Karnataka High Court
Yellappa S/O Bettappa Chendur vs The State Of Karnataka on 3 January, 2014
Author: Aravind Kumar
Bench: Aravind Kumar
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 03RD DAY OF JANUARY 2014
BEFORE
THE HON'BLE MR.JUSTICE ARAVIND KUMAR
W.P.NOs. 82112-82141 OF 2013(LB-RES)
BETWEEN:
1. YELLAPPA S/O BETTAPPA CHENDUR
AGE: 65 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
2. ANDAPPA S/O BHARAMAREDDY RAMAREDDER
AGE: 45 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
3. YELLAPPA S/O BHARAMAPPA KORI
AGE: 55 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
4. DEVAPPA S/O SHIVAPPA KAREHONNAPPANAVAR
AGE: 58 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
5. SATYAPPA S/O HANAMAPPA BANDIHAL
AGE: 65 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
6. DEVAPPA S/O SOMAREDDAPPA GIRADDI
AGE: 65 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
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7. YELLAREDDAPPA S/O KALAKAPPA RAMAREDDY
AGE: 58 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
8. BALAREDDAPPA S/O YELLAREDDAPPA
AGE: 48 YEARS, OCC: AGRICULTURE,
R/O: ARKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
9. CHANNABASAPPA S/O BASAPPA GADDI
AGE: 48 YEARS, OCC: AGRICULTURE,
R/O: ARKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
10. KALAKAPPA S/O YAMANAPPA KAMMAR
AGE: 60 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
11. SHARANAPPA S/O HANAMAPPA KAMANUR
AGE: 45 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
12. PREMAPPA S/O VEERAPPA SANGANAL
AGE: 48 YEARS, OCC: AGRICULTURE,
R/O: ARKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
13. HUCHCHEERAPPA
S/O NARASAPPA CHANAPANAHALLI
AGE: 65 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
14. KHEMAPPA S/O SATYAPPA BANDIHAL
AGE: 55 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
15. MAHALINGAPPA
S/O BASAPPA KAREHONNAPPANAVAR
AGE: 55 YEARS, OCC: AGRICULTURE,
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R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
16. SMT. HANUMAVVA W/O HANAMAPPA CHAHAD
AGE: 60 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
17. NAGAPPA S/O KENCHAPPA MADIWALAR
AGE: 58 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
18. HANUMARADDEPPA
S/O SHEKHARADDEPPA BHAVIKATTI
AGE: 58 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
19. SMT. HANAMAVVA W/O YALLAPPA
AGE: 60 YEARS, OCC: AGRICULTURE,
R/O: ARKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
20. SHIVAPPA S/O RAMAPPA CHAHAD
SINCE DECEASED BY HIS LRS.
20(A)KANAKAPPA S/O SHIVAPPA CHAHAD
AGE: 60 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
20(B)DEVAPPA S/O SHIVAPPA CHAHAD
AGE: 48 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
20(C)HANAMAPPA S/O SHIVAPPA CHAHAD
AGE: 54 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
20(D)SMT.SHIVAWWA W/O RAMAPPA CHAHAD
AGE: 45 YEARS, OCC: AGRICULTURE,
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R/O: ARAKERI VILLAGE,
TQ: YELBURGA, DIST: KOPPAL
21. DEVAPPA S/O HANAMAPPA CHANAPANAHALLI
AGE: 48 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE,TQ: YELBURGA,
DIST: KOPPAL
22. MONAYYA S/O BASAYYA MATAPATHI
DECEASED BY HIS LRS.
(A)SAVITRAMMA W/O MONAYYA MATAPATHI
AGE: 55 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
(B)BASAYYA S/O MONAYYA MATAPATHI
AGE: 25 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
(C)ERAYYA S/O MONAYYA MATAPATHI
AGE: 20 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
23. SMT. SHANKRAMMA W/O ESHAYYA MATAPATHI
AGE: 45 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
24. MALLAYYA S/O SHIVAYYA MATAPATI
SINCE DECEASED BY HIS LRS.
(A)SMT. MAHADEVAMMA
W/O MALLAYYA MATAPATHI,
AGE: 55 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
(B) VEERANNA S/O MALLAYYA MATAPATHI
AGE: 25 YEARS, OCC: AGRICULTURE,
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R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
24(C)SHIVAMMA D/O MALLAYYA MATAPATHI
AGE: 22 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
25. SMT. KALAWWA W/O YALLAPPA KAMMAR
AGE: 65 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
26. HANAMAPPA S/O SAKRAPPA BANDIHAL
AGE: 50 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
27. HUCHCHIRAPPA S/O MARIBASAPPA KUKUNUR
AGE: 60 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
28. SMT. NAGAWWA W/O TIPPANNA BANDIHAL
AGE: 50 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
29. BALAPPA S/O YALLAPPA MURADI
AGE: 65 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL
30. GAVIYAPPA S/O VEERABHADRAPPA GADDI
AGE: 50 YEARS, OCC: AGRICULTURE,
R/O: ARAKERI VILLAGE, TQ: YELBURGA,
DIST: KOPPAL ... PETITIONERS
(BY SRI P G MOGALI, ADV.)
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AND
1. THE STATE OF KARNATAKA
BY ITS SECRETARY,
DEPARTMENT OF REVENUE,
M.S.BUILDING,
BANGALORE-560001
2. THE LAND ACQUISITION OFFICER
AND THE ASSISTANT COMMISSIONER
KOPPAL TALUK AND
DIST: KOPPAL
3. THE INCOME, TAX OFFICER
INCOME TAX DEPARTMENT,
HOSPET, TALUK HOSPET,
DIST: BELLARY
... RESPONDENTS
(BY SRI A.G. MALDAR, HCGP FOR R1 & R2 )
(SRI RAVIRAJ, ADV. FOR R3
THESE WRIT PETITIONS ARE FILED UNDER
ARTICLES 226 AND 227 OF CONSTITUTION OF INDIA
PRAYING TO QUASH THE CIRCULAR DATED:04/09/2010,
ISSUED BY THE RESPONDENT NO.1, VIDE ANNEXURE-A.
DIRECT THE RESPONDENT NO.1 & 2 TO CONSIDER THE
REPRESENTATION OF THE PETITIONER VIDE ANNEXURE-
C DATED:27/12/2012 AND PAY THE ENTIRE
COMPENSATION AMOUNT TO THEM WITHOUT
DEDUCTING THE INCOME TAX OUT OF THE
COMPENSATION AMOUNT PAYABLE TO THE PETITIONERS.
THESE WRIT PETITIONS COMING ON FOR HEARING
THIS DAY, THE COURT MADE THE FOLLOWING:
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ORDER
Heard the learned counsel appearing for the parties. Perused the case papers.
2. Issue in this writ relates to deduction of income tax at source in respect of payment of compensation awarded towards lands of the petitioners acquired and interest on delayed payment paid to the property loosers by the state.
3. Petitioners' land and houses were acquired by the Government for public purpose namely for an irrigation project called "Hirehalla Irrigation Project" and award came to be passed by Special Land Acquisition Officer. Not being satisfied with the compensation awarded by the Land Acquisition Officer, petitioners sought for reference under Section 18 of the Land Acquisition Act. Reference Court enhanced the compensation. For recovery of the award amounts, execution petitions :8: came to be filed by the petitioners and even after lapse of several years amounts were not deposited even though attachment warrants came to be issued in the execution petitions filed by the petitioners.
4. Petitioners have been informed by the 2nd respondent that compensation amounts would be deposited before the executing court after deducting tax at source @ 10+1=11% by virtue of Circular dated 04.09.2010 issued by 1st respondent. It is the grievance of the petitioners that in similar circumstances, tax has not been deducted by 2nd respondent while depositing the compensation amounts before civil court and requests made by the petitioners has not been considered by the respondents to deposit the compensation amounts without deducting income tax at source and here these writ petitions have been filed seeking direction to the respondents to consider their representation dated 27.12.2012 Annexure-C and to :9: pay entire compensation amount without deducting income tax. Petitioners have also sought for quashing of the impugned Circular dated 04.09.2010 Annexure-A.
5. Petitioners' counsel would elaborate his submission by contending that Section 194LA of Income Tax Act, 1961 does not apply to compensation payable on account of acquisition of agricultural lands. In support of his submission, he has relied upon the decisions of this Court reported in the case of MYSORE URBAN DEVELOPMENT AUTHORITY AND OTHERS VS. THE INCOME TAX OFFICER (TDS) MYSORE AND ANOTHER (2008 (4) KCCR S.N.247) dated 06.06.2008 passed in W.P.No.11295/2006 (T-IT).
6. In the instant case, petitioners' agricultural land holdings came to be acquired by 2nd respondent for the project called 'Hirehalla Irrigation Project' and award came to be passed under Section 11 of the Land Acquisition Act determining the compensation payable : 10 : to each of the petitioners. Not being satisfied with the quantum of compensation awarded by Land Acquisition Officer, petitioners filed applications seeking reference to Civil Court under Section 18 of the Act. The reference court enhanced the compensation. On account of Land Acquisition Officer not satisfying the awards, petitioners filed execution petitions and took out attachment of movables. Though the judgment debtors assured the decree holders that amounts would be deposited within a month or two, same was not deposited. Petitioners claim to have approached 2nd respondent and are said to have been informed that compensation amount would be deposited before the executing court after deducting income tax at the rate of 10+1=11% and an endorsement dated 03.08.2011 Annexure-B has been issued to the petitioners intimating thereunder that Circular dated 04.09.2010 issued by 1st respondent mandates such deduction. : 11 :
7. It is contended by learned counsel for the petitioners that Section 194LA of Income Tax Act, 1961, does not enable the 2nd respondent to deduct tax at source on compensation payable on account of acquisition of agricultural lands in view of Explanation
(ii) to Section 194LA. It is also contended that petitioners have not done any business or not carried on any profession to get the money payable by the respondents due to acquisition of their lands and as such they are seeking for quashing of the Circular dated 04.09.2010-Annexure 'A' and for a mandamus to direct respondents 1 and 2 to consider their representation dated 27.12.2012 Annexure-C and to pay entire compensation without deducting income tax.
8. On the other hand, learned AGA submits that 2nd respondent is entitled to deduct 11% income tax at source on compensation payable to the petitioners. : 12 :
9. By Finance Act (No.2) act, 2004, Section 194LA was inserted with effect from 01.10.2004 which reads as under:
"194LA: Payment of compensation on acquisition of certain immovable property:
Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten percent of such sum as income-tax thereon:
Provided that no deduction shall be made under this Section where the amount of such payment or, as the case may be, the aggregate amount of such payment to a : 13 : 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."
8. Perusal of the above provision would indicate that deduction of tax at source is required to be made in respect of compensation paid for acquisition of immovable property other than agricultural land."
10. A Co-ordinate bench of this Court had an occasion to examine the Circular dated 04.09.2010 impugned in the present writ petition and after examining the : 14 : provisions of the Income Tax Act and particularly Section 194LA, it has been held as under:
"9. Section 28 empowers the Court to award interest on the excess amount of compensation over the amount awarded by the Deputy Commissioner, Section 34 provides for payment of interest if the compensation is not deposited before taking possession of the land. These provisions make a distinction between the amount awarded as compensation and interest payable on the amount so awarded. Perusal of the different provisions of the Land Acquisition Act would disclose that after the statutory notifications are issued and the requisite notice is given to the persons interested in the lands acquired, the Deputy Commissioner, after holding necessary enquiry makes an award inter alia determining the amount of compensation payable for the lands acquired. Section 15 of the Act says that in determining the amount of compensation, the Deputy Commissioner shall be guided by the provisions contained in : 15 : Sections 23 and 24. Section 23 provides for matters to be considered in determining compensation and Section 24 describes the matters to be neglected in determining the compensation. A perusal of Section 23 shows that interest is not an item included in the compensation for any of the matters mentioned therein nor is it mentioned as the consideration for acquisition of the land. Thus, the Act itself makes a clear distinction between the compensation payable for the land acquired and the interest payable on the compensation awarded.
10. The 'interest' in the context means, a consideration paid either for use of money or for forbearance in demanding it, after it has fallen due. It is a compensation allowed by law or fixed by parties or permitted by custom or usage for use of money, belonging to another or for the delay in paying the money after it has become payable.
11. The Apex Court in Dr.SHAMLAL NARULA VS. COMMISSIONER OF INCOME TAX, PUNJAB, JAMMU AND KASHMIR, : 16 : HIMACHAL PRADESH AND PATIALA - (1964) 53 ITR 151 has held that interest, whether it is statutory or contractual, represents the profit the creditor might have made if he had the use of the money or the loss he suffered because he had not that use. It is something in addition to the capital amount, though it arises out of it. The Scheme of the Act and the express provisions thereof establish that the statutory interest payable under Section 34 is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the land acquired. In a case where title of the land passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. Therefore, the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of compensation amount and therefore, is a revenue receipt liable to tax under the Income Tax Act.: 17 :
12. In BIKRAM SINGH AND OTHERS VS. LAND ACQUISITION COLLECTOR AND OTHERS (1997) 224 ITR 551, the Apex Court has again held that interest received on delayed payment of compensation under the Land Acquisition Act is a revenue receipt exigible to Income Tax.
13. In the instant case, admittedly, the immovable property acquired was agricultural land. In the circular at Annexure 'B' dated 4.9.2010, the State Government has clarified that tax has to be deducted at source in respect of the interest awarded under Sections 28 and 34 of the Act on the compensation for acquiring the agricultural lands though deduction of tax at source shall not be made in respect of compensation paid for acquisition of agricultural land.
14. As has been noticed above, interest is not an item of compensation nor is it a consideration for acquisition of land. Interest under Section 28 is statutorily paid for the delayed payment of compensation amount. It is a revenue receipt. The amount received as : 18 : interest on the amount of compensation assessed under the Land Acquisition Act is taxable under the Income Tax Act. The bar contained in Section 194LA for deducting the tax at source is only in respect of the compensation determined for acquiring the agricultural lands. The said bar is not applicable in so far as interest is concerned. Therefore, I do not find any error in the circular at Annexure 'B' dated 04.09.2010. In my opinion, the second respondent has rightly deducted 10% of the interest amount towards deduction of tax at source. There is no merit in the writ petitions. They are accordingly dismissed. No costs."
(emphasis supplied by me)
11. In the background of law laid down when the facts on hand are examined it would indicate that petitioners have submitted a representation on 27.12.2012 Annexure-C to the 2nd respondent requesting not to deduct income tax source on the compensation amount payable to them. On account of non-consideration of : 19 : said representation, petitioners are seeking a direction and also for quashing of the Circular dated 04.09.2010 Annexure-A. In view of the fact that the validity of the Circular dated 04.09.2010 having been upheld by this Court in W.P.No.69000-690001/2010 (LA-RES) by order dated 04.01.2012, 1st prayer sought for by the petitioners cannot be granted.
12. However, insofar as second prayer is concerned, merits acceptance since it has already been held by co- ordinate bench of this court that bar containing in Section 194LA would only relate to payment of interest and not to compensation, similar direction is required to be issued in the present writ petitions. Hence, the following:
ORDER
i) Writ petitions are hereby allowed in part, : 20 :
ii) Respondents 1 and 2 are directed to consider the representation dated 27.12.2012 vide Annexure-C expeditiously at any rate within 8 weeks from the date of receipt of certified copy of this order and deposit the entire compensation amount before the jurisdictional court.
iii) It is made clear that respondents shall not deduct tax at source in respect of the compensation component determined for acquiring the petitioners' lands and the bar contained in the Circular dated 04.09.2010 would be applicable only insofar as interest is concerned.
Ordered accordingly.
SD/-
JUDGE RMS/-Jm/-