TMI Blog2017 (4) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 96 of the 2013 Act was intended to be a tool towards securing the laudable objectives of the 2013 Act. Therefore, it can never be contended that Section 194LA of the Income Tax Act will make in roads into the welfare provision contained in the 2013 Land Acquisition Act. There is no use in giving effect to the provisions of Section 96 of the 2013 Act by first asking the Land Acquisition authority to deduct tax under Section 194LA and then driving the poor land losers from pillar to post to get a refund of the amount from the Income Tax Department. An interpretation that will lead the farmers and land losers to go from the Collectorate to the Income Tax Officer, is antithetic to the objects and reasons of the 2013 Act. Writ petitions are allowed and there shall be a direction to the respondents not to deduct tax at source, whenever any compensation is paid for the acquisition of a land under the 2013 Land Acquisition Act, except those covered by Section 46 of the 2013 Act. In cases where by way of an interim order the tax deducted at source was directed to be kept in a Fixed Deposit in the name of the Registrar (Judicial) of this Court, the Registry shall either liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.Nos.7874 and 9423 of 2016. 6. At the time when notice was ordered in the above writ petitions, this Court granted a limited interim order directing the District Collector to deposit with the Registrar (Judicial) of this Court, the tax already deducted at source, with a further direction to the Registrar (Judicial) to keep the amount in an interest bearing cumulative fixed deposit. 7. Subsequently, the Central Board of Direct Taxes (CBDT) issued a Circular bearing No.36/2016, dated 25-10-2016, clarifying that the compensation received under an award exempted from the levy of income tax under Section 96 of the 2013 Act shall not be taxable, even if there is no specific provision for exemption under the Income Tax Act, 1961. Therefore, one set of land owners whose lands were acquired have come up with the 3rd writ petition W.P.No.44382 of 2016 seeking a mandamus not to deduct tax at source, in terms of the Circular of the CBDT. 8. The short question that arises for consideration in these writ petitions is as to whether income-tax is liable to be deducted at source under Section 194LA of the Income Tax Act, 1961 despite the provisions of Section 96 of the Central Act 30 of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le the obligation cast under Section 194LA of the Income Tax Act is on the person responsible for making payment to the land owner and hence both should not be mixed up, (b) that the question as to whether an income is exempt from tax or not lies within the jurisdiction of the Assessing Officer and hence the person responsible to make payment cannot be allowed to assume the role of the Assessing Officer, for the purpose of determining whether tax should be deducted at source or not in a given case, (c) that the obligation cast under Section 194LA is in respect of any sum and hence the obligation is absolute, (d) that what is exempt under Section 96 of the 2013 Act is only the payment of tax and not the liability of a person making payment to another, to deduct tax at source, and (e) that even Circular No.36/2016 of the CBDT does not cover the liability of the payer to deduct tax at source and hence the reliance placed upon the same is misconceived. 12. We have carefully considered the above submissions. 13. The first two contentions of Mr. Anand Kumar Kapoor, learned counsel for the petitioners, raised on the principles that the latter Parliamentary enactment will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said case leading to a reference under Section 31 of the 1894 Act. Incidentally, a question arose as to whether income-tax could be deducted at source. The Division Bench held that it is not, on a statement made by the Government Pleader appearing for the State of Kerala. Neither the Union of India nor the Commissioner of Income Tax was a party to the judgment of the Division Bench of the Kerla High Court in K.Sreekumar. 16. The 2nd decision of the Division Bench of the Kerala High Court is dated 08-8-2016 in W.A.No.1528 of 2016 in the Commissioner of Income-tax v. Pramod and others. The said case arose out of a direction issued by a Single Judge in yet another writ petition not to deduct tax at source. The Division Bench confirmed the judgment of the Single Judge simply on the basis of the decision in W.A.No.1422 of 2005 without any discussion on the scope of Section 194LA. Therefore, the 3rd contention that the decision of the Single Judge of the Kerala High Court in Kochi Metro Rail Ltd., was overturned by a Division Bench of the Kerala High Court, is completely contrary to facts. The 1st Division Bench of the Kerala High Court answered the question on a concession giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S regime, every person making payment of any sum becomes obliged to deduct a particular percentage of the said amount for payment to the Department. This collection under Section 194LA is authorised by law. All that Article 265 of the Constitution of India says is that no tax shall be levied or collected except by the authority of law. Section 194LA is that authority of law and it is not under challenge. Therefore, to say that the deduction of tax at source is violative of Article 265, is wholly untenable. 21. As pointed out by the Supreme Court itself in paragraph-22 of its decision in Bhawani Cotton Mills Ltd., there is a broad distinction between the exemption from payment of tax provided in the Statute itself and the non-liability or non-imposition of tax. In cases where an exemption from payment of tax or a rebate of tax is granted, the benefit is claimed within the four corners of the Act. If something falls outside the purview of the Tax Law, it is only then that the observations of the Supreme Court in paragraph-21 of its report would apply. 22. The next contention of the learned counsel for the petitioners is that after the issue of Circular No.36/2016, dated 25-10-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 190 of the Income Tax Act. Despite the fact that Section 194LA obliges the payer of any sum to make a deduction, the nature of the deduction is clearly indicated to be income-tax in the last part of Section 194LA. The substantive portion of Section 194LA concludes with the words as income-tax thereon. 26. Similarly, the entire scheme of Chapter-XVII of the Income Tax Act, 1961, as indicated by Section 190(1) is the payment of tax on income, by way of deduction or collection at source. Therefore, the last contention is that Section 194LA of the Income Tax Act, 1961, cannot be pressed into service on an income which is not liable to tax under Section 96 of the 2013 Land Acquisition Act. 27. The aforesaid contention, in our considered view, merits acceptance. If we have a look at the entire scheme of the Income Tax Act, which is as complicated as complications could be, it may be seen that the Act is divided into XXIII Chapters. All the Chapters flow in a logical sequence. While the first few Chapters deal with income, computation of income etc., the next few Chapters deal with deductions, rebates and levies, anti-avoidance etc. Chapter-XIV prescribes the procedure for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case may be, the aggregate amount of such payments to a resident during the financial year does not exceed two hundred thousand rupees. Explanation.For the purposes of this section,-- (i) agricultural land means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (ii) immovable property means any land (other than agricultural land) or any building or part of a building. 31. The last few words of the substantive part of Section 194LA of the Income Tax Act, 1961, also makes it clear that the nature of the deduction was income-tax. In view of the usage of the words such sum as income-tax thereon towards the end of the substantive part of Section 194LA, the words any sum appearing in the 1st line of Section 194LA gets circumscribed. 32. Having analysed Sections 190 and 194LA of the Income Tax Act, 1961, let us now have a look at Section 96 of the 2013 Land Acquisition Act. It reads as follows: 96. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 190, 193 [Interest on Securities] 194-I [Rent], 194A [Other Interest] 194B [Winnings from Lottery] 194BB [Winnings from Horse Race] 194D [Insurance Commission] 194DA [Payments for Life Insurance] 194E [Payment to non-resident sportsmen] 194G [Commission on Sale of Lottery Ticket] 194H [Commission/Brokerage] 194K [Income in respect of Units] 194LB [Interest from Infrastructure Debt Fund] 194LBA [Units of a business trust] 194LBB [Units of an Investment Fund] 194LC [Interest from an Indian Company] 194LD [Interest on Certain Bonds and Government Securities] 195 [Other Sums] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards securing the laudable objectives of the 2013 Act. Therefore, it can never be contended that Section 194LA of the Income Tax Act will make in roads into the welfare provision contained in the 2013 Land Acquisition Act. There is no use in giving effect to the provisions of Section 96 of the 2013 Act by first asking the Land Acquisition authority to deduct tax under Section 194LA and then driving the poor land losers from pillar to post to get a refund of the amount from the Income Tax Department. An interpretation that will lead the farmers and land losers to go from the Collectorate to the Income Tax Officer, is antithetic to the objects and reasons of the 2013 Act. Hence, the second contention of the learned standing counsel for the Department is liable to be rejected. Accordingly, it is rejected. 40. Therefore, in fine, the writ petitions are allowed and there shall be a direction to the respondents not to deduct tax at source, whenever any compensation is paid for the acquisition of a land under the 2013 Land Acquisition Act, except those covered by Section 46 of the 2013 Act. In cases where by way of an interim order the tax deducted at source was directed to be kept ..... 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