Prakash S/o Byroji Rao (Dead) Through Legal Heirs & Ors. Vs Special Land Acquisition Officer & Anr. (Karnataka High Court)
Summary: The Karnataka High Court, in Prakash S/o Byroji Rao (Dead) Through Legal Heirs & Ors. Vs Special Land Acquisition Officer & Anr., examined whether the authorities could deduct tax at source (TDS) while disbursing enhanced compensation awarded by the Supreme Court for land acquired under the Land Acquisition Act, 1894. Justice K.S. Hemalekha considered a writ petition filed by the landowners seeking payment of compensation at ₹105 per square foot, as directed by the Supreme Court in Civil Appeal No. 5309 of 2025, without deduction of TDS. The petitioners apprehended that the authorities would deduct 10% TDS, as allegedly done in similar land acquisition matters.
The dispute concerned land bearing Survey No. 47, measuring 6 acres and 4 guntas of tank-fed land and 1 acre of dry land, situated at Basavana Ganguru Village, Holalluru Hobli, Shivamogga Taluk and District. The land was acquired for the Upper Thunga Canal Project following a preliminary notification dated 11 September 1997 under Section 4(1) of the Land Acquisition Act, 1894. Possession was taken on 19 December 2000. The Land Acquisition Officer initially awarded compensation at ₹1,00,000 per acre for tank-fed land and ₹47,000 per acre for dry land through an award dated 23 July 2001. Dissatisfied with the valuation, the landowners sought a reference under Section 18 of the Land Acquisition Act, resulting in L.A.C. No. 58 of 2001.
The reference court enhanced compensation to ₹2,00,000 per acre for tank-fed land and ₹1,00,000 per acre for dry land. The landowners subsequently approached the Karnataka High Court in MFA No. 8540 of 2015 seeking further enhancement to ₹105 per square foot. However, the Division Bench dismissed their appeal on 12 June 2024 because of delay in filing. The landowners challenged that decision before the Supreme Court through SLP No. 20149 of 2024. By its order dated 17 April 2025 in Civil Appeal No. 5309 of 2025, the Supreme Court granted compensation at ₹105 per square foot, noting that the same rate awarded for adjoining land had already been upheld in Civil Appeal No. 7587 of 2021 and connected appeals. The petitioners thereafter requested the Executive Engineer, Upper Thunga Project, to release the enhanced compensation.
Before the High Court, the petitioners argued that the authorities could not deduct TDS from the enhanced compensation. They relied on Commissioner of Income Tax, Faridabad Vs Ghanshyam (HUF), reported in (2009) 8 SCC 412, and Power Grid Corporation of India Ltd. Vs Assistant Commissioner, Mysore Division & Others, decided by the Karnataka High Court in W.P. No. 43215 of 2015 and connected matters. According to the petitioners, these judgments established that interest awarded under Section 28 of the Land Acquisition Act, 1894 formed part of enhanced compensation and was distinguishable from interest awarded under Section 34 for delayed payment. The Additional Government Advocate submitted that compensation would be deposited in accordance with the Supreme Court’s directions and applicable law.
The High Court examined the distinction recognised by the Supreme Court in Ghanshyam (HUF). It observed that interest awarded under Section 28 represents an accretion to the value of acquired land and consequently forms part of enhanced compensation. In contrast, interest under Section 34 is payable because of delay in making payment after compensation has been determined. The Court also referred to its earlier decision in Power Grid Corporation of India Ltd., which applied the same principle and held that TDS could not be deducted from interest forming part of enhanced compensation under Section 28. Since the acquisition proceedings had attained finality and the compensation awarded to the petitioners constituted enhanced compensation under the 1894 Act, the respondents were not entitled to deduct TDS while making payment.
Accordingly, the Karnataka High Court allowed the writ petition and directed the Special Land Acquisition Officer and the Executive Engineer, Upper Thunga Project, to pay compensation in accordance with the Supreme Court’s order dated 17 April 2025 in Civil Appeal No. 5309 of 2025, without deducting any amount towards TDS. The Court further directed the Executive Engineer to deposit the amount within eight weeks from receipt of a copy of its order. The judgment reiterates the distinction between interest forming part of enhanced land acquisition compensation under Section 28 and interest payable for delayed payment under Section 34, while applying that distinction to protect the compensation awarded to the landowners from TDS deduction.
Cases Discussed:
- Commissioner of Income Tax, Faridabad Vs Ghanshyam (HUF) (Supreme Court); (2009) 8 SCC 412: Relied upon for the distinction between interest under Sections 28 and 34 of the Land Acquisition Act, 1894. Section 28 interest forms part of enhanced compensation, whereas Section 34 interest relates to delayed payment.
- Power Grid Corporation of India Ltd. Vs Assistant Commissioner, Mysore Division & Others (Karnataka High Court); W.P. No. 43215/2015 and connected matters; 07/03/2018: Followed for the principle that TDS cannot be deducted from interest awarded under Section 28 because such interest forms part of enhanced land acquisition compensation.
- Supreme Court; Civil Appeal No. 5309/2025; 17/04/2025: The Supreme Court awarded compensation at ₹105 per square foot for the petitioners’ acquired land, providing the basis for the present writ petition seeking payment without TDS.
- Supreme Court; Civil Appeal No. 7587/2021 and connected appeals: Referred to in the Supreme Court’s order dated 17 April 2025 because the compensation rate of ₹105 per square foot for adjoining land had already been upheld in those proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioners have approached this Court seeking a writ of mandamus directing the respondents to pay compensation in terms of the order passed by the Hon’ble Apex Court in C.A.No.5309/2025 dated 17.02.2025, without deducting any amount towards Tax Deduction at Source (‘TDS’ for short).
2. Heard learned counsel for the petitioners and learned counsel for the respondents.
Brief facts:
3. The petitioners are the absolute owners of the land bearing Sy.No.47, measuring 6 acres, 4 guntas of tank fed land and 1 acre of dry land situated at Basavana Ganguru Village, Holalluru Hobli, Shivamoga Taluk and District. The said land was acquired by the respondents for alignment of upper Thunga canal in the year 1997, notification under Section 4(1) of the Land Acquisition Act, 1894 (‘Act, 1894’ for short) on 11.09.1997, followed by the final notification. The possession of the land was taken on 19.12.2000. The Land Acquisition Officer (‘LAO’ for short) passed an award on 23.07.2001 by fixing compensation to the claimants at the rate of ₹1,00,000/- for the tank fed land and ₹47,000/- for the dry land. Not being satisfied, the petitioners sought reference under Section 18 of the Act, 1894, which was numbered as L.A.C.No.58/2001.
4. The Civil Court enhanced compensation to ₹2,00,000/- per acre for tank fed land and ₹1,00,000/- per acre for dry land. The petitioners preferred M.F.A.No.8540/2015 before Division Bench of this Court seeking further enhancement to ₹105/- per square feet. The Division Bench of this Court dismissed the M.F.A.No.8540/2015 on 12.06.2024 on the ground of delay in filing the appeal. Aggrieved by which, the petitioners approached the Apex Court in S.L.P.No.20149/2024. The Apex Court, by order dated 17.04.2025, partly allowed the Special Leave Petition by awarding ₹105/- per square feet for the land of the petitioners’ land. The petitioners subsequently, submitted a representation to respondent No.2 seeking release of compensation in terms of the said Apex Court’s order dated 17.04.2025.
5. Learned counsel for the petitioners contends that deduction of TDS from compensation under the Act, 1894 is impermissible in view of the judgment of the Apex Court in Commissioner of Income Tax, Faridabad Vs. Ghanshyam (HUF)1 (Ghanshyam). He further relies on the judgment of this Court in M/s. Power grid Corporation of India ltd. Vs. The Assistant Commissioner, Mysore Division and Others2 (M/s. Power grid Corporation), wherein this Court applied the ratio in Ghanshyam’s case and directed that no TDS to be deducted from the compensation payable under the Land Acquisition Act.
6. Per contra, learned Additional Government Advocate submits that the compensation due to the petitioners shall be deposited strictly in accordance with the order of the Apex Court in C.A.No.5309/2025 and as per law.
7. The proceedings relating to acquisition have attained finality. The Apex Court in C.A.No.5309/2025, while awarding compensation of ₹105/- per square feet held in paragraph No.4 as under:
“4. In view of the fact that the higher compensation of Rs.105/- per sq. feet awarded by the High Court for the adjoining land has already been upheld by this Court in Civil Appeal No.7587/2021 and other connected appeals, we are satisfied that the appellants are also entitled to the compensation at the above mentioned higher rate.”
8. The apprehension of the petitioners is that 10% TDS would be deducted, as has been done in identical matters by the respondents. The Apex Court in Ghanshyam’s case stated supra has categorically held that the interest awarded under Section 28 of the Act, 1894 forms part of the “enhanced compensation”, whereas, the “interest” under Section 34 pertains only to delay in making payment after the compensation is determined. The relevant observations are, “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. On the other hand, interest under Section 34 is payable only for delay in making payment after the amount is determined”.
9. This Court in M/s. Power grid Corporation stated supra applying the above ratio held that the interest under Section 28 forms part of the compensation and therefore, no TDS can be deducted on such payments.
10. In view of the authoritative pronouncement of the Apex Court in the case of Ghanshyam and this Court in the case of M/s. Power grid Corporation stated supra and the fact that the compensation awarded to the petitioner under Act, 1894, constitutes “enhanced compensation”. The respondents are not entitled to deduct any amount towards TDS while making payment of the same and hence, this Court pass the following:
ORDER
i. The writ petition is allowed.
ii. Respondent Nos.1 and 2 are directed to make payment of the compensation amount to the petitioner as per the order of the Apex Court in C.A.No.5309/2025 dated 17.04.2025 without deducting any amount towards TDS.
iii. Respondent No.2 shall deposit the said amount within eight weeks’ from the date of the receipt of the copy of this order.
Notes:
1 (2009) 8 SCC 412
2 W.P.No.43215/2015 and connected matters.
