Karnataka High Court
The Commissioner Of Income Tax (Tds) vs M/S Tushira Industries on 29 October, 2024
Author: Krishna S.Dixit
Bench: Krishna S.Dixit
-1-
WA No.100568 of 2023
AND 4 CONNECTED
IN THE HIGH COURT OF KARNATAKA,
DHARWAD BENCH R
DATED THIS THE 29TH DAY OF OCTOBER, 2024
PRESENT
THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A.PATIL
WRIT APPEAL NO.100568/2023 (LA-RES)
C/W.
WRIT APPEAL NO.100611/2023, 100638/2023,
100644/2023, 100647/2023 (LA-RES)
IN WA NO.100568/2023:
BETWEEN:
THE COMMISSIONER OF INCOME TAX (TDS),
ROOM NO.59, HMT BHAVAN, 4TH FLOOR,
BELLARY ROAD, BENGALURU-560032.
(PRESENT JURISDICTIONAL AUTHORITY:
THE COMMISSIONER OF INCOME TAX (TDS),
RUA-DE-AUREM, PANAJI, GOA-403001.
... APPELLANT
(BY SRI. M. THIRUMALESH & ROOPA ANVEKAR, ADVOCATES)
AND:
1. M/S. TUSHIRA INDUSTRIES,
LAKMANAHALLI, NEAR KMF, DHARWAD,
REP. BY ITS PARTNER,
SHRI PURUSHOTTAM S/O. AKHAI PATEL,
AGED ABOUT 55 YEARS,
R/O: AMBA NIVAS, YALAKKI SHETTAR COLONY,
SHANKAR MATH ROAD, DHARWAD,
DIST.: DHARWAD.
-2-
WA No.100568 of 2023
AND 4 CONNECTED
2. STATE OF KARNATAKA,
REP BY ITS SECRETARY,
DEPARTMENT OF PUBLIC WORKS, PORTS
AND INLAND WATER TRANSPORT,
VIKASA SOUDHA, BENGALURU-560 001.
3. THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
REP. BY MANAGING DIRECTOR,
SHANTI NAGAR, BENGALURU-560 008.
4. THE SPECIAL LAND ACQUISITION OFFICER,
THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
5. THE HUBLI-DHARWAD BRTS COMPANY LTD.,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009
... RESPONDENTS
(BY SRI. C.M. CHANDRASHEKAR, SENIOR COUNSEL FOR
SRI. J.M. ANIL KUMAR, ADVOCATE FOR R1;
SRI. V.S. KALASURMATH, HCGP FOR R2)
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH
COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE
ORDER IN PARA NOS.21 TO 23 PASSED BY THE LEARNED
SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103378
OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER
THE INCOME TAX ACT, 1961 & ETC.,
IN WA NO.100611/2023:
BETWEEN:
THE COMMISSIONER OF INCOME TAX (TDS),
ROOM NO.59, HMT BHAVAN, 4TH FLOOR,
BELLARY ROAD, BENGALURU-560 032.
(PRESENT JURISDICTIONAL AUTHORITY:
THE COMMISSIONER OF INCOME TAX (TDS),
RUA-DE-AUREM, PANAJI, GOA-403 001.
... APPELLANT
(BY SRI. M. THIRUMALESH & ROOPA ANVEKAR, ADVOCATES)
-3-
WA No.100568 of 2023
AND 4 CONNECTED
AND:
1. SRI VIJAY M.VALSANG S/O. MAHANTAPPA,
AGED ABOUT 56 YEARS,
R/O. 4TH MAIN, GANDHI NAGAR, DHARWAD.
2. STATE OF KARNATAKA,
R/BY ITS SECRETARY,
DEPARTMENT OF PUBLIC WORKS,
PORTS AND INLAND WATER TRANSPORT,
VIKASA SOUDHA, BENGALURU-560 001.
3. THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
REP. BY MANAGING DIRECTOR,
SHANTI NAGAR, BENGALURU-560 008.
4. THE SPECIAL LAND ACQUISITION OFFICER,
THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
5. THE HUBLI-DHARWAD BRTS COMPANY LTD.,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
... RESPONDENTS
(BY SRI. C.M. CHANDRASHEKAR, SENIOR COUNSEL FOR
SRI. J.M. ANIL KUMAR, ADVOCATE FOR R1;
SRI. V.S. KALASURMATH, HCGP FOR R2)
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH
COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE
ORDER IN PARA NOS.21 TO 23 PASSED BY THE LEARNED
SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103379
OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER
THE INCOME TAX ACT, 1961 & ETC.,
-4-
WA No.100568 of 2023
AND 4 CONNECTED
IN WA NO.100638/2023:
BETWEEN:
THE COMMISSIONER OF INCOME TAX (TDS),
ROOM NO.59, HMT BHAVAN, 4TH FLOOR,
BELLARY ROAD, BENGALURU-560 032.
(PRESENT JURISDICTIONAL AUTHORITY:
THE COMMISSIONER OF INCOME TAX (TDS),
RUA-DE-AUREM, PANAJI, GOA-403 001.
... APPELLANT
(BY SRI. M. THIRUMALESH & ROOPA ANVEKAR, ADVOCATES)
AND:
1. SHRI MEHARWADE VISHNU S/O. RAJARAM,
AGED ABOUT 61 YEARS,
SHREENIKETAN,
DOLLARS COLONY, BEHIND GOKUL ROAD,
HUBBALLI, DIST. DHARWAD.
2. SHRI SIDDAPPA S/O. NINGAPPA PUJARI,
AGED ABOUT 61 YEARS, R/O. SAI SADAN,
2ND CROSS, SHAMBAVI COLONY,
GANDINAGAR, DHARWAD.
3. KOTHARI MEENAKSHI W/O. ATUL
C/O. ATUL KULKARNI,
AGED ABOUT 59 YEARS,
F-2, "OM BANGALE", DOLLARS COLONY
COMPOUND, BEHIND NEW BUS STAND,
GOKUL ROAD, HUBBALLI,
DIST. DHARWAD-580 030.
4. STATE OF KARNATAKA,
REP. BY ITS SECRETARY,
DEPARTMENT OF PUBLIC WORKS, PORTS
AND INLAND WATER TRANSPORT,
VIKASA SOUDHA, BENGALURU-560 001.
5. THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
R/BY MANAGING DIRECTOR, SHANTI NAGAR,
BENGALURU-560 008.
-5-
WA No.100568 of 2023
AND 4 CONNECTED
6. THE SPECIAL LAND ACQUISITION OFFICER,
THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
7. THE HUBLI-DHARWAD BRTS COMPANY LTD.,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
... RESPONDENTS
(BY SRI. C.M. CHANDRASHEKAR, SENIOR COUNSEL FOR
SRI. J.M. ANIL KUMAR, ADVOCATE FOR R1;
SRI. V.S. KALASURMATH, HCGP FOR R2)
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH
COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE
ORDER IN PARA NO.21 TO 23 PASSED BY THE LEARNED SINGLE
JUDGE DATED 12.04.2023 PASSED IN WP NO.103376 OF 2017
TO THE EXTENT REFUND OF THE TDS MADE UNDER THE
INCOME TAX ACT, 1961 AND ETC.,
IN WA NO.100644/2023:
BETWEEN:
THE COMMISSIONER OF INCOME TAX (TDS),
ROOM NO.59, HMT BHAVAN, 4TH FLOOR,
BELLARY ROAD, BENGALURU-560 032.
(PRESENT JURISDICTIONAL AUTHORITY:
THE COMMISSIONER OF INCOME TAX (TDS),
RUA-DE-AUREM, PANAJI, GOA-403 001.
... APPELLANT
(BY SRI. M. THIRUMALESH & ROOPA ANVEKAR, ADVOCATES)
AND:
1. SHRI PRAKASH B AGADI,
S/O. BASAPPA ALIAS BASAVARAG,
AGED ABOUT 68 YEARS,
R/O. H. NO.01, PRASHANTI,
VIVEKANAND NAGAR,
VIDYAGIRI, DHARWAD-580 004.
-6-
WA No.100568 of 2023
AND 4 CONNECTED
2. STATE OF KARNATAKA,
REP. BY ITS SECRETARY,
DEPARTMENT OF PUBLIC WORKS,
PORTS AND INLAND WATER TRANSPORT,
VIKASA SOUDHA, BENGALURU-560 001.
3. THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
REP. BY MANAGING DIRECTOR,
SHANTI NAGAR, BENGALURU-560 008.
4. THE SPECIAL LAND ACQUISITION OFFICER,
THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
5. THE HUBLI-DHARWAD BRTS COMPANY LTD.,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
... RESPONDENTS
(BY SRI. C.M. CHANDRASHEKAR, SENIOR COUNSEL FOR
SRI. J.M. ANIL KUMAR, ADVOCATE FOR R1;
SRI. V.S. KALASURMATH, HCGP FOR R2)
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH
COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE
ORDER IN PARA NO.21 TO 23 PASSED BY THE LEARNED SINGLE
JUDGE DATED 12.04.2023 PASSED IN WP NO.103375 OF 2017
TO THE EXTENT REFUND OF THE TDS MADE UNDER THE
INCOME TAX ACT, 1961 AND ETC.,
IN WA NO.100647/2023:
BETWEEN:
THE COMMISSIONER OF INCOME TAX (TDS),
ROOM NO.59, HMT BHAVAN, 4TH FLOOR,
BELLARY ROAD, BENGALURU-560 032.
(PRESENT JURISDICTIONAL AUTHORITY
THE COMMISSIONER OF INCOME TAX (TDS),
RUA-DE-AUREM, PANAJI, GOA-403 001.
...APPELLANT
(BY SRI. M. THIRUMALESH & ROOPA ANVEKAR, ADVOCATES)
-7-
WA No.100568 of 2023
AND 4 CONNECTED
AND:
1. SHRI MEHARWADE VISHNU S/O. RAJARAM
AGED ABOUT 66 YEARS,
R/O. SHREENIKETAN, DOLLARS COLONY,
BEHIND GOKUL ROAD, HUBBALLI,
DIST. DHARWAD.
2. KOTHARI MEENAKSHI W/O. ATUL
C/O. ATUL KULKARNI,
AGED ABOUT 65 YEARS,
F-2, OM BANGALE,
DOLLARS COLONY COMPOUND,
BEHIND NEW BUS STAND, GOKUL ROAD,
HUBBALLI, DIST. DHARWAD-580 030.
3. STATE OF KARNATAKA,
REP. BY ITS SECRETARY
DEPARTMENT OF PUBLIC WORKS,
PORTS AND INLAND WATER TRANSPORT,
VIKASA SOUDHA, BENGALURU-560 001.
4. THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED,
R/BY MANAGING DIRECTOR,
SHANTI NAGAR, BENGALURU-560 008.
5. THE SPECIAL LAND ACQUISITION OFFICER,
THE KARNATAKA ROAD DEVELOPMENT
CORPORATION LIMITED, 1ST FLOOR,
KSFC BUILDING, P.B. ROAD, RAYAPUR,
DHARWAD-580 009.
6. THE HUBLI-DHARWAD BRTS COMPANY LTD.,
1ST FLOOR, KSFC BUILDING, P.B. ROAD,
RAYAPUR, DHARWAD-580 009.
... RESPONDENTS
(BY SRI. C.M. CHANDRASHEKAR, SENIOR COUNSEL FOR
SRI. J.M. ANIL KUMAR, ADVOCATE FOR R1;
SRI. V.S. KALASURMATH, HCGP FOR R2)
-8-
WA No.100568 of 2023
AND 4 CONNECTED
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH
COURTACT, 1961, PRAYING TO, SET ASIDE THAT PART OF THE
ORDER IN PARA NO.21 TO 23 PASSED BY THE LEARNED SINGLE
JUDGE DATED 12.04.2023 PASSED IN WP NO.103377 OF 2017
TO THE EXTENT REFUND OF THE TDS MADE UNDER THE
INCOME TAX ACT, 1961 AND ETC.,
THESE APPEALS HAVING BEEN RESERVED FOR JUDGMENT
ON 26.09.2024 COMING ON FOR PRONOUNCEMENT, THIS DAY,
KRISHNA S.DIXIT J., DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A.PATIL
CAV JUDGMENT
(PER: THE HON’BLE MR. JUSTICE KRISHNA S.DIXIT)
The Commissioner of Income Tax (TDS) has preferred
these intra court appeals, for laying a challenge to a
common judgment dated 12.04.2023 entered by a learned
Single Judge of this Court whereby, land-losers’
W.P.No.103377/2017 c/w other identical cases, having
been favoured, they have been relieved off from the levy of
income tax on the compensation paid for the acquisition of
their lands. This relief, he has granted principally in terms
of section 96 of Right to Fair Compensation and
Transparency in Land Acquisition, Rehabilitation and
Resettlement Act, 2013.
-9-
WA No.100568 of 2023
AND 4 CONNECTED
2. Learned Senior Panel Counsel appearing for the
Revenue urged the following points for voiding the
impugned judgment:
2.1. Section 96 of 2013 Act providing for exemption
from income tax on the amount payable as compensation,
is invocable only when acquisition of private lands for public
purpose has been accomplished under the provisions of this
very Act and not under any other statutes such as the
Karnataka Highways Act, 1964, to be specific.
2.2. Section 96 of 2013 Act enacts a part of law
relating to Income Tax; the Parliament in its wisdom has
exempted from tax the compensation payable for the land
acquisition done under the provisions of this Act only, as a
matter of policy and that such a provision has to be
construed literally, there being no room for its otherwise
interpretation.
2.3. What income should be taxed and what should
be exempted are a matter of legislative wisdom; by
employing the said wisdom, Parliament has enacted Income
Tax Act, 1961 providing for levy on the compensation
payable for compulsory purchase of land, done under the
provisions of 2013 Act alone and not any other statute.
There being no challenge to section 96 of the new Act, court
– 10 –
WA No.100568 of 2023
AND 4 CONNECTED
by interpretative process cannot restrict or widen its scope
& application.
3. Learned Senior Advocate 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
– 11 –
WA No.100568 of 2023
AND 4 CONNECTED
compensation awards or agreements are not made by
31.12.2013′. This very G.O mandates ‘The land acquisition
for the project will follow the process of Land Acquisition
under the Karnataka State Highways Act, 1964 as to be
amended to include the provisions and process of the
RTFCTLARR Act, 2013…’
3.4. Article 265 of the Constitution of India empowers
levy and collection of tax by authority of law and
accordingly, the Finance Act (No.2) of 2004 provided for
levy of tax to be deducted at source u/s 194LA of the 1961
Act on the compensation payable for compulsory acquisition
of land ‘under any Enactment’. However, by virtue of
enactment of section 96 of 2013 Act, ‘…Parliament in its
wisdom disallowed the levy of tax on compulsory
acquisition…’
3.5. The State Government itself has undertaken to
reimburse the income tax component in respect of
compensation payable to the land-losers and therefore, the
Revenue is not entitled to levy & recover any amount by
way of income tax from them.
3.6. These appeals have been rendered infructuous
inasmuch as the Income Tax Department has refunded
entire TDS amount not only to the private respondents
herein but to all land-losers in the subject acquisition
– 12 –
WA No.100568 of 2023
AND 4 CONNECTED
process, more particularly when such a refund is made
without reserving right to prosecute the appeals.
4. We have heard learned counsel for the parties;
we have perused the Appeal Papers and adverted to
relevant of the Rulings cited at the Bar. Having done all
that, we are inclined to grant indulgence in the matter as
under and for the following reasons:
4.1. The first contention of land-losers that the 2013
Act has impliedly repealed the provisions of all statutes in
general providing for acquisition of land and more
particularly, section 15 of the 1964 Act and therefore, the
acquisition done under the provincial statutes should be
deemed to have been done under the 2013 Act, is difficult
to countenance, and the reasons for this are not far to
seek:
(a) Article 246(2) read with Entry 42 (Acquisition
and requisitioning of property), List III, Schedule VII of the
Constitution concurrently lays open a wide legislative field;
the enactment of 2013 Act by the Parliament is broadly
relatable to this Entry. The legislative entries are only the
fields of legislation and not the centers of legislative power
vide UJAGAR PRINTS vs. UNION OF INDIA1. Section 96
1
AIR 1989 SC 516
– 13 –
WA No.100568 of 2023
AND 4 CONNECTED
of this Act which grants tax exemption to compensation
payable for acquisition of lands is a piece of law pertaining
to 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 BENGAL2. 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 therefore the other could not
have been enacted. This view gains support from
KARUNANIDHI vs. UOI. 3 In such a scenario there is no
2
AIR 1962 SC 1044
3
(1979) 3 SCC 431
– 14 –
WA No.100568 of 2023
AND 4 CONNECTED
scope for invoking either the doctrine of ‘Occupied Field’ or
the idea of ‘Repugnancy’ and therefore the contention as to
Article 254(2) of the Constitution has to remain miles away.
Even otherwise, when 2013 Act specifically intends to retain
other legislations which inter alia provide for acquisition of
property, such a contention would not arise. (This aspect
of the matter is further discussed infra).
(b) Added to the above, it could not have been the
intention of Makers of the Constitution that in a federal
structure like ours (though Prof.K.C.Wheare called it ‘quasi-
federal’), a conflict should arise in the matter of legislative
process. To avoid possible conflict, civilized jurisdictions
have adopted inter alia the rule of harmonious construction.
This conventional rule enjoins the constitutional courts with
a duty, (however onerous it may prove to be to discharge)
to ascertain in what degree and to what extent, authority to
deal with matters falling within the jurisdiction of each
legislature exists and to define/delineate in the particular
case at their hands, the limits of their respective powers.
Some of the Entries in different Lists may overlap and at
times may appear to be in direct conflict with each other.
Therefore, as of necessity, courts have to reconcile the
Entries by bringing them into a harmony; this they do by
placing a reasonable and pragmatic construction on them.
Keeping that in mind, the contention of land-losers that the
2013 Act has completely obliterated the provisions of all
– 15 –
WA No.100568 of 2023
AND 4 CONNECTED
State legislations providing for acquisition of land, being too
far fetched, cannot be countenanced. Arguably, such a
contention could have been entertained had the subject
matter of 2013 Act and that of 1964 Act, in pith and
substance happened to be the same; however, that is not
the case. The fact that the State Act has secured the Assent
of the President way back in 05.11.1964 under the
provisions of Article 254 of the Constitution does not make
any difference to this legal position.
(c) Contention of the kind does not fit into the intent
& policy content of 2013 Act. This new legislation is not in
derogation of all the existing legislations pertaining to
acquisition of property but is in addition to existing State
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
– 16 –
WA No.100568 of 2023
AND 4 CONNECTED
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.4
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 Act came
into force (w.e.f. 1.1.2014). There is a very strong
presumption that substantive statutes are prospective in
operation unless otherwise indicated by their Maker.
Learned Sr. Panel Counsel appearing for the Revenue is
right in telling us that it is the date of initial Notification for
an acquisition like the one under Section 4 of the erstwhile
1894 Act or Section 15 of the 1964 Act, which is relevant to
determine the applicability of law. Merely because the
awards came to be passed after the 2013 Act came into
force, its provisions ipse jure do not become applicable to
the acquisition in question, subject to all just exceptions
into which argued case of the land-losers does not fit. The
reasoning of the learned Single Judge to the contra vide
paragraphs 20 to 22 of the impugned judgment, therefore
is flawsome. By virtue of Government Order dated 14th
November 2014 or the Addendum issued in November
4
(2017) 3 KLJ 573 DB
– 17 –
WA No.100568 of 2023
AND 4 CONNECTED
2015, the provisions of section 96 of the 2013 Act do not
become applicable to the subject land acquisition of 2012.
Despite repeatedly asking, learned counsel appearing for
the land-losers and the learned AAG appearing for the State
were not in a position to relate the subject Government
Order to any statutory provision. Further, what the State
cannot do by enacting a law i.e., exempting the
compensation from income tax, it cannot do in exercise of
its Executive Power by issuing the Government Order of the
kind. Plainly it is so because the legislative competence in
this regard apparently lies with the Parliament. It has been
firmly settled by half century jurisprudence vide RAI
SAHIB RAM JAWAYA KAPUR vs. STATE OF PUNJAB5
that the Executive Power of the State is co-extensive with
its legislative competence. If State has no legislative power,
a Government of the State cannot arrogate to itself the
corresponding Executive Power. Much is not necessary to
discuss.
4.3. Section 96 of the 2013 Act which the land-losers
heavily banked upon to escape from taxation, runs as
under:
“Exemption from income-tax, stamp duty and
fees.-
No income tax or stamp duty shall be levied on any
award or agreement made under this Act, except
under section 46 and no person claiming under any5
AIR 1955 SC 549
– 18 –
WA No.100568 of 2023
AND 4 CONNECTED
such award or agreement shall be liable to pay any
fee for a copy of the same.”
The text of this provision is as clear as Gangetic waters. It
applies only to the awards or agreements 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.6 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.7
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
policy matter of Parliamentary wisdom. Our Constitution in
6
107 U.S. 147, 152 (1883)
7
542 U.S. 88, 101 (2004)
– 19 –
WA No.100568 of 2023
AND 4 CONNECTED
a sense, has enacted Fiscal Federalism vide MINERAL
AREA DEVELOPMENT vs. M/s STEEL AUTHORITY OF
INDIA, 8Courts in the interpretative process do not enlarge
or constrict the scope of fiscal legislation.
4.4. The submission of learned counsel for the land-
losers that all persons who give up their lands in the
statutory acquisition process, whichever be the enactment
would constitute one homogenous class vide NAGPUR
IMPROVEMENT TRUST vs. VITTAL RAO9 and therefore
Sec.96 of 2013 Act should be read down as to include the
awards made under other statutes as well, is too farfetched
an argument and therefore, cannot be acceded to. As
already mentioned above, a plethora of legislations both
Central & State, provide for acquisition of private property
for the purpose of effectuating their principal objects, such
as establishment of industrial areas, laying of roads,
providing housing accommodation, granting house sites to
the members of oppressed classes, etc. These statutes
relate to several Entries in the Lists and incidentally they
provide for such acquisition. Many of them invoke the
procedure for acquisition of property as prescribed under
the provisions of erstwhile 1894 Act. It is true that the
compensation package availing to the land-losers under
these Statutes arguably is not as attractive as the one
8
2024 LiveLaw (SC) 512
9
(1973) 1 SCC 500
– 20 –
WA No.100568 of 2023
AND 4 CONNECTED
intended under the 2013 Act. In other words, the amount of
compensation payable for the acquisition of property inter
alia under the State Legislations is comparatively less than
what is being awarded under the new statute. In addition,
Section 96 of the 2013 Act exempts compensation from the
levy of Income Tax. However, on that basis one cannot
profitably contend that the land-losers under 2013 Act and
those under other legislations constitute one homogenous
class and therefore all the benefits including exemption
from taxation availing under the former should normatively
avail under the latter. Persons loosing property in the
acquisition under 2013 Act constitute a class apart qua
those who do it under other statutes, at least for the
purpose of claiming exemption from taxation.
4.5. The above apart, law relating to compensation is
one thing and the law governing levy of tax on
compensation payable for the land acquired, is another.
Both can be enacted in one statute book 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
– 21 –
WA No.100568 of 2023
AND 4 CONNECTED
intent is not forthcoming from the new Act. Viewed from
this angle, the decision of Apex Court in UNION OF INDIA
vs. TARSEM SINGH.10 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 11 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 what has been so laid down.
4.6 Learned Sr. advocate appearing for the land-
losers insisted for the reading down of section 96 of the
2013 Act so as to extend the benefit of exemption from
income tax to the persons who have lost their land in the
acquisition process under the provisions of all other statutes
in general and 1964 Act in particular. We do not accede to
the same for more than one reason: There is no challenge
to the provisions of section 96 of the new Act on the ground
that it is discriminatory and therefore is liable to be voided
as being violative of Article 14 of the Constitution. All
endeavors are confined to construing this provision, which
10
(2019) 9 SCC 304
11
(1901) A.C. 495
– 22 –
WA No.100568 of 2023
AND 4 CONNECTED
does not admit any interpretation, regard being had to its
textual clarity. Rowlatt, J in CAPE BRANDY SYNDICATE
vs. IR12 observed:
“In a taxing Act one has to look merely at
what is clearly said. There is no room for any
intendment. There is no equity about a tax.
There is no presumption as to tax. Nothing is to
be read in, nothing is to be implied. One can
only look fairly at the language used.”
Ordinarily, in the absence of challenge to the vires of a
legislative provision, Courts do not readily invoke the
doctrine of reading down, subject to all just exceptions,
more so when such a provision has essentially enacted a
fiscal policy of great significance. It hardly needs to be
reiterated that the provisions of fiscal legislations have to
be construed strictly, unless an otherwise intent is
discernable. The doctrine of reading down may be invoked
and applied if the statute is silent, ambiguous or admits
more than one interpretation. But where it is express, and
clearly mandates to take certain action or to mean certain
things, the function of the Court is to interpret it plainly. In
the absence of challenge, ordinarily courts do not Permit
the invocation of this doctrine to alter the policy Content of
a statute. It is relevant to see what the Apex Court
observed in Minerva Mills vs. UOI13
12
[1921] 1 KB 64
13
AIR 1980 SC 1789
– 23 –
WA No.100568 of 2023
AND 4 CONNECTED
“64. … The device of reading down is not to
Be resorted to in order to save the
susceptibilities Of the law makers, nor indeed
to imagine a law of One’s liking to have been
passed. One must at least Take the
Parliament at its word …
65. … If the Parliament has manifested a
Clear intention to exercise an unlimited
power, it is Impermissible to read down the
amplitude of that Power so as to make it
limited. 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
– 24 –
WA No.100568 of 2023
AND 4 CONNECTED
Sections 103 and 107 of the Central RTFCTLAR Act,
2013, the said RTFCTLARR Act of 2013 itself
became applicable to the present acquisition. It is
the date of initial Notification for an acquisition like
under Section 4 of the old Central Land Acquisition
Act of 1894 or Section 15 of the Karnataka
Highways Act, 1964, which is relevant to determine
the applicable law. By Government Order dated
14th November 2014 or the Addendum issued by
HDBRTS Company limited in November 201,
neither the Central RTFCTLARR Act, 2013 could be
made applicable to the present land acquisition of
2012 nor has it been so done by the respondent-
State Government. Therefore, the claim of the
appellants that the Act of 2013 applies to the
present acquisition and all proceedings for
determining the compensation have to be
undertaken accordingly is a misconception and the
same deserves to be rejected. We do not find any
error in the findings of the learned Single Judge in
this regard repelling this contention.”
4.8. The next contention advanced on behalf of land-
losers that the State itself has specifically undertaken to
look after the tax component of the compensation amount
and therefore the Revenue is liable to refund TDS amount
to them, does not merit acceptance. The primary liability
to pay the income tax is on the person who earns income.
The entity who effects TDS is only an agency, who is
enjoined with a statutory duty to do it vide Sec.194LA of
1961 Act. Compulsory acquisition of property under any
law is included in the definition of “transfer” under section
2(47). Any profit or gain arising from such transfer attracts
income tax under the head “Capital Gains” as provided
– 25 –
WA No.100568 of 2023
AND 4 CONNECTED
under section 45(5). Same is the position even in the case
of enhanced compensation, although year of assessment
may differ. This view gains support from COMMISSIONER
OF INCOME TAX vs GHANSHAM (HUF)14. We are told at
the Bar that the land-losers in their Income Tax Returns for
the Assessment Year 2016-17 had offered the receipt of
compensation awarded for the lands lost in the subject
acquisition as Long Term Capital Gains and their claim for
exemption u/s 54D of the Act came to be rejected by the
Assessing Authority while completing the assessment
u/s.143(3) by placing reliance on the Co-ordinate Bench
decision of this court in ANIL supra. As per the 1961 Act,
deductions and deposits to the credit of Central
Government account and TDS Statements are to be filed
voluntarily by the deducting agency. TDS authorities can
only 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.
14
2009 315 ITR 1(SC)
– 26 –
WA No.100568 of 2023
AND 4 CONNECTED
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. Section 45(5) provides that
where the capital gains arise from the transfer of
capital asset, being a transfer of capital asset by
way of compulsory acquisition under any law or
transfer, the consideration for which is decided by
the Central Government or RBI, and the
compensation, if enhanced or further enhanced
shall be dealt in the following manner:
(a) The capital gain in respect of compensation
awarded or the consideration as determined by
the Central Government or RBI shall be
chargeable to tax as income from capital gain in
the previous year in which the compensation or
such consideration is received.
– 27 –
WA No.100568 of 2023
AND 4 CONNECTED
(b) If the amount by which the compensation
or consideration is enhanced or further enhanced
by the court, Tribunal or other authority, such
enhanced amount shall be deemed to be income
chargeable under the head ‘capital gain’ in the
year in which final order of the
Court/Tribunal/other authority is received.
(c) In case where the compensation referred
to in clause (a) or enhanced compensation
referred to in clause (b) is reduced by any court,
Tribunal or other authority, the assessed capital
gain shall be recomputed by taking the
compensation or consideration as reduced by the
order of the Court/Tribunal or other authority.
4.9.2 Section 45(5) was introduced vide Finance Act, 1987
w.e.f 01.04.1988. It enacts overriding provisions and takes
care of the following situation :–
“Where the capital gains arise from the transfer of
a capital asset, being–
(a) a transfer by way of compulsory acquisition
under any law, or
(b) a transfer the consideration for which was
determined or approved by the Central
Government or RBI.
The compensation or consideration for such
transfer is enhanced or further enhanced by any
Court, Tribunal or other authority – the capital gain
shall be computed in the manner specified in
clause (b) of section 45(5) as under:
(a) the compensation awarded in the first
instance or, as the case may be the
consideration determined or approved
– 28 –
WA No.100568 of 2023
AND 4 CONNECTED
by CG or RBI is chargeable to capital
gains tax in the year in which
compensation is first received;
(b) Where the compensation or
consideration is enhanced by the
Court/Tribunal/other authority, such
enhanced amounts shall be chargeable
to tax in the year in which such
amounts are received.”
The object and rationale for the introduction of this
provision was analyzed by the Apex Court in
COMMISSIONER OF INCOME-TAX vs. GHANSHYAM
(HUF)15 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 computation15
(2009) 315 ITR 1 (SC).
– 29 –
WA No.100568 of 2023
AND 4 CONNECTED
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. Accordingly, additional compensation is
treated as “deemed income” in the hands of the
recipient even if the actual recipient happens to
be a person different from the original transferor
by reason of death, etc. For this purpose, the
cost of acquisition in the hands of the receiver of
the additional compensation is deemed to be nil.
However, the compensation awarded in the first
instance would continue to be chargeable as
income under the head “Capital Gains”, in the
previous year in which transfer took place”.
Further, the Court also discussed the taxability of additional
compensation, solatium and interest paid in terms of 1894
Act under the provisions of section 45(5) of the 1961 Act.
In Para 33 of the decision, it was held that additional
amount under section 23(1A) and solatium under section
23(2) of the 1961 Act would form part of enhanced
compensation under section 45(5)(b).
4.9.3 Section 145B provides that the interest received
by an assessee on any compensation or on enhanced
compensation shall be deemed to be the income of the
previous year in which it is received. Section 56 is like a
residuary heading. Incomes which are liable to income tax
and income which is not chargeable to tax under any of the
– 30 –
WA No.100568 of 2023
AND 4 CONNECTED
heads specified in section 14, items A to E is chargeable to
tax as ‘income from other sources’. Section 56(2) lists out
specifically certain incomes that are chargeable to tax as
income from other sources and one such income is interest
received on compensation or on enhanced compensation
referred to in section 145B. The question whether interest
received on amount of compensation under the 1894 Act
for the delay in its payment was income or not, was
addressed in BIKRAM SINGH vs. LAND ACQUISITION
COLLECTOR16 wherein it is observed:
“… it is settled law that the interest received on
delayed payment of the compensation is a
revenue receipt exigible to income-tax …… It
would mean that the interest received as income
on the delayed payment of the compensation
determined under section 28 or 31 of the Land
Acquisition Act is a taxable event. Therefore, we
hold that it is a revenue receipt exigible to tax
under section 4 of the Act.”
Section 10(37) provides that an individual or HUF can claim
exemption in respect of capital gain arising on transfer by
way of compulsory acquisition of agricultural land situated
in an urban area, provided compensation is received on or
after April 1, 2004. This exemption is available if the land
16
(1997) 224 ITR 551 (SC)
– 31 –
WA No.100568 of 2023
AND 4 CONNECTED
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 agricultural land
which is not situated in specified urban area, is
not regarded as a capital asset. Hence, capital
gains arising from the transfer (including
compulsory acquisition) of such agricultural
land is not taxable. Finance (No. 2) Act, 2004
inserted section 10(37) in the Act from
01.04.2005 to provide specific exemption to
the capital gains arising to an Individual or a
– 32 –
WA No.100568 of 2023
AND 4 CONNECTED
HUF from compulsory acquisition of an
agricultural land situated in specified urban
limit, subject to fulfilment of certain
conditions. Therefore, compensation received
from compulsory acquisition of an agricultural
land is not taxable under the Act (subject to
fulfilment of certain conditions for specified
urban land).
2. The RFCTLARR Act which came into effect from
1st January, 2014, in section 96, inter alia
provides that income-tax shall not be levied on
any award or agreement made (except those
made under section 46) under the RFCTLARR
Act. Therefore, compensation received for
compulsory acquisition of land under the
RFCTLARR Act (except those made under
section 46 of RFCTLARR Act), is exempted
from the levy of income-tax.
3. As no distinction has been made between
compensation received for compulsory
acquisition of agricultural land and non-
agricultural land in the matter of providing
exemption from income-tax under the
RFCTLARR Act, the exemption provided under
section 96 of the RFCTLARR Act is wider in
scope than the tax-exemption provided under
the existing provisions of Income-tax Act,
1961. This has created uncertainty in the
matter of taxability of compensation received
on compulsory acquisition of land, especially
those relating to acquisition of non-agricultural
land. The matter has been examined by the
Board and it is hereby clarified that
compensation received in respect of award or
agreement which has been exempted from
levy of income-tax vide section 96 of the
RFCTLARR Act shall also not be taxable under
the provisions of Income-tax Act, 1961 even if
– 33 –
WA No.100568 of 2023
AND 4 CONNECTED
there is no specific provision of exemption for
such compensation in the Income-tax Act,
1961.”
4.9.5. A THUMBNAIL DESCRIPTION OF CASE LAW
RELATING TO RELEVANT ASPECTS OF INCOME TAX ON
COMPENSATION FOR ACQUISITION:
(a) As to Scope of Section 45(5) of 1961 Act:
In K. MAHENDAR vs. CIT17 it was held that a
perusal of section 45(5) shows that two conditions are to be
satisfied for the application 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 AHMAD18 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
17
[2008] 303 ITR 245 (Madras)
18
[2007] 295 ITR 444 (Allahabad)
– 34 –
WA No.100568 of 2023
AND 4 CONNECTED
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. GOVINDBHAIMAMAIYA19 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 Coordinate Bench of this
Court in CHIEF CIT v. SMT. SHANTAWA20 said that
Section 45(5)(b) will be attracted only when the assessee
receives the ‘enhanced compensation’, in pursuance of a
final award/order of a court, tribunal or other authority
increasing the compensation. If any amount is received
after stay of the award, in pursuance of any interim order,
as a payment subject to the final result, it will not be an
19
(2014) 367 ITR 498 (SC)
20
[2004] 267 ITR 67
– 35 –
WA No.100568 of 2023
AND 4 CONNECTED
amount received as ‘enhanced compensation’ contemplated
under section 45(5)(b), but only an interim payment
received subject to final decision. It will attract section
45(5)(b) only when the final decision is rendered. In
TOPANDASKUNDANMAL vs. CIT21 it was held that the
additional compensation which is inchoate or contingent,
would not create a debt that only on a final determination
of the amount of compensation that the right to such
income in the nature of compensation would arise or
accrue, and till then, there was no liability in praesenti in
respect of the additional amount of compensation claimed
by the land-loser in acquisition.
(d) As to whether solatium received forms part
of consideration for compulsory acquisition:
In KARVALVES LTD. vs. CIT 22 the assessee, a public
limited company was granted a licence by the erstwhile
princely State of Cochin to distribute electricity in the
Ernakulam area. The Kerala State Electricity Board issued a
notice to the assessee to purchase the said electrical
21
[1978] 114 ITR 237 (Guj HC)
22
[1992] 60 Taxman 483 (Kerala)
– 36 –
WA No.100568 of 2023
AND 4 CONNECTED
undertaking at Ernakulam. One of the questions that arose
was: Whether solatium paid for the transfer of the
undertaking forms part of the sale consideration and forms
part of the capital asset. The Court having examined
several decisions held that solatium is part of the sale
consideration, the value of which should be taken into
account, and that is a capital asset for the purpose of
determining the capital gains and on transfer of the
business of the Emakulam Electrical Undertaking, levy of
capital gains tax was attracted.
(e) As to whether mere negotiation between the
parties would alter the nature of acquisition from
compulsory to voluntary acceptance:
In BALAKRISHNAN vs. UOI 23, it is held that merely
because the amount of compensation was negotiated
resulting into an agreement, the statutory acquisition under
the 1894 Act does not 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
23
[2017] 80 taxmann.com 84 (SC)
– 37 –
WA No.100568 of 2023
AND 4 CONNECTED
learned Single Judge of this court in VELLARA FRANCIS
THOMAS vs. UOI24 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,25 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 26 where the exemption from income tax was
granted, was on the premise that the notifications although had
been issued in 2011, the compensation was paid under the new
24
[2024] 162 taxmann.com 68 (Karnataka)
25
[2023] 9 TMI 1443
26
[2023] 153 taxmann.com 685 (Karnataka)
– 38 –
WA No.100568 of 2023
AND 4 CONNECTED
legislation i.e., 2013 Act. Even otherwise, we do not subscribe to
pleaded ratio of the said decision.
4.9.6. As to non-levy of income tax vis-a-vis its
exemption:
The heading of section 96 of 2013 Act employs the
expression ‘Exemption from income tax…’. However, the
substantive provision employs the term ‘No income tax…
shall be levied…’. Non-levy of income tax on the
compensation awarded for acquisition of land is one thing
and exemption from taxability is another. Former is a case
of non-applicability of charging section enacted in the 1961
Act, whereas latter is a case of its applicability. A subtle
difference lies between these two, and mistaking one for
the other may have implications. To put it succinctly, the
question of exemption from tax liability arises when the
income is otherwise taxable. This logic accords with the
opinion of the great jurist of yester decades Mr.Nani A.
Palkhivala that Mother Teresa was not taxable because the
Nobel Prize was not ‘income’ and therefore, the question of
– 39 –
WA No.100568 of 2023
AND 4 CONNECTED
giving her any special exemption did not arise.27 The
relevant part of Palkhivala’s letter addressed to the Law
Ministry reads as under:
“Some official of the Law Ministry is reported to
have expressed the view that Mother Teresa may
be held liable to Indian income tax in respect of
the value of the Nobel Prize… The correct
position in law is that Mother Teresa is not liable
to Indian income tax in respect of the Nobel
Prize, and therefore the question of giving her
any special exemption does not arise… It is only
when a certain amount is income in character
that the question of seeking exemption for it
under section 10 of the Income-tax Act would
arise…”
After all, in a statute, a heading of a provision cannot
control its text vide MAQBOOL vs STATE OF UP.28 In
saying this, we are mindful of the Indian legislative practice
that even the headings are voted in the Legislature unlike
in England. Therefore, whether it is construed as an
exemption or a non-levy, it would still not benefit the land-
losers in acquisition notified prior to 2013 Act coming into
force and that too when it was done under a State
Legislation, i.e., 1966 Act.
27
‘Nani A.Palkhivala – A Life’ by M.V.Kamath, Pages 74-75
28
AIR 2011 SC 2542
– 40 –
WA No.100568 of 2023
AND 4 CONNECTED
4.9.7 Despite vociferous submission, it has not been
demonstrated on behalf of the land-losers that the State
has given an undertaking to and the 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
– 41 –
WA No.100568 of 2023
AND 4 CONNECTED
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 contempt proceedings, one cannot hastily jump to the
conclusion that the right to prosecute these pending
Appeals would whither away. If the Judgement Debtor
complies with the Decree, his pending Appeal against the
same thereby does not commit legal suicide. Such
compliance is subject to outcome of the Appeals, which if
succeed, restitution as a matter of course follows. An
argument to the contrary, if accepted, would enormously
prejudice the interest of Public Exchequer, as rightly
contended on behalf of the Revenue.
4.9.9 AN APPEAL TO THE CENTRAL
GOVERNMENT:
a) All the above being said, one cannot turn a Nelson’s
Eye to the apparent hostile discrimination of the persons
losing land in acquisition process under the statutes other
than 2013 Act, are put to: Firstly, the benefit of package
– 42 –
WA No.100568 of 2023
AND 4 CONNECTED
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.
b) 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 specify.
– 43 –
WA No.100568 of 2023
AND 4 CONNECTED
In the above circumstances, these Appeals are
allowed and the impugned orders of the learned Single
Judge are set at naught; the subject Writ Petitions of land-
losers are liable to be and accordingly dismissed. Costs
made easy.
Registry to send a copy of this Judgement by Speed
Post immediately to:
i) The Ministry of Finance, Government of India,
New Delhi.
ii) The Chairman, Law Commission of India, New
Delhi.
Sd/-
(KRISHNA S.DIXIT)
JUDGE
Sd/-
(VIJAYKUMAR A.PATIL)
JUDGE
Cbc, snb, bsv