Karnataka High Court
M/S Durga Motors vs Special Land Acquisiton Officer on 13 March, 2024
Author: N S Sanjay Gowda
Bench: N S Sanjay Gowda
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NC: 2024:KHC:10191
WP No. 2112 of 2020
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF MARCH, 2024
BEFORE
THE HON'BLE MR JUSTICE N S SANJAY GOWDA
WRIT PETITION NO. 2112 OF 2020 (LA-RES)
BETWEEN:
1. M/S DURGA MOTORS, CHITRADURGA,
A REGISTERED PARTNERSHIP FIRM,
BY PARTNER,
RAJESH M.M, 50 YEARS
S/O M.MADHAVA RAO,
R/AT BHAVANA,
JCR EXTENSION, 1ST CROSS,
CHITRADURGA-577502.
...PETITIONER
(BY SRI. RAJENDRA M.S., ADVOCATE)
AND:
1. SPECIAL LAND ACQUISITON OFFICER
NATIONAL HIGHWAY AUTHORITY OF INDIA,
HOSAPETE-CHTRADURGA DIVISION,
Digitally N.H.50, 2ND CROSS, JCR EXTSNION,
signed by
KIRAN CHITRADURGA-577502.
KUMAR R
Location:
HIGH 2. THE DEPUTY GENERAL MANAGAER
COURT OF NATIONAL HIGHWAYS AUTHORITY OF INDIA,
KARNATAKA
KARNATAKA REGION,
BENGALURU - TUMAKURU ROAD (NH.4)
M.S.RAMAIAH ENCLAVE,
BESIDES NAGASANDRA METRO STATION,
BEGNALURU-560073.
3. THE MINISTRY OF ROAD
TRANSPORT AND HIGHWAYS
TRANSPORT BHAVAN,
NO.1, SANSAD MARG,
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WP No. 2112 of 2020
GOLKUL NAGAR, CONNAUGHT PLACE,
NEW DELHI-110001,
BY ITS SECRETARY.
4. THE MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF TAXES
ITA II DIVISION
NORTH BLOCK, NEW DELHI-110001.
5. THE UNION OF INDIA,
REPRESENTED BY ITS
REVENUE SECRETARY,
REVENUE DEPARTMENT
NEW DELHI 110 001.
6. THE MINISTRY OF RURAL
DEVELOPMENT, GOVT. OF INDIA,
REPRESENTED BY ITS SECRETARY,
NEW DLHI 110 001.
...RESPONDENTS
(BY SRI. R.V.NAIK., ADVOCATE FOR R-1 & R-2;
SRI. MADANAN PILLAI, CGC FOR R-3 TO R-6)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO
QUASH THE IMPUGNED AWARD NOTICE VIDE ANNEXURE-A
DATED 31.07.2019 PASSED BY THE R-1 IN SO FAR AS
DIRECTING DEDUCTION OF RS.48,29,170 TOWARDS TDS (TAX
DEDUCTED AT SOURCE) IN RESPECT OF THE COMPENSATION
PAYABLE TO THE PETITIONER UNDER THE PROVISIONS OF
RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND
ACQUISITION, REHABILITATION AND RESETTLEMENT ACT
2013, ETC.
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WP No. 2112 of 2020
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
THE COURT MADE THE FOLLOWING:
ORDER
1. This petition is filed for quashing of the award notice dated 31.07.2019 in respect of that portion of the notice wherein a sum of Rs.48,29,170/- had been deducted as income tax out of the compensation payable to the petitioner, and for a direction to respondent No.1 to grant interest at 12% per annum on the compensation amount, within three months from the date of the award till the date of the payment.
2. A prayer is also sought to declare that Section 105(3) of the Central Act No.30 of 2013, insofar as it relates to inclusion and incorporation of the First Schedule, and the Rehabilitation and Resettlement specified in the Second and Third Schedule, is unconstitutional on the ground of it being arbitrary and discriminatory.
3. A prayer is also sought to declare that the common Notification dated 28.08.2015 issued under Section 105(3) -4- NC: 2024:KHC:10191 WP No. 2112 of 2020 to the extent of only the First Schedule, and the Rehabilitation and Resettlement specified in the Second and Third Schedule is unconstitutional, arbitrary and discriminatory.
4. The relevant facts of this case are that land in Sy.No.42/3B of Pillekerena Halli village, Chitradurga Taluk was acquired for widening of National Highway 13 (present National Highway 50) into a four-lane highway, and ultimately, an award was passed on 08.02.2019 in respect of this land by respondent No.1.
5. It is the case of the petitioner that after the award was passed, without there being any order for deduction of tax at source ("Tax Deducted at Source", hereinafter referred to as "TDS") in the award, respondent No.1 had proceeded to deduct a sum of Rs.48,29,170/- as TDS, and that this act of deducting TDS was fully illegal and is required to be quashed.
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6. The respondents, however, contend that deduction of tax of Rs.48,29,170/- was as per Section 194(LA) of the Income Tax Act, 1961 (for short, "the IT Act") and they were thus obligated by law to ensure deduction of an amount equal to 10% of the compensation while paying the compensation to the land-loser, and, for the discharge of this statutory duty, they could be found fault with.
7. It is also contended that the benefit available under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ("the 2013 Act") exempting income tax on the compensation amount would not be applicable in case of acquisition under the National Highways Act, 1956 ("the NH Act"), in view of the Office Memorandum dated 06.06.2019 issued by the Union Government.
8. It is stated that the benefit of Section 96 of the 2013 Act, by which income tax cannot be levied on payment of compensation, would be inapplicable to the acquisition of -6- NC: 2024:KHC:10191 WP No. 2112 of 2020 lands that were acquired under the enactments specified in the Fourth Schedule. It is stated that though, by virtue of Section 10(37) of the IT Act, the compensation awarded for compulsory acquisition was exempted from income tax, tax was being deducted by virtue of Section 194 (LA) of the IT Act. Reliance is placed on Section 105 of the 2013 Act to state that the provisions of the Act would not apply to the enactment specified in the Fourth Schedule, and since there is an express exclusion of the applicability of the Act, the petitioner cannot claim the exemption provided under Section 96 of the 2013 Act.
9. It is also stated that the Government of India had issued a Removal of Difficulties Order in 2015, whereby only the provisions relating to determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule, and infrastructure amenities in accordance with the Third Schedule were only made -7- NC: 2024:KHC:10191 WP No. 2112 of 2020 applicable, and therefore, the exemption to Section 96 of the 2013 Act would be inapplicable.
10. Section 1051 of the 2013 Act stipulates that the provisions of the 2013 Act shall not apply to the enactments relating to the land acquisitions specified in the Fourth Schedule. In the Fourth Schedule, the NH Act is also included as Item No.7 and thus, by virtue of sub- Sections (1) and (3) of Section 105, the provisions of 2013 Act would not apply.
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"105. Provisions of this Act not to apply in certain cases or to apply with certain modifications.-(1) Subject to sub-section (3), the provisions of this Act shall not apply to the enactments relating to land acquisition specified in the Fourth Schedule.
(2) Subject to sub-section (2) of section 106, the Central Government may, by notification, omit or add to any of the enactments specified in the Fourth Schedule.
(3) The Central Government shall, by notification, within one year from the date of commencement of this Act, direct that any of the provisions of this Act relating to the determination of compensation in accordance with the First Schedule and rehabilitation and resettlement specified in the Second and Third Schedules, being beneficial to the affected families, shall apply to the cases of land acquisition under the enactments specified in the Fourth Schedule or shall apply with such exceptions or modifications that do not reduce the compensation or dilute the provisions of this Act relating to compensation or rehabilitation and resettlement as may be specified in the notification, as the case may be.
(4) A copy of every notification proposed to be issued under sub-section (3), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses of Parliament."-8-
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11. However, Section 105(1) of the 2013 Act makes it clear that, that it would be subject to sub-section (3). Sub-section (3) of Section 105 states that the Central Government should by Notification direct that any provisions of the 2013 Act:
a. relating to determination of compensation in accordance with the First Schedule, b. rehabilitation and resettlement in accordance with the Second Schedule, and c. infrastructure amenities in accordance with the Third Schedule could be made applicable under the enactments specified in the Fourth Schedule to the 2013 Act. It also provides that those Schedules could be made applicable with such exceptions or modifications, however, subject to the condition that it would not reduce the compensation or dilute the provisions of the Act relating to compensation or rehabilitation.-9-
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12. It is not in dispute that the Central Government has exercised its power under Section 105(3) of the 2013 Act and has issued a Notification which is also published in the Gazette making the provisions relating to the above mentioned three factors to the enactments specified in the 4th schedule. Thus, the provisions of the 2013 Act in so far as it relates to the determination of compensation in accordance with the 1st Schedule and rehabilitation and resettlement specified in the 2nd and 3rd Schedules would apply to the acquisition made under the NH Act.
13. Section 113 of the 2013 Act confers power on the Central Government to pass an order if any difficulty arises in giving effect to the provisions of the 2013 Act. This power is, however, limited to a period of two years from the date of commencement of said Act.
14. The Central Government in exercise of this power has passed Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement
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NC: 2024:KHC:10191 WP No. 2112 of 2020 (Removal of Difficulties) Order, 2015. The preamble of the order reads as follows:
" Whereas, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013) (hereinafter referred to as the RFCTLARR Act) came into effect from 1st January, 2014;
And whereas, sub-section (3) of Section 105 of the RCTLARR Act provided for issuing of notification to make the provisions of the Act relating to the determination of the compensation, rehabilitation and resettlement applicable to cases of land acquisition under the enactments specified in the Fourth Schedule to the RFCTLARR Act;
And whereas, the notification envisaged under sub-section (3) of Section 105 of the RFCTLARR Act was not issued, and the RFCTLARR (Amendment) Ordinance, 2014 (9 of 2014) was promulgated on 31st December, 2014, thereby, inter alia, amending Section 105 of the RFCTLARR Act to extend the provisions of the Act relating to the determination of the compensation and rehabilitation and resettlement to cases of land acquisition under the enactments specified in the Fourth Schedule to the RFCTLARR Act;
And whereas, the RFCTLARR (Amendment) Ordinance, 2015 (4 of 2015) was
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NC: 2024:KHC:10191 WP No. 2112 of 2020 promulgated on 3rd April, 2015 to give continuity to the provisions of the RFCTLARR (Amendment) Ordinance, 2014;
And whereas, the RFCTLARR (Amendment) Second Ordinance, 2015 (5 of 2015) was promulgated on 30th May, 2015 to give continuity to the provisions of the RFCTLARR (Amendment) Ordinance, 2015 (4 of 2015);
And whereas, the replacement Bill relating to the RFCTLARR (Amendment) Ordinance, 2015 (4 of 2015) was referred to the Joint Committee of the Houses for examination and report and the same is pending with the Joint Committee;
As whereas, as per the provisions of article 123 of the Constitution, the RFCTLARR (Amendment) Second Ordinance, 2015 (5 of 2015) shall lapse on the 31st day of August, 2015 and thereby placing the land owners at the disadvantageous position, resulting in denial of benefits of enhanced compensation and rehabilitation and resettlement to the cases of land acquisition under the 13 Acts specified in the Fourth Schedule to the RFCTLARR Act as extended to the land owners under the said Ordinance;
And whereas, the Central Government considers it necessary to extend the benefits available to the land owners under the RFCTLARR Act to similarly placed land owners whose lands are acquired under the 13
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NC: 2024:KHC:10191 WP No. 2112 of 2020 enactments specified in the Fourth Schedule; and accordingly the Central Government keeping in view the aforesaid difficulties has decided to extend the beneficial advantage to the land owners and uniformly apply the beneficial provisions of the RFCTLARR Act, relating to the determination of compensation and rehabilitation and resettlement as were made applicable to cases of land acquisition under the said enactments in the interest of the land owners."
15. As could be seen from the preamble to said order, that the Central Government has taken note of the fact that Section 105(3) provided for issuing a Notification to make the provisions of the 2013 Act relating to determination of compensation, rehabilitation and settlement applicable to the cases of land acquisition under the enactments specified in the Fourth Schedule.
16. It is also noticed that as per the provisions of Article 123 of the Constitution, the Central Government found it necessary to extend the benefits available to the land owners under the 2013 Act to similarly placed land owners whose lands were acquired under the enactments specified
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NC: 2024:KHC:10191 WP No. 2112 of 2020 in the Fourth Schedule, and hence, in order to ensure that the beneficial advantage of the land owners under 2013 Act would uniformly apply in the matter of determination of compensation and rehabilitation and resettlement, the Removal of Difficulties Order was being issued.
17. The preamble of the order, by itself, indicates that the Central Government intended to ensure that the land owners who lost the lands not only under the 2013 Act, but also the land owners who lost their lands under the enactments specified in the Fourth Schedule should have a uniform determination of compensation and the beneficial compensation under the 2013 Act and thus made them applicable to all the enactments.
18. It is, therefore, clear that the basic objective behind the issuance of the 2015 order was to ensure that even in cases of land acquisition specified under Fourth Schedule, which had made the provisions of 2013 Act inapplicable, were, nevertheless, brought within the purview of the
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NC: 2024:KHC:10191 WP No. 2112 of 2020 2013 Act insofar as it related to determination of compensation, rehabilitation and resettlement.
19. If the provisions of 2013 Act are made applicable by virtue of the Removal of Difficulties 2015 Order, it is obvious that all the benefits flowing out of the provisions of 2013 Act will have to be made applicable. Merely because the order indicates that the provisions of the 2013 Act relating to determination of compensation in accordance with the First Schedule, the Rehabilitation and Resettlement in accordance with the Second Schedule, and infrastructure amenities in accordance with the Third Schedule are made applicable to the enactments specified in the Fourth Schedule that does not mean that the benefits in the matter of determination of compensation is restricted only to the quantum of compensation which is specified in the First Schedule.
20. It is to be stated here that once compensation is determined under the provisions of the 2013 Act, as a necessary consequence, the benefits flowing from the
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NC: 2024:KHC:10191 WP No. 2112 of 2020 provisions of said Act, including exemptions from income tax, stamp duty and fees contemplated under Section 96 of the 2013 Act, would also have to be made applicable. If this consequential benefit is not given, it would basically mean that land-losers under the enactments specified in the fourth schedule are subjected to discrimination and this would be against the intent of the Centre in issuing the 2015 Order.
21. It is to be noticed here that Section 103 of the 2013 Act makes it clear that the provisions of the 2013 Act are in addition to and not in derogation of any other law. It is, therefore, clear that even if Section 194(LA) of the IT Act restricts the exemption to the acquisitions made under 2013 Act, by virtue of Section 103 of the 2013 Act and the order issued under Section 113 of the 2013 Act, it is clear that the exemption provided under Section 96 of the 2013 Act would also apply.
22. The matter can also be looked at from another angle. If, for the purposes of determining compensation, the
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NC: 2024:KHC:10191 WP No. 2112 of 2020 2013 Act is applicable and the other consequential benefits contemplated under that Act are not provided, it would basically mean that though the Central Government intended a uniform application of the laws of relation with respect to determination of compensation, by an isolated reading of the provisions, only a certain portion of the 2013 Act would be made applicable. This is obviously not the intention of the Central Government as could be seen from the preamble to the 2015 order.
23. The counsel for the petitioner has placed reliance on the following decisions to contend that the deduction of tax would be illegal:
a. Union of India & Ors. v. Tarsem Singh & Ors.2 decided by the Apex Court under the National Highways Act, declaring that the provisions of the Land Acquisition Act, 1984 relating to solatium and interest contained in Section 23(1A) and (2) as well as interest 2 (2019) 9 SCC 304.
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NC: 2024:KHC:10191 WP No. 2112 of 2020 payable in terms of the proviso to Section 28 would apply to acquisitions made under the National Highways Act;
b. K. Vijayan Ansari v. District Collector3 and Shajan S. Babu v. State of Kerala4 wherein the High Court of Kerala directed the payment of the compensation to the petitioners under the 2013 Act without deducting income tax from such amount, in terms of Section 96 of said Act; and c. Satish Kumar & Anr. v. the Income Tax Officer5 decided by the Income Tax Appellate Tribunal, Chandigarh with a direction that the land acquired under the NH Act is subject to the provisions of the 2013 Act and TDS cannot thus be deducted;
d. C. Nandakumar v. P.B. Mangathayar & Ors.6 wherein the High Court of Telangana emphasized 3 2016 SCC OnLine Ker 37224.
42016 SCC OnLine Ker 34556.
52023 (104) ITR (Trib.) 694.
62017 SCC OnLine Hyd 55 (DB).
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NC: 2024:KHC:10191 WP No. 2112 of 2020 on the objective of Section 96 of the 2013 Act and concluded that the provisions of Section 194LA of the Income-tax Act (pertaining to TDS) should not undermine the welfare provisions of the 2013 Land Acquisition Act. As a result, the respondents therein were directed to not deduct tax at source under the 2013 Act, except where specified by Section 46;
e. Alagarsamy & Ors. v. Revenue Divisional Officer7, also decided by the High Court of Telangana following the judgment rendered in C. Nandakumar (supra) with a finding that TDS cannot be deducted out of the compensation payable under the 2013 Act.
24. On the other hand, the learned counsel for respondent nos. 1 and 2, in support of his arguments, has relied on Paras 17.9 and 18.3 of the judgment of this Court rendered in Manohar Patel R. & Ors. v. Union of 7 2019 SCC OnLine Mad 37287.
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NC: 2024:KHC:10191 WP No. 2112 of 2020 India & Ors.8, wherein it has been held that only Schedules-I, II and III are applicable to acquisition for the enactments listed under Schedule-IV and the entire 2013 Act is inapplicable for acqusition under the NH Act. This citation can be of no avail to the respondents for the reason that the subject matter in question therein was regarding the applicability of the 2013 Act in cases of acquisition made under the NH Act, and the issue of deduction of tax at source from the value of compensation awarded was not dealt with and the applicability of Section 96 was also not considered.
25. It is, therefore, clear that the respondents were not justified in deducting tax at source at the rate of 10% per annum. As a consequence, the award notice which provides for TDS will have to be quashed, and the same is accordingly quashed.
8 W.P. No.10103/2020 and connected matters disposed of on 19.07.2022 at Bangalore.
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26. Pursuant to an interim order granted by this Court, the tax deducted at Rs.48,29,169/- has been deposited before this Court, and this Court had directed that the amount so deposited shall be kept in interest bearing Fixed Deposit. Since it is now held that the deduction of tax was improper, the amount deposited before this Court along with the accrued interest shall be made over to the petitioner. Writ Petition is, accordingly, disposed of.
27. In view of disposal of Writ Petition, pending I.As., if any, are accordingly disposed of.
Sd/-
JUDGE hnm List No.: 1 Sl No.: 23