TMI Blog2022 (4) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 194-LA of the Income Tax Act amended vide Finance Act 67 of 2017 w.e.f 01.04.2017 as well as the CBDT Circular dated 25.10.2016 or not. Whether the writ petitions are maintainable in view of the remedy of seeking enhancement of compensation before the reference court being available to the petitioners, who have already sought for such reference? - HELD THAT:- Merely because the remedy to seek enhancement before the reference court is available to the petitioners and they have sought for reference, there is no bar/prohibition for the petitioners to contend that they are entitled to compensation under the said Act of 2013 and not under the said Act of 1894; in other words, the right to seek compensation under the said Act of 2013 on the ground that the same was applicable and not the said Act of 1894 is completely different, distinct and mutually exclusive and independent from the right to seek reference on the ground that the compensation awarded under either of the enactments is meager and inadequate and deserves to be enhanced - notwithstanding the availability of the remedy in favour of the petitioners to seek enhancement before the reference court which they had already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners towards acquisition of the subject lands under the said Act of 2013. Whether the compensation payable in favour of the petitioners is exempt from payment of tax deduction at source(TDS) and also from payment of income tax in view of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and Section 194-LA of the Income Tax Act amended vide Finance Act 67 of 2017 w.e.f 01.04.2017 as well as the CBDT Circular dated 25.10.2016? - HELD THAT:- A conjoint reading and the cumulative effect of Section 96 of the said Act of 2013, the CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T.Act make it abundantly clear that compensation payable in respect of the awards passed subsequent to 01.01.2014 when the said Act of 2013 came into force would be exempt from payment of income tax as well from deduction of tax deduction at source(TDS). In the instant case, the subject lands were acquired pursuant to preliminary notifications issued under Section 28(1) of the KIAD Act subsequent to 01.01.2014 which were followed by the impugned awards as well as the impugned endorsements, official memora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Board Of Direct Taxes, New Delhi; The Chief Commissioner Of Income Tax (Tds), Bengaluru; Income Tax Officer Ward V(2)(3); The State Of Karnataka; Karnataka Industrial Areas Development; The Special Deputy Commissioner Karnataka Industrial Areas Development Board Board; The Special Land Acquisition Officer Karnataka Industrial Areas; The Bangalore Metro Rail Corporation Limited Bengaluru Hon'ble Mr. Justice S.R. Krishna Kumar For the Petitioners : Sri P.N. Rajeswara, Advocate. For the Respondents : Sri Madanan Pillai, Cgc For R1, Sri K.V.Aravind, Advocate For R2 To R4, Sri G.V.Shashikumar, Aga For R5, Sri Ashok N.Nayak, Advocate For R6 R7, Sri K.Krishna, Advocate For R8) ORDER In W.P.No.43206/2018, petitioners have sought for the following reliefs:- (i) DECLARE that the benefit of exemption from payment of income tax on compensation amount for acquisition of land provided under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 extends to acquisition of lands under Karnataka Industrial Areas Development Act, 1966. (ii) Declare that the 7th respondent is not required to deduct any tax at source in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioners in W.P.No.43206/2018 claim to be the owners of subject properties bearing property identification No.R1E-235 and R1E-235A situated at Sadaramangala Village (now under BBMP) White Field Main Road, Bengaluru. The subject properties have been developed by the petitioners into a business complex and a luxury boutique hotel. 2.1 Petitioners contend that the subject properties were acquired by the respondents for the purpose of Bangalore Metro Rail Project Phase-II. Among the properties, subject property bearing property identification No.R1E-235 was acquired vide preliminary notification under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966 (for short the KIAD Act ) issued on 22.09.2015 and the final notification dated 04.04.2016 was issued under Section 28(4) of the KIAD Act, pursuant to which, the impugned General Award at Annexure-AC was passed on 25.10.2018. Similarly, subject property bearing identification No.R1E-235A was acquired vide preliminary notification dated 16.12.2017 and final notification dated 25.05.2018, pursuant to which, the impugned General Award at Annexure-AD was passed on 25.10.2018. 3. The petitioners in W.P.No.53718/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not entitled to deduct the tax at source (TDS) on the compensation amount and the action of the respondents in deducting the tax at source was illegal, discriminatory, arbitrary and contrary to the provisions of the said Act of 2013 as well as the provisions of the Income Tax Act, 1961 (for short the I.T. Act ) in view of Section 96 of the said Act of 2013 and the Circular dated 25.10.2016 issued by the Central Board for Direct Taxes as well as Section 194-LA of the I.T. Act w.e.f 01.04.2017. (iv) The compensation payable in favour of the petitioners is also exempt from payment of income tax and action of the respondents in not granting exemption and demanding payment of income tax was also illegal, discriminatory, arbitrary and contrary to Section 96 of the said Act of 2013 as well as the CBDT Circular dated 25.10.2016 and the provisions of Section 194-LA of the I.T. Act. 6. In addition to reiterating the various contentions urged in their statement of objections and referring the material on record, learned Senior counsel for the BMRCL and the other counsel for the respondents made the following submissions:- (i) The writ petitions are not maintainable, in view of availabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly, when the petitioners have already sought for reference seeking enhancement of compensation. In this context, it is relevant to state that there is no nexus or connection between the claim of the petitioners that they are entitled to compensation under the said Act of 2013 and their claim to seek enhancement of compensation before the reference court; both claims/contentions are distinct, different and mutually exclusive and independent of each other and merely because petitioners are entitled to seek / have sought for reference, the said circumstance cannot be made the basis to come to the conclusion that the present petitions are not maintainable as held in Union of India vs. Pushpavathi others - (2018)3 SCC 28, Smt.Channarajammanni vs. Union of India others - AIR 1988 KAR 49 (DB) and the LAO Hanmakonda vs. Pittala Saranga Pani- 1998 +(2) APLJ 20. 9.1 As held in the aforesaid decisions, merely because the remedy to seek enhancement before the reference court is available to the petitioners and they have sought for reference, there is no bar/prohibition for the petitioners to contend that they are entitled to compensation under the said Act of 2013 and not under the said Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolative of Article 14 of the Constitution of India. 10.3 Thirdly, it is contended that Section 30 of the KIAD Act (prior to amendment vide Karnataka Act No. 20 of 2022 w.e.f 05.04.2022) which provided for payment of compensation for KIADB acquisitions under the said Act of 1894 was legislation by reference and not legislation by incorporation and consequently, upon repeal of the said Act of 1894 and enactment of the said Act of 1894, petitioners were entitled to compensation under the said Act of 2013, since the impugned awards were passed / to be passed after 01.01.2014 when the said Act of 2013 came into force. 10.4 Fourthly, it is contended that Karnataka Industrial Areas Development (Amendment) Act, 2022 (Karnataka Act No. 20 of 2022) amended Section 30 of the KIAD Act w.e.f 05.04.2022 whereby the earlier Section 30 stood substituted with retrospective and retroactive effect from 01.01.2014 by making the provisions relating to compensation under the said Act of 2013 applicable to KIAD acquisitions and on this score also, petitioners were entitled to compensation under the said Act of 2013 and not under the said Act of 1894 which was not applicable to KIADB acquisitions after 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 11209-11212/2019 held as under:- 27. The genesis of the challenge to the provisions of the KIAD Act vis- -vis the notifications issued under Section 28[1] and 28[4] of the KIAD Act relates to the visible distinction inasmuch as award of compensation under the two enactments and apprehension of denial of the higher compensation which otherwise the petitioners are legitimately entitled to, under the Act, 2013. This grievance of the petitioners is addressed by the Board wherein, a specific stand has been taken in the Statement of Objections filed by the Board, in paragraph 17, that the Board constituted under the KIAD Act, in its meeting has resolved that the compensation as regards lands acquired under the KIAD Act, shall be in tune with the New Act, 2013. The said paragraph is quoted hereunder for ready reference: 17. Without prejudice to the aforementioned the doctrine of Severability is applicable where though an enactment as a whole is within the legislative competence of a legislature, particular provisions of the enactment go outside the scope of the legislative entry under which the legislature enacted the law. It is submitted that the repugnancy in the KIAD Act, 1966 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the petitioners being redressed by the Board as aforesaid, the grounds urged by the petitioners in as much as discrimination in resorting to the provisions of the KIAD Act, does not survive for consideration. 29. As could be seen, the resultant factors of getting compensation under the Act, 2013 being achieved by the petitioners, in view of the undertaking given by the Board before this Court in terms of the objections filed coupled with the submissions of the learned Senior counsel on instructions, the writ petitions deserve to be dismissed. 30. Hence, the following: ORDER [i] Sections 28[4] and [5] of the Karnataka Industrial Areas Development Act, 1966 and the provisions contained in Chapter VII of the said KIAD Act are intravires the Constitution of India. [ii] The notifications dated 09.12.2016 as well as 20.07.2018 issued under Sections 28[1] and 28[4] of the KIAD Act are legally valid and enforceable. [iii] The petitioners are entitled to compensation in terms of the Act, 2013 as per the undertaking given by the KIADB before this Court in the event the petitioners are not agreeable for a consent award under Section 29[2] of the KIAD Act. With the aforesaid observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also urged that 1966 Act is a self contained code. In support of aforesaid submissions, reliance has been placed on the decisions of Supreme Court in 'MAGANLAL CHHAGANLAL (P) LTD. V. MUNICIPAL CORPORATION OF GREATER BOMBAY AND ORS.', (1974) 2 SCC 402 AND 'GIRNAR TRADERS V. STATE OF MAHARASHTRA AND ORS.', (2011) 3 SCC 1. It is also contended that issue with regard to applicability of Section 24(2) of the 2013 Act to the proceeding under 1966 Act is no longer res integra and it has been held that Section 24(2) does not apply to the proceeding under 1966 Act. In this connection, reference has been made to decision of Supreme Court in 'SPECIAL LAND ACQUISITION OFFICER, MYSORE V. ANASUYA BAI', (2017) 3 SCC 313. 51. By the aforesaid Amendment Act, the state government has been granted the power to exempt the projects mentioned therein from the application of Chapter II and III of the Act. The KIADB vide its resolution dated 27.08.2016 has resolved to determine the amount of compensation in respect of the land which may be acquired under 1966 Act as per Schedule I of 2013 Act. Therefore, the grievance of the owners of the land in so far as it pertains to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under the said Act of 2013 and the liability of the respondents to pass awards and pay the same has same has been recognised, accepted, confirmed and affirmed by this Court in the aforesaid litigations which have has attained finality and become conclusive and binding upon the State and KIADB. 10.14 Under these circumstances, I am of the considered opinion that in the light of the undisputed fact that the subject lands of the petitioners have been acquired pursuant to notification issued under Section 28(1) of the KIAD Act after 01.01.2014 when the said Act of 2013 came into force, petitioners would be entitled to compensation under the said Act of 2013 and not under the said Act of 1894 which was clearly not applicable for the purpose of payment of compensation in favour of the petitioners. 10.15 Insofar as the other contentions urged by the petitioners with regard to payment of compensation under the said Act of 2013 are concerned, viz., parity in payment of compensation under different enactments, Section 30 of the KIAD Act (prior to amendment) being legislation by reference and not legislation by incorporation, amendment to Section 30 of the KIAD Act by the Karnataka Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des exemption from payment of taxes and deduction of TDS in respect of compensation paid under the said Act of 2013. The said CBDT Circular reads as under:- Circular No.36/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ITA.II Division, North Block, New Delhi, the 25* of October, 2016 Sub : Taxability of the compensation received by the land owners for the land acquired under the Right of Fair Compensation Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLAAR Act) Reg. 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 Sec.10(37) in the Act from 01.04.2005 to provide specific exemption to the capital gains arising to an Individual or a HUF from compulsory acquisition of an agricultural land situated in specified urban-limit subject to fulfillment of certain conditions for specified urban land) 2. The RFCTLARR Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees: Provided further that no deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013). (emphasis added) 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. It is profitable to extract Section 10(37) of the I.T.Act, which reads as follows:- 10. Income not included in total income: In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head Capital gains arising from the transfer of agricultural land, where- (i) such land is situate in any area referred to in item (a) or it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of C.Nanda Kumar v. Union of India and others - 2017 SCC Online Hyd 55 have held that compensation payable to land losers would be exempt from payment of income tax. 11.6 It is sought to be contended by the learned counsel for the revenue that Section 96 of the said Act of 2013, CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T. Act are applicable only to the lands acquired under the said Act of 2013 and not to the lands acquired under the KIAD Act. It is pointed out that Section 96 of the said Act of 2013 Act employs the language award or agreement made under this Act and not award or agreement made as per this Act and therefore, in view of the express language employed by the legislature, the benefit of exemption from payment of income tax or tax deduction at source (TDS) cannot be claimed by the petitioners. The said contentions urged by the revenue cannot be accepted for more than one reason:- (i) Firstly, while dealing with Point No.2 with regard to the question as to whether the compensation was payable to the petitioners under the said Act of 2013 or under the said Act of 1894, I have already come to the conclusion that the petitioners are entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013. As noted supra, Karnataka Industrial Areas Development (Amendment) Act, 2022 (Karnataka Act No. 20 of 2022) amended Section 30 of the KIAD Act w.e.f 05.04.2022, whereby the provisions relating to compensation under the said Act of 2013 have been made applicable to KIAD acquisitions. Consequent upon the passing of the present order, the respondents would necessarily have to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013 which has been made applicable to KIADB acquisitions in view of the amendment to Section 30 of the KIAD Act w.e.f 05.04.2022. 11.7 Viewed from this angle also, though the question as to whether the said amendment to Section 30 is prospective or retrospective has not been gone into in the present order and the same is left open to be decided in an appropriate case, in the light of the undisputed fact that the respondents would necessarily have to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of agreement subsequent to 01.01.2014 in respect of KIADB acquisitions would also be exempt from tax deduction at source (TDS). 13. In the result, I pass the following:- ORDER (i) W.P.No.43206/2018 and W.P.No.53718/2017 are hereby allowed; (ii) The impugned awards in W.P.43206/2018 at Annexure-AC dated 25.10.2018 and Annexure-AD dated 25.10.2018 are hereby quashed; (iii) The impugned Endorsement in W.P.43206/2018 at Annexure-S dated 19.09.2018 is hereby quashed; (iv) The impugned Official Memorandum at Annexure-A in W.P.No.53718/2017 dated 06.10.2017 is hereby quashed and respondents are directed to refund the amount deducted from the petitioners towards tax deduction at source(TDS) together with applicable from the date of deposit till the date of refund; (v) It is declared that the petitioners in both the petitions are entitled to compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; (vi) It is also declared that the compensation payable in favour of the petitioners in both the petitions is exempt from payment of income tax as well as exempt from tax deduction at source(TDS) under the Income Tax A ..... 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