first blush. But I find myself unable to accept the interpretation canvassed by the department on considering the other parts of the section. The sum payable must be in the nature of compensation or enhanced compensation or the consideration or enhanced consideration on account of compulsory acquisition. The words 'compensation' and 'enhanced compensation' are concepts which are apparently taken from the provisions of the Land Acquisition Act. Section 9 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 29 speaks about apportionment of compensation when there are other persons interested. Section 30 refers to the dispute relating to the apportionment of the compensation or any part thereof, or as to the persons to whom the same or any part thereof is payable leading to the reference of the same by the Collector to the court. Section 31 sub sections (1) (3) and (4) reads as follows: 31.Payment of compensation or deposit of same in Court.- (1) On making an award under Section 11, the Collector shall tender payment of the compensation awarded by him to the persons interested entitled thereto according to the award, and shall pay it to them unless prevented by some one or more of the contingencies mentioned in the next sub-section. xxxxx xxxxx (3) Notwithstanding anything in this section, the Collector may, with the sanction of the appropriate Government, instead of awarding a money compensation in respect of any land, make any arrangement with a person having a limited interest in such land, either by the grant of other lands in exchange, the remission of land revenue on other lands held under the same title, or in such other way as may be equitable having regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provide for acquisition of assets, that is laws other than the Land Acquisition Act. For instance he relied on the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and the Burmah Oil Company (Acquisition of Shares of Oil India Limited and the Undertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited Act, 1981. In the latter Act, Section 10 provides for payment of a sum of more than ₹ 21 Crores apparently in consideration of the transfer to and vesting in the Central Government of the shares of the Oil Company and also the right, title and interest of each specified Company in terms of its undertaking in India. Likewise, Section 6 of the Banking Companies Act also provide for payment of amount in respect of the transfer as was specified in such schedule. 14. I notice that both these Acts are much prior to the insertion of Section 194LA of the Income Tax Act. I notice that both the words 'compensation' and 'consideration' as also 'enhanced compensation' and 'enhanced consideration must be payable on account of compulsory acquisition under any law. The words 'consideration' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .......... the amount by which the written down value of machinery or plant exceeds the amount for which the ............ machinery or plant .......... is actually sold or its scrap value: It was in the context of the said statutory provision the court proceeded to hold as follows: The word sale is not defined in the Indian Income-tax Act and, therefore, it must be given its ordinary grammatical meaning. According to the Oxford Dictionary sale means an act of selling or making over to another for a price. It has also been defined as an exchange of a thing for a price. Making over anything for a price or exchanging it for a price suggests that the act is voluntary. The ordinary conception of sale is that something is handed over for a price as the result of negotiation and agreement. There is an agreement between the parties whereby one person known as the seller hands over a thing or property to the other person known as the buyer for a consideration usually in terms of money which has been agreed between the parties. That is the ordinary English conception of a sale . xxxxx xxxxx It seems to me quite clear that the acquisition of this plant by the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to take care of the land and protect it against encroachment. In the case before me, where, the land owners, may be in the context of the notification under Section 4(1) have executed sale deeds in favour of the petitioner, it cannot be held that it is still not a sale of property, the incidents which would be governed by the provisions of the Transfer of Property Act and title passed upon the registration of the sale deeds. The decision reported in Fazilka Electric Supply Co. Ltd. v. Commissioner of Income-Tax, Delhi ((1959) 36 ITR 411) is also relied on by the counsel for the respondents. The question which arose was whether there was a sale within the meaning of Section 10(2) (vii) of the Income Tax Act, 1922. The assessee in the said case carried on business of generation and supply of electricity. Under the terms of its licence, a clause empowered the Government to exercise its option to purchase the undertaking. The price paid by the Government was in excess of the written down value of the assets. Therein the court proceeded to hold that a transaction which amounts to compulsory acquisition does not come within the purview of Section 10(2)(vii) of the Income Tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, therefore, of the opinion that neither 'compulsory sale' nor 'compulsory purchase' equates with 'compulsory acquisition'. That being so there was no compulsory acquisition in the present case. xxxxx xxxxx Both in England and in India one of the essential factors of a transaction of sale is that there must be an agreement express or implied to sell, i.e., there must be a mutual assent between the parties. The court proceeded to ultimately hold that the transaction amounted to sale under Section 10(2)(vii) of the Income Tax Act. In the course of the judgment, the court proceeded to repel the stand of the Company that the element of mutuality is lacking in the case holding that the rules show that a draft licence has to be sent by an applicant for licence containing definite and specific terms on which the licence is sought, which amounts to an offer, which the Government accepts or rejects and the licence itself amount to a contract between the parties. 17. In Matajog v. H.C. Bhari (AIR 1956 Sc 44) one of the questions which arose was whether there was implied power to remove the obstruction caused to the discharge of his duties by the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Committee headed by the District Collector was formed and the said committee after holding discussions with the land owners about the value of land, submitted its recommendations to the Government. However, since the land owners did not agree to the land value so approved by the Government and thereupon a Grievance Redressal Cell headed by the District Collector met on 19.9.2006 and submitted revised recommendations to the Government. Accordingly, the Grievance Redressal Cell headed by the District Collector fixed a value of ₹ 84,268/- ( Eighty four thousand two hundred sixty eight) in respect of 2.40 ares of land described in the schedule which has got tarred road access, which was approved by the Government by G.O.(MS) 26/06 vi.sa.va dated 22.12.2006 and this was fully agreed to by us. In order to rehabilitate the 42 residents from the acquired land the Government issued orders on 20.4.2007 to assign 5 cents each free of cost. But not being satisfied with this, when the evacuees including us resorted to agitational methods and legal action, the District Collector submitted a new rehabilitation package to the State Level Empowered Committee (SLEC) to acquire land under Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the petitioner may possess the properties, pay tax in their name and apply for mutation. The usual covenants found in a sale are also to be found in the document. 18. After having considered the terms of the sale as also the attendant circumstances, and the circumstances which began with the issuance of notification under Section 4(1), I am of the firm view that the sale deeds would constitute sale under the Transfer of Property Act and cannot be treated as a compulsory acquisition under the law for acquisition of immovable property. As already noticed, there was no divesting of the title of the land owners under Section 16 of the Land Acquisition Act, namely, passing of an award, and possession being taken thereunder or by possession being taken earlier under the urgency clause, namely Section 17. The mere issuance of notification under Section 4(1) does not have the effect of divesting of title of the land owner. Only if there were such divesting of the title of the land owner, and amounts were paid either as compensation or as enhanced compensation, could it be said that there is compulsory acquisition under the law for the time being in force. It may be true that when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letely take away S.4 notification. Once that order i.e. Under S.48 of the Act has been passed, result is that the Government has withdrawn from the acquisition land which formed the subject matter of S.4 notification. Thereafter, if it wants for any reason to start acquisition proceedings, the only manner permissible in law is by issuing a fresh notification under S.4 of the Act. It cannot by resort to the power under S.23 of the General Clauses Act revive and bring back S.4 notification which was wiped away and ceased to exist when order under S.48(1) of the Act was passed. The position under the law is that an order under S.48 of the Act has the result of withdrawing the notification issued under Section 4. This means that there is a clear slate and if subsequently the Government wants to acquire the land it must start from the stage of issuing a fresh notification under Section 4 of the Act. Once a notification under Section 4 is effaced by way of withdrawal, the only way it can restart the acquisition proceedings, if so advised, is to issue a fresh notification. This means, in the facts of this case, that even though Government started out by issuing a notification under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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