Gujarat High Court
Patel Kalidas Maganbhai vs State Of Gujarat on 24 April, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/2645/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 2645 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 2710 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 2711 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 2892 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 2893 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3048 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3049 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3050 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3051 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3052 of 2018
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JUVANBHAI KALAJIBHAI MACHHAR
Versus
STATE OF GUJARAT
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Appearance:
MR VIJAY N RAVAL for the PETITIONER(s) No. 1
MR VIJAY N RAVAL(2025) for the PETITIONER(s) No. 2,3
NOTICE SERVED(4) for the RESPONDENT(s) No. 1,2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 24/04/2018
COMMON ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. This group of petitions arise in common background. We may record facts from Special Civil Application No.2645 of 2018. Petitioners have challenged the action of the State authorities in Page 1 of 7 C/SCA/2645/2018 ORDER deducting tax at source while making payment of compensation pursuant to the award passed by the reference Court. In greater detail, the facts would show that the petitioners are the original land owners whose various parcels of land situated at village:Vadgam, Taluka:Khanpur, District:Mahisagar, came to be acquired by the State Government for the purpose of construction of implementation of Sujlam Suflam Spreading Canal Project, for which, notification under section 4 of the Land Acquisition Act, 1894, was issued on 25.09.2004 and published on 07.10.2004. Notification under section 6 of the said Act was issued on 13.01.2005. The Land Acquisition Officer passed his award on 11.04.2005 awarding compensation to the claimants at the rate of Rs.60,000/ per hectare for Jarayat lands and Rs.100/ per hectare for Kharaba lands.
2. Aggrieved by such award, the petitioners sought and were granted reference before the reference Court which was registered as LAR No.216 of 2006. Such reference along with main reference case LAR No.216 of 2006 with other consolidated references were disposed of by reference Court by an award dated Page 2 of 7 C/SCA/2645/2018 ORDER 31.03.2015. The reference Court held that the claimants would receive additional compensation at the rate of Rs.147/ per sq.mtr. for Jarayat land. This additional compensation would be accompanied by the 12% increase and solatium flowing from section 23(1A) and 23(2) of the Act and interest at the rate of 9% per annum from the date of taking of the possession for the first year and thereafter at the rate of 15% per annum till actual payment. The additional amounts would also carry similar interest.
3. As per of the award, there was a schedule of computation of additional compensation payable to the claimants. As per this schedule, the additional compensation accompanied by solatium and 12% price rise as directed by the reference Court came to Rs.18,15,473/ and Rs.5,05,598/ i.e. in all a total of Rs.23,21,071/.
4. While implementing such award, the Government computed the basic amount of additional compensation at Rs.23,21,071/, calculated interest at the rate of 9% and 15% as directed by the reference Court at Rs.42,32,299/. The claimants thus, as per the Page 3 of 7 C/SCA/2645/2018 ORDER calculation of the Government dues, had to receive total compensation with interest of Rs.65,53,370/. However, the Government actually paid a sum of Rs.57,06,910/. This was on account of the fact that while making the payment, TDS at the rate of 20% on the interest component of Rs.42,32,299/ was deducted. The Government thus reduced the total amount to be paid to the claimants by a sum of Rs.8,46,460/ by way of TDS and deposited the same with the Central Government. It is this deduction of TDS which is the bone of contention in the present petition. With varying figures, this is the only question involved in other petitions also.
5. At the outset, we may record that undisputedly, the interest referred to herein above paid to the claimants is one arising under section 28 of the said Act. Short question is, was the Government correct in deducting TDS on such interest. The issue is no longer open for debate. This Court in case of Movaliya Bhikhubhai Balabhai v. IncomeTax Officer (TDS) and another, reported in [2016] 388 ITR 343 (Guj), under identical sitaution has considered the issue and held as under:
Page 4 of 7 C/SCA/2645/2018 ORDER
"13. The upshot of the above discussion is that since interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression interest as contemplated in section 145A of the I.T. Act. The first respondent Income Tax Officer was, therefore, not justified in refusing to grant a certificate under section 197 of the I.T. Act to the petitioner for nondeduction of tax at source, inasmuch as, the petitioner is not liable to pay any tax under the head income from other sources on the interest paid to it under section 28 of the Act of 1894.
14. The petitioner had earlier challenged the communication dated 9th February, 2015 whereby its application for a certificate under section 197 of the I.T. Act had been rejected, and subsequently, tax on the interest payable under section 28 of the Act of 1894 has already been deducted at source. Consequently, the challenge to the above communication has become infructuous and hence, the prayer clause came to be modified. However, since the amount paid under section 28 of the Act of 1894 forms part of the compensation and not interest, the second respondent was not justified in deducting tax at source under section 194A of the I.T. Act in respect of such amount. The petitioner is, therefore, entitled to refund of the amount wrongly deducted under section 194A of the I.T. Act.
15. For the foregoing reasons, the petition succeeds and is accordingly allowed. The second respondent having wrongly deducted an amount of Rs.2,07,416/ by way of tax deducted at source out of the amount of Rs.20,74,157/ payable to the petitioner under section 28 of the Act of 1894 and having deposited the same with the income tax authorities, taking a cue from the decision of the Punjab and Haryana High Page 5 of 7 C/SCA/2645/2018 ORDER Court in Jagmal Singh v. State of Haryana (supra), the first respondent is directed to forthwith deposit such amount with the Reference Court, which shall thereafter disburse such amount to the petitioner herein. Rule is made absolute accordingly with costs."
6. Similar issue came up before this Court in case of Punjbhai Surigbhai Khavad v. Executive Engineer passed in Special Civil Application No.13528 of 2017. By judgment dated 28.08.2017, the Court directed as under:
"6.04. Under the circumstances, while allowing the present petition, the respondent department is to be directed to first refund / return the amount of Rs.37,82,000/ which the respondent has wrongly deducted towards income tax and deposited with the Income Tax Department and thereafter, it will be open for the respondent to apply for refund of the income tax which the respondent has wrongly deducted and deposited with the Income Tax Department.
7.00. In view of the above and for the reasons stated above, present petition succeeds. The respondent is hereby directed to return the amount of Rs.37,82,000/ to the petitioner, which the respondent has wrongly deducted towards income tax on amount of interest under section 28 of the Land Acquisition Act on enhanced compensation and wrongly deposited with the Income Tax Department, to be returned / refunded to the petitioner within a period of four weeks from today, failing which, it shall carry interest at the rate of 9% per annum."Page 6 of 7 C/SCA/2645/2018 ORDER
7. Under the circumstances, it is declared that it was incorrect on the part of the respondent authority to deduct tax at source while paying compensation to the petitioner arising out of respective land reference award in relation to the interest under section 28 of the Act. Such deducted amount shall be deposited before the reference Court who shall disburse the same amongst the claimants. It is clarified that even if some out of the original claimants may not have filed the petitions, they would be in the proportion of their right entitled to receive refund of such amounts. After depositing same amount with the reference Court, it would be open for the respondents to approach the Income Tax Department for reversing the amounts deposited with the Revenue under the heading of tax deducted at source.
8. All petitions are allowed and disposed of accordingly.
(AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 7 of 7