Union of India Vs Smt. Kunhamina Hajjumma (Karnataka High Court)
Karnataka HC: No TDS on Compensation for Compulsory Acquisition of Land – Revenue’s Appeal Dismissed; Mere Pendency of SLP Without Stay Does Not Dilute Binding Precedent
The Karnataka High Court dismissed the Revenue’s writ appeal concerning TDS deducted by BMRCL from compensation paid for acquisition of land. The assessee had challenged a Section 148 notice for AY 2019-20 and had also sought a direction to BMRCL to refund/pay the amount deducted as TDS along with applicable interest.
The Single Judge had allowed the assessee’s writ petition by following the Division Bench decision in Bangalore Metro Rail Corporation Ltd. v. Sri Balaji Corporate Services & Ors., WA No. 890/2022 and connected matters dated 27 September 2023.
The High Court reiterated the principle laid down in Bangalore Metro Rail Corporation Ltd. that tax cannot be deducted from compensation paid towards acquisition of land, and a person receiving such compensation would be entitled to claim exemption from income tax.
The Revenue pointed out that the earlier Division Bench judgment had been challenged before the Supreme Court in SLP (C) No. 3799/2024. However, when specifically questioned by the Court, the Revenue conceded that there was no stay of the Karnataka High Court judgment.
Significantly, BMRCL informed the Court that the Single Judge’s order had already been complied with and the tax collected had been refunded. The Division Bench therefore found no error or illegality in the Single Judge following the binding coordinate Bench decision and dismissed the Revenue’s writ appeal.
Key takeaway: Compensation received on acquisition of land cannot be subjected to TDS in terms of the binding Karnataka High Court ruling in Bangalore Metro Rail Corporation Ltd. Further, the mere filing or pendency of an SLP before the Supreme Court does not dilute the binding effect of a High Court judgment when there is no stay of that judgment.
Cases Discussed
- Bangalore Metro Rail Corporation Limited v. Sri Balaji Corporate Services and Others (Karnataka HC), W.A.No.890/2022 and connected matters dated 27.09.2023
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Heard learned senior standing counsel Sri.Y.V.Raviraj for appellants/Revenue and learned counsel Sri.Usman.P., for respondent/assessee through video conference. Perused the entire writ appeal papers.
2. The respondent/assessee was before the learned Single Judge questioning Annexure-B – notice issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2019-20 and had also sought for a writ of mandamus directing the BMRCL – second respondent herein to pay compensation in lieu of TDS effected together with interest as applicable from the date of TDS till date. Learned Single Judge following the decision of the Co-ordinate Bench of this Court in the case of BANGALORE METRO RAIL CORPORATION LIMITED VS. SRI BALAJI CORPORATE SERVICES AND OTHERS in W.A.No.890/2022 and connected matters dated 27.09.2023 allowed the writ petition.
3. In BANGALORE METRO RAIL CORPORATION LIMITED (supra), the Co-ordinate Bench has held that the tax cannot be deducted from the compensation amount paid towards acquisition of land and such person who receives compensation on acquisition of his land would be entitled to claim exemption from payment of income tax.
4. Learned counsel Sri.Y.V.Raviraj for appellants/Revenue would submit that the decision of the Co-ordinate Bench in BANGALORE METRO RAIL CORPORATION LIMITED (supra) is challenged and the same is pending before the Hon’ble Apex Court in SLP(C).No.3799/2024.
5. To the Court’s query, learned counsel for the appellants/Revenue would submit that there is no stay of the judgment of the Co-ordinate Bench.
6. Learned counsel for the respondent No.2 also submits that the order of the learned Single Judge is already complied with, by refunding the tax collected.
7. In the above circumstances, we do not find any error or illegality in the order passed by the learned Single Judge, that too, following the decision of the Co-ordinate Bench in BANGALORE METRO RAIL CORPORATION LIMITED (supra). Accordingly, writ appeal stands rejected.
