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
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.
