Section 96 mandates that no income-tax shall be levied on any award made under the Act except under Section 46. Section 46 deals with the purchase of land by a person other than a specified person through private negotiations. The benefit of Section 96 is not available when a land is purchased through private negotiations by a person other than a specified person under Section 46(1).
Therefore, in cases other than those covered by Section 46 of the 2013 Land Acquisition Act, the levy of income-tax is barred by Section 96 and as a consequence, the deduction or collection under Section 194LA of the Income Tax Act, 1961, is impermissible.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Heard Mr. Abraham Markos, the learned senior counsel for the petitioner and Mr.Christopher Abraham, the learned Standing Counsel the Income Tax Department for respondents.
2. The petitioner challenges Ext.P8 assessment order and Ext.P9 demand notice as illegal, beyond the jurisdiction of respondent no.1 and quash Exts.P8 and P9. On 22.01.2019 the learned Standing Counsel sought time to get instructions and the Court granted interim suspension of Exts.P8 and P9 for eight weeks. The interim orders are extended from time to time. The respondents have not filed counter affidavit or statement opposing the writ prayers.
3. The point for consideration in the instant writ petition substantially arises under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (for short ‘Act 30 of 2013’). The circumstances relevant for disposing of the writ petition are stated thus:
4. The Special Tahsildar (LA), Kochi -1 made Award No. A3-31/12 LAC – 58/15 dated 30.10.2015 under Act 30 of 2013. The compensation awarded for the acquisition of land, buildings etc of the petitioner by Kochi Metro Rail Project is Rs.7,54,24,705/-. During the Assessment Year 2016-17 the petitioner has received 80% of the compensation determined through Award dated 30.10.2015. Through Ext.P8, the first respondent while computing the net taxable income of the petitioner-assessee has included the compensation amount of 80% received in the subject Assessment Year and assessed the income of the petitioner. Hence the writ petition.
5. The first respondent in Ext.P8 while dealing with the contention of petitioner that the compensation received under Act 30 of 2013 is completely exempt from any liability under the Income Tax Act, Stamp duty and fees etc has recorded a few findings. I have taken note of all the findings and the following conclusion is reproduced for ready reference:
“The main intention of the section is to spare the poor farmer the further burden of Income-tax, who has already suffered loss of livelihood, replacement, emotional trauma etc. This is clear from the concluding lines of the Section 96. It says that “no person claiming under any such award or agreement shall be liable to pay fee for a copy of the same”. The Act here envisages a poor agriculturist, for whom even paying a few rupees of copying fees, which cannot possibly exceed Rs.100/- considering the number of pages, shall be a huge economic burden.
From the above discussion, it can clearly be seen that compensation on a depreciable asset cannot be said to be covered by Section 96 of the RFCTLAAR Act.”
6. Mr.Abraham Markos appearing for petitioner contends that the first respondent failed to appreciate the purpose, purport and object of exemption under Section 96 of Act 30 of 2013. According to him, the exemption is complete if Section 46 of Act 30 of 2013 is not attracted to an acquisition under Act 30 of 2013. There is no need to search for intention or subject Section 96 to any other mode of interpretation except giving effect to the plain or literal construction the section permits. He refers to the Division Bench judgment of High Court of Andhra Pradesh in C. Nanda Kumar v. Union of India in W.P.(C) No.7874 of 2016 and batch (Ext.P7) and states that the ratio of the said decision is applicable in all fours, in support thereof he relies on the following paragraphs:
“7. Subsequently, the Central Board of Direct Taxes(CBDT) issued a Circular bearing No.36/2016, dated 25.10.2016, clarifying that the compensation received under an award exempted from the levy of income tax under Section 96 of the 2013 Act shall not be taxable, even if there is no specific provision for exemption under the Income Tax Act, 1961. Therefore, one set of land owners whose lands were acquired have come up with the 3rd writ petition W.P.(C)No.44382 of 2016 seeking a mandamus not to deduct tax at source, in terms of the Circular of the CBDT”.
“18. But we do not know why the petitioners raise this contention. We are concerned in this case with the impact of Section 194LA of the Income Tax Act, 1961 upon Section 96 of the 2013 Land Acquisition Act. There is no ambiguity either in Section 96 of the 2013 Land Acquisition Act or in Section 194 LA of the Income Tax Act. Therefore, this contention is completely irrelevant.” “23. There is no dispute about the fact that the Circulars issued by the Central Board are binding upon the revenue. But in the Circular dated 25.10.2016, there is no whisper about the implication of Section 96 of the 2013 Land Acquisition Act upon Section 194 LA of the Income Tax Act, 1961. This can be appreciated from the operative portion of Circular No.36/2016, which reads as follows:-
3. As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under Section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide Section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961.
26. Similarly, the entire scheme of Chapter-XVII of the Income Tax Act, 1961, as indicated by Section 190(1) is the payment of tax on income, by way of deduction or collection at source. Therefore, the last contention is that Section 194LA of the Income Tax Act, 1961, cannot be pressed into service on an income which is not liable to tax under Section 96 of the 2013 Land Acquisition Act.
28. Therefore, it is clear that Chapter-XVII in entirety is about deduction or collection and recovery of tax. This is why Section 190(1) of the Act speaks only about tax on income. Section 190(1) of the Income Tax Act, 1961 reads as follows:
190. Deduction at source and advance payment.(1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of section 192, as the case may be, in accordance with the provisions of this Chapter.
29. If there can be no tax on a particular income by virtue of some special provisions contained in an enactment other than the Income Tax Act, 1961, it is not known how any provision contained in Chapter-XVII of the Income Tax Act could be invoked. The emphasis under Section 190(1) is on the tax on such income. What follows from Sections 192 onwards are actually deduction or collection at source or advance payment of tax on income. Once this is clear, we will have no difficulty in concluding that Section 96 of the 2013 Land Acquisition Act makes Section 194LA of the Income Tax Act, 1961, inapplicable to the compensation paid under the award.
33. Section 96 mandates that no income-tax shall be levied on any award made under the Act except under Section 46. Section 46 deals with the purchase of land by a person other than a specified person through private negotiations. The benefit of Section 96 is not available when a land is purchased through private negotiations by a person other than a specified person under Section 46(1).
34. Therefore, in cases other than those covered by Section 46 of the 2013 Land Acquisition Act, the levy of income-tax is barred by Section 96 and as a consequence, the deduction or collection under Section 194LA of the Income Tax Act, 1961, is impermissible.
39. We cannot lose sight of the fact that Central Act 30 of 2013 is a welfare legislation, which made a quantum leap from the provisions of the 1894 Land Acquisition Act. The object of the 2013 Act is not merely to provide just and fair compensation but also to make provisions for the rehabilitation and resettlement of the families of the land losers. The preamble to the Act shows that the Act was intended to look at land losers as persons who can become partners in the development of the country. Section 96 of the 2013 Act was intended to be a tool towards securing the laudable objectives of the 2013 Act. Therefore, it can never be contended that Section 194LA of the Income Tax Act will make in roads into the welfare provision contained in the 2013 Land Acquisition Act. There is no use in giving effect to the provisions of Section 96 of the 2013 Act by first asking the Land Acquisition authority to deduct tax under Section 194LA and then driving the poor land losers from pillar to post to get a refund of the amount from the Income Tax Department. An interpretation that will lead the farmers and land losers to go from the Collectorate to the Income Tax Officer, is antithetic to the objects and reasons of the 2013 Act. Hence, the second contention of the learned standing counsel for the Department is liable to be rejected. Accordingly, it is rejected.
40. Therefore, in fine, the writ petitions are allowed and there shall be a direction to the respondents not to deduct tax at source, whenever any compensation is paid for the acquisition of a land under the 2013 Land Acquisition Act, except those covered by Section 46 of the 2013 Act. In cases where by way of an interim order the tax deducted at source was directed to be kept in a Fixed Deposit in the name of the Registrar(Judicial) of this Court, the Registry shall either liquidate the deposit and transfer the funds to the account of the petitioners or makeover/transfer the Fixed Deposit in the name of the concerned petitioners to enable them to encash the same. The miscellaneous petitions, if any, pending in these writ petitions shall stand closed. No costs.”
He prays for allowing the writ petition.
7. Mr.Christopher Abraham submits that the language of Section 96 is clear and unambiguous and there is no need to refer to intention or find out other ways and means to include the compensation received by the petitioner for any purpose of tax liability including the capital gains.
8. I have perused Exts.P8 and also the ratio laid down by the Division Bench of High Court of Andhra Pradesh in C. Nanda Kumar v. Union of India. The language of Section 96 is clear, plain and simple. The exemption is complete if the compensation is paid under an Award after the owner is denied ownership/possession of land, building etc pursuant to compulsory acquisition under Act 30 of 2013. The exemption granted by the Parliament, this Court is of the view, is denied through an impermissible interpretation adopted by the first respondent. The point is covered in favour of petitioner both by the precedent and circular No.30/2016 referred in Ext.P7.
9. For the above reasons, Ext.P8 is set aside. The writ petition is accordingly allowed.