Smt. Supriya S. Shetty Vs Union of India (Karnataka High Court)
NH Land Acquisition Compensation Fully Exempt: Karnataka HC Says No Tax & No TDS After 01.01.2014- Section 96 Wins Again: HC Quashes TDS Demands on Highway Acquisition Compensation
Background & Context
- Petitioner Supriya S. Shetty challenged the action of authorities in deducting / demanding TDS on compensation paid for acquisition of land for National Highway purposes.
- The acquisition proceedings were conducted by NHAI / Competent Authority but awards were passed after 01.01.2014, the date on which the RFCTLARR Act, 2013 (Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation & Resettlement Act) came into force.
- Authorities treated the acquisition as taxable under Income-tax Act & insisted on TDS u/s 194LA, prompting the writ petition.
Core Legal Issue
- Whether compensation paid for NH acquisition after 01.01.2014 is exempt u/s 96 of the RFCTLARR Act, 2013?
- Whether authorities can deduct TDS u/s 194LA when RFCTLARR Section 96 bars levy of income-tax?
Petitioner’s Key Arguments
- Once the 2013 RFCTLARR Act is applicable, Section 96 prohibits levy of income-tax, including TDS, on compensation.
- NH Act (1956) now incorporates provisions of RFCTLARR Act through amendments; hence NHAI must issue awards only under the 2013 Act, not under the repealed 1894 Act.
- CBDT Circular dated 25.10.2016 also clarified that no TDS is deductible when compensation is exempt.
- Cited earlier High Court decisions including:
-Balaji Corporation Solutions,
– KIADB acquisition cases where authorities themselves treated compensation as exempt & did not deduct TDS.
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