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TMI Blog2024 (11) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons losing land in acquisition process under the statutes other than 2013 Act, are put to: Firstly, the benefit of package availing under the new Act 2013 Act are pretty attractive compared to those contemplated under State legislations such as Karnataka Industrial Areas Development Act 1966, inter alia providing for acquisition. In the new Act, the amount of compensation payable to the land-losers is much higher. Added to the above, under Section 96 of the 2013 Act, the compensation is exempted from the levy of income tax. There are other rehabilitatory facilities too. It is quite obvious that there is a lot of heart-burn in the class of persons who have lost lands in acquisitions accomplished under the statutes other than 2013 Act. As already mentioned above, ordinarily, land-losers in acquisition process, whichever be the statute, do constitute one homogenous class, at least viewed from the angle of recompense. It is high time that the Central Government addresses this aspect of the matter before long and thereby assuages the grievance of land losing farmers, consistent with the policy content laudable intent enacted in Section 96 of the new Act. Much is not necessary to speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocate Mr. S.M. Chandrashekar appearing for the land-losers per contra made the following submission for resisting these appeals: 3.1. The provisions of all local statutes such as the Karnataka Highways Act, 1964, Karnataka Industrial Areas Development Act, 1966, Bangalore Development Authority Act, 1976, Karnataka Urban Development Authorities Act, 1987, etc, stand impliedly repealed by the enactment of 2013 Act and therefore, section 96 of this new Act exempting compensation from the income tax comes to the rescue of his clients, even when the acquisition of their lands was under the local laws. 3.2. Regardless of multiple statutes providing for acquisition of private land for public purpose, all land-losers constitute one homogenous class for bane or benefits and therefore, the exemption from income tax enacted u/s 96 of 2013 Act is available to all of them; if necessary, the provision should be read down to accord with rule of equality constitutionally enshrined in Article 14. 3.3. The Government Order dated 14.11.2014 makes 2013 Act applicable to all cases of acquisition where compensation awards or agreements are not made by 31.12.2013 . This very G.O mandates The land acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o income tax, though it is not conventionally enacted in the 1961 Act; it is relatable to Entry 82 (Taxes on income other than agricultural income), List I. Thus, we may call 2013 Act as a rag-bag legislation to borrow the words of Chief Justice M.N. Venkatachalaiah, since it is not confined to one single Entry. However, the Karnataka Highways Act, 1964 is relatable to Entry 13 (Communications that is to sayroads, ). It hardly needs to be stated that the fields of legislation should be construed with widest amplitude vide CALCUTTA GAS COMPANY (PROPRIETARY) LIMITED vs. STATE OF WEST BENGAL AIR 1962 SC 1044. Viewed from that angle, legislation relating to roads can inter alia provide for acquisition of land for the purpose of laying roads in general and State Highways in particular. Merely because, a State statute relating to a substantive field of legislation such as roads, incidentally provides for acquisition, one cannot hastily fit into the scope of Entry 42 of List III i.e., Acquisition and requisitioning of property . If two legislations deal with separate and distinct matters, though of cognate allied character, it cannot be said that one has already occupied the field and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislations. This view is plainly enacted by the Parliament in section 103 of the Act which reads as under: Provisions to be in addition to existing laws.- The provisions of this Act shall be in addition to and not in derogation of, any other law for the time being in force. Added, section 105 makes the new Act not applicable to certain Central enactments relating to land acquisition, that are enlisted in the Fourth Schedule. It seeks to modify their provisions in certain cases if the Central Government issues the Notification to that effect. Sub-section (3) of the said provision makes issuance of such a Notification mandatory. Section 107 clarifies that the new Act does not come in the way of any State inter alia enacting a law more beneficial. A conjoint reading of these provisions makes it abundantly clear that the 2013 Act far from intending repeal of the State legislations, saves them in so many words. This view gains support from a Coordinate Bench decision in ANIL AND OTHERS vs. STATE OF KARNATAKA (2017) 3 KLJ 573 DB. 4.2. Admittedly, the subject acquisition was initiated vide Notification dated 10.09.2012 issued under the provisions of 1964 Act i.e., much before the 2013 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made under the provisions of the said Act, which becomes apparent by the term made under this Act consciously employed by the Parliament. To contend that even the awards passed under any other legislation would fit into the precincts of this provision is to render the said term otiose. It has been a canon of construction that courts should give effect, if possible, to every clause and word of a statute, avoiding, if it may be, any construction which implies that the legislature was ignorant of the meaning of the language it employed vide MONTCLAIR vs. RAMSDELL 107 U.S. 147, 152 (1883). The modern variant of this is: statutes should be construed so as to avoid rendering superfluous any statutory language. A statute should be construed to give effect to all its provisions, so that none of its part will be inoperative or superfluous, void or insignificant vide HINNDA vs. WINN 542 U.S. 88, 101 (2004). If the Parliament intended to exempt compensation from income tax, even when acquisition is made or awards are passed under any law whichsoever , it would have structured section 96 with a different text. After all, what income should be taxed and what should be exempted, is a polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inasmuch as our Constitution does not prohibit making of rag-bag legislations . It hardly needs to be stated that the grievance of land-losers in all the appeals at our hand is not as to payment of compensation but denial of exemption from income tax. It cannot be argued that regardless of the law under which acquisition of property happens, all owners of the property who have lost their lands in acquisition should be given exemption from income tax. Such a Parliamentary intent is not forthcoming from the new Act. Viewed from this angle, the decision of Apex Court in UNION OF INDIA vs. TARSEM SINGH (2019) 9 SCC 304. which shuns classification of land owners on the basis of the statute under which acquisition has happened, does not come to the rescue of respondents, the inner voice of the said decision being parity in the matter of compensation and not in the matter of its taxation. The decision does not whisper anything about taxability of compensation. It was Lord Halsbury in QUINN VS. LEATHEM (1901) A.C. 495 who more than a century ago said that a case is an authority for the proposition that it lays down in its fact matrix and not for all that, that would logically follow from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited. The principle of Reading down cannot be invoked or applied in Opposition to the clear intention of the legislature The above observations broadly support our view what learned Sr. Advocate insisted upon is virtually reading into and not reading down of the subject provision. 4.7. The vehement submission of learned Sr. Advocate appearing for the land-losers that the subject Government Order of 2014 has adopted the provisions of 2013 Act for the purpose of granting benefits to the land-losers in the acquisition in question, is only a partial truth. A Coordinate Bench of this Court in ANIL supra has observed at para 11 as under: It is a misconception of the appellants-petitioners that merely because the State Government has adopted the yardsticks and criteria for determining the market value of compensation on the basis of principles enacted in the new Land Acquisition Act, 2013 in the Government Order dated 14th November 2014 and even the Addendum-I issued by the respondent-HDBRTS Company Limited in November 2015, as envisaged and permitted under Sections 103 and 107 of the Central RTFCTLAR Act, 2013, the said RTFCTLARR Act of 2013 itself became applicable to the present acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly refund the TDS deducted if such agency files the request for refund in the prescribed Form 26B; the verification of such an application in format is undertaken as per the extant norms and manner. It is only the jurisdictional assessing authority who can make the refund of TDS to an assessee in accordance with the provisions of law. That being the position, exemption from levy of income tax cannot be claimed on the ground that State Government has agreed to reimburse the same. The pleaded assurance of reimbursement of tax component repels the very idea of exemption from tax. 4.9 Law relating to taxation of compensation received on account of acquisition needs to be examined at some depth in order to understand the scheme of income tax regime. Following is the summary: 4.9.1 Compulsory acquisition is included in the definition of transfer under Section 2 (47) of the Income 1961 Act. Relevant portion of section 2 (47) reads as follows: 2 (47) transfer , in relation to a capital asset, includes: (i) xx (ii) xx (iii) the compulsory acquisition thereof under any law. Any profit or gain arising from the transfer of capital asset is leviable to income tax under the head capital gains. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAX vs. GHANSHYAM (HUF) (2009) 315 ITR 1 (SC). Para 16 of the decision reads as under: In cases where capital gains accrued or arose by way of compulsory acquisition, the additional compensation stood awarded in several stages by different appellate authorities which necessitated rectification of the original assessment at each stage. To provide for rectification of the assessment of the year in which capital gains was originally assessed, section 155 (7A) was also introduced. However, as stated above, since additional compensation under the Land Acquisition Act, 1894 was awarded in several stages multiple rectifications had to be made to the original assessment which cause great difficulty in carrying out the required rectification and in effecting the recovery of additional demand. It was also noticed that repeated rectifications of assessment on account of enhancement of compensation by different courts often resulted in mistakes in computation of tax. Therefore, with a view to remove these difficulties, the Finance Act, 1987 inserted section 45 (5) to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation is received on or after April 1, 2004. This exemption is available if the land was used by the assessee (or by his parents in the case of an individual) for agricultural purpose for a period of 2 years immediately preceding the date of its transfer. 4.9.4 Section 194LA of 1961 Act prescribes the mechanism for deduction of tax at source on the compensation paid on account of compulsory acquisition. This section provides that any person responsible for paying a sum, a compensation or consideration or enhanced compensation or enhanced consideration, under any law, of any immovable property (other than agricultural land) shall at the time of payment or credit whichever is earlier, deduct income tax at the rate of ten percent of the compensation. 1st Proviso exempts from deduction where the aggregate amount of compensation payable does not exceed Rs. 2.5 Lakh. 2nd Proviso is clarificatory in nature. In effect, it only reiterates the law enacted in Section 96 of 2013 Act. For easy implementation of the 2nd proviso, CBDT Circular No. 36/2016, dated 25.10.2016 was issued and it reads as under: 1. Under the existing provisions of the Income-tax Act, 1961 ('the Act'), an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the section, namely, the capital gains must arise from the transfer of a capital asset by way of compulsory acquisition under any law and the compensation for such transfer is enhanced or further enhanced by any court or tribunal or other authority. (b) As to whether Section 45 (5) is retrospective or prospective: In CIT vs. IQBAL AHMAD [2007] 295 ITR 444 (Allahabad) it was held that even though sub-section (5) of section 45 was inserted by the Finance Act, 1987, with effect from April 1, 1988, this provision is only clarificatory in nature and has to be given retrospective effect for the reason in cases where capital asset is being compulsorily acquired under any law, till such time compensation is received, the amount would not be available to the recipient for being invested in the specified assets in order to claim exemption under section 54B of the Act. (c) As to whether enhanced compensation would be liable to income tax: In CIT vs. GOVINDBHAIMAMAIYA (2014) 367 ITR 498 (SC) was held that where compensation given to the assessee i.e., owner of the land acquired would be income , then the compensation/consideration also becomes income by virtue of section 45 (5) (b). A Coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot cease to be compulsive. Therefore for all practical purposes the award amount would be treated as compensation only and as a consequence exemption u/s. 10 (37) was available to the assessee. A learned Single Judge of this court in VELLARA FRANCIS THOMAS vs. UOI [2024] 162 taxmann.com 68 (Karnataka) held that the compensation for the land acquired under the 1966 Act is exempt from income tax. We do not subscribe to this broad proposition in view of a Co-ordinate Bench decision in ANIL supra. We need to refer to another Co-ordinate Bench decision in BMRCL vs. M/S.SRI BALAJI CORPORATE SERVICES [2023] 9 TMI 1443, which gives an impression that the compensation for the lands acquired is exempt from income tax in terms of Section 96 of 2013 Act, although acquisition was made under the provisions of 1966 Act. One important factor that weighed with the Bench was that the said acquisition was commenced post 2013 Act, unlike in the case at hand. The decision of a learned Single Judge in SHARANAPPA VS DEPUTY COMMISSIONER [2023] 153 taxmann.com 685 (Karnataka) where the exemption from income tax was granted, was on the premise that the notifications although had been issued in 2011, the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has been accepted by the Revenue/Central Government so as to be bound by it, to reimburse Income Tax component. If such an undertaking was ever given, that does not exempt the recipients of compensation from paying the tax. In a sense, the pleaded stand of the land-losers presupposes taxability of compensation under the provisions of 1961 Act as discussed already above. However, it is open to the land-losers to take up appropriate proceedings against the State for getting reimbursement of tax paid, in accordance with law. 4.9.8 Lastly, it was submitted by the learned Sr. Counsel appearing for the land-losers that the TDS component having already been refunded to all the land-losers including the respondents herein by the Department, these Appeals have become infructuous. We do not subscribe to that view. Learned Panel Counsel appearing for the Revenue is right in telling us that the payment to these respondents was done under the threat of contempt proceedings and that the benefit was extended to non-litiguous assesses on the principle of parity. According to him, such a grace cannot tax the Revenue. Merely because refund was made to other land-losers who had not initiated any ..... 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