Ramakrishnappa Vs Special Land Acquisition Officer (Karnataka High Court)
Summary: The Karnataka High Court disposed of connected writ petitions filed by landowners seeking release of enhanced land acquisition compensation without deduction of tax at source (TDS) from the interest component. The petitioners challenged the respondents’ proposal to deduct 10% TDS under Section 194LA of the Income-tax Act, 1961, from amounts payable pursuant to earlier judgments of the High Court. The Court relied on the Supreme Court’s decision in Commissioner of Income-Tax, Faridabad v. Ghanshyam (HUF) and decisions of its Co-ordinate Benches holding that interest awarded under Section 28 of the Land Acquisition Act, 1894 forms part of enhanced compensation. Accordingly, it directed the respondents to release the compensation without deducting TDS on the interest component within two months from receipt of the order.
The petitioners owned lands situated in Basavana Ganguru Village, Holalluru Hobli, Shivamogga Taluk and District. Their lands were notified for acquisition for the Upper Tunga Canal Project through a preliminary notification dated 11 September 1997 under Section 4(1) of the Land Acquisition Act, 1894, followed by a final notification. An award dated 23 July 2001 determined compensation at rates stated as ₹60,000 per acre and ₹1,00,000 per acre for the relevant categories of land. Dissatisfied with the amounts awarded, the landowners sought references under Section 18 of the 1894 Act. The Reference Court enhanced compensation to ₹2,00,000 per acre for irrigated lands.
The petitioners subsequently pursued MFA No. 2739/2015, MFA No. 1189/2021 and MFA No. 2295/2015 before the High Court, claiming compensation at ₹105 per square foot. By judgments and awards dated 29 November 2024 and 12 August 2025, a Division Bench determined compensation at ₹105 per square foot. The petitioners then submitted representations seeking disbursement of the enhanced compensation in accordance with those judgments. However, the calculation sheet prepared by the respondents disclosed a proposed deduction of 10% towards TDS under Section 194LA of the Income-tax Act.
The petitioners argued that Section 194LA was inapplicable to their circumstances because the payments represented compensation for compulsory acquisition of their lands. They further submitted that the interest awarded by the Court was statutory in nature and intended to account for inflation and the passage of time between determination and payment of compensation. According to the petitioners, the compensation itself could not be treated as income liable to tax deduction and, consequently, the respondents had no authority to deduct TDS from the interest forming part of that compensation.
During the hearing, counsel for the petitioners submitted that the issue was no longer res integra in view of the judgment of a Co-ordinate Bench in W.P. No. 26755/2025. Both the Additional Government Advocate representing respondent No. 1 and counsel representing respondent No. 2 acknowledged that a similar question had already been considered by the High Court. The dispute therefore centred on the legal character of interest awarded as part of enhanced compensation and the respondents’ authority to deduct tax from that component.
The High Court referred to the Supreme Court’s ruling in Commissioner of Income-Tax, Faridabad v. Ghanshyam (HUF), reported in 2009 (8) SCC 412. The Supreme Court had explained that interest awarded under Section 28 of the Land Acquisition Act, 1894 constitutes an accretion to the value of the acquired land and forms part of enhanced compensation or consideration. Such interest is intended to account for the increase in value over the period between determination of compensation and payment. The High Court also relied on M/s. Power Grid Corporation of India Ltd. v. The Assistant Commissioner, Mysore Division and Others, W.P. No. 43215/2015, in which a Co-ordinate Bench had held that no TDS could be deducted from interest awarded under Section 28 because it formed part of compensation.
Following these authorities and the earlier decision in W.P. No. 26755/2025, the Karnataka High Court held that the connected writ petitions deserved similar disposal. It directed the respondents to pay compensation in accordance with the judgments in MFA No. 2739/2015, MFA No. 1189/2021 and MFA No. 2295/2015 without deducting any tax at source on the interest component. The respondents were required to comply within two months from receiving a copy of the order. The decision specifically concerns interest forming part of enhanced land acquisition compensation under Section 28 of the Land Acquisition Act, 1894.
Cases Discussed
- Commissioner of Income-Tax, Faridabad Vs Ghanshyam (HUF) — 2009 (8) SCC 412 (Supreme Court). Interest awarded under Section 28 of the Land Acquisition Act, 1894 forms part of enhanced compensation.
- M/s. Power Grid Corporation of India Ltd. Vs The Assistant Commissioner, Mysore Division and Others — W.P. No. 43215/2015 (Karnataka High Court). Relied upon for the proposition that TDS cannot be deducted from Section 28 interest forming part of compensation.
- Karnataka High Court, W.P. No. 26755/2025 — Co-ordinate Bench decision relied upon as directly covering the issue. Party names and judgment date are not stated in the supplied text.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
The petitioners in these petitions have sought for a writ in the nature of mandamus to direct respondents No.1 and 2 to pay compensation as per the judgments passed by this Court in MFA No.2739/2015, MFA No.2295/2015 and 1189/2021 dated 29.11.2024 and 12.08.2025 respectively without deducting any amount towards Tax Deduction at Source (TDS).
2. (i) The petitioners claim that they are the owners of certain lands situate in Basavana Ganguru Village, Holalluru Hobli, Shivamogga Taluk and District which were notified for Upper Tunga Canal Project in terms of a preliminary notification dated 11.09.1997 issued under Section 4(1) of the Land Acquisition Act, 1894 (henceforth referred to as ‘Act, 1894’ for short), followed by a final notification.
(ii) The petitioners in W.P.Nos.35970/2025 and 35685/2015 and in W.P.No.34653/2025 contend that an award was passed on 23.07.2001 determining the compensation payable at a sum of Rs.60,000/- per acre, a sum of Rs.1,00,000/- per acre for rain-fed lands respectively. Being aggrieved by the said award, references were sought under Section 18 of the Act, 1894 and the reference Court enhanced the compensation to a sum of Rs.2,00,000/- per acre for irrigated lands. The petitioners thereafter filed MFA No.2739/2015, MFA No.1189/2021 and MFA No.2295/2015 respectively claiming compensation at the rate of Rs.105/- per square feet and a Division Bench of this Court vide judgments and awards dated 29.11.2024 and 12.08.2025 determined the compensation payable at Rs.105/- per square feet.
(iii) The petitioners contend that they made several representations requesting the respondents to release the compensation as per the judgments passed by this Court in MFA No.2739/2015, MFA No.1189/2021 and MFA No.2295/2015. The respondents prepared a calculation sheet which disclosed that 10% of the compensation is deducted towards TDS under Section 194LA of the Income Tax Act, 1961. The petitioners claim that Section 194LA of the Income Tax Act, 1961 is not applicable to them, as they have lost their lands and that the interest awarded by the Court is statutory in nature and is intended to factor inflation. The petitioners therefore contend that a direction be issued to the respondents to pay the compensation as per the judgments passed by this Court in MFA No.2739/2015, MFA No.1189/2021 and MFA No.2295/2015 without deducting any amount towards TDS.
3. The learned counsel appearing for the petitioners in all these cases submits that the issue is no longer res integra in view of the judgment passed by a Co-ordinate Bench of this Court in W.P. No.26755/2025. He submits that when the compensation payable to the petitioners itself cannot be treated as income and it cannot be subject to deduction of tax, the respondents are not authorized to deduct any amount from the interest payable on the compensation awarded.
4. The learned Additional Government Advocate appearing for respondent No.1 does not dispute the fact that a similar question was considered by a Co-ordinate bench of this Court in W.P. No.26755/2025.
5. The learned counsel for the respondent No.2 does not dispute the aforesaid position of law.
6. The Apex Court in the case of Commissioner of Income-Tax, Faridabad Vs. Ghanshyam (HUF), 2009 (8) SCC 412, held that the interest awarded under Section 28 of the Land Acquisition Act, 1894, forms part of the enhanced compensation and that such interest is intended to factor inflation during the period between the determination of compensation and its payment. The Hon’ble Apex Court also held that “interest under Section 28 of the Act, 1894 is an accretion to the value of the land and hence forms part of the enhanced compensation or consideration”.
7. As a matter of fact, a Co-ordinate bench of this Court in M/s. Power Grid Corporation of India ltd. Vs. The Assistant Commissioner, Mysore Division and others – W.P.No.43215/2015, held that the interest awarded under Section 28 of the Act, 1894 forms part of the compensation and therefore, no TDS can be deducted on such payment.
8. In view of the above position of law and in view of the judgment of Co-ordinate Bench of this Court in W.P.No.26755/of 2025, these writ petitions also deserve to be disposed off accordingly.
9. Accordingly, these writ petitions are disposed off. The respondents are directed to pay the compensation to the petitioners in all these petitions in terms of the judgments passed by this Court in MFA No.2739/2015, MFA No.1189/2021 and MFA No.2295/2015 without deducting any tax at source on the interest component.
10. This shall be complied within a period of two months from the date of receipt of a copy of this order.
