Defense Estate Officer Vs Sunanda W/O. Prabhakar Naik (Karnataka High Court)
The Karnataka High Court dismissed the writ petition filed by the Defense Estate Officer, Karnataka and Goa Circle, challenging the Execution Court’s order dated 02.09.2022 in Execution Case No.35/2020, which had held that tax was not required to be deducted at source from the amount payable to the land losers. The dispute arose from acquisition of agricultural land measuring 1 acre 11 guntas at Kodar Village, Karwar Taluk, for the Naval Base Seabird Project. The acquisition dated back to 1986-87. Compensation awarded in 1988 was accepted under protest and the reference proceedings culminated in enhancement of compensation by order dated 28.08.2006. Despite the long passage of time, the entire compensation remained unpaid and the landowners were compelled to initiate execution proceedings.
The Defense Estate Officer had made payment after deducting ₹2,65,077 as TDS. Before the High Court, it was contended that although compensation for acquisition of agricultural land constituted a capital receipt, the interest component represented revenue income taxable as “income from other sources”. Reliance was placed on Sections 56(2)(viii), 145B and 194-LA of the Income-tax Act, 1961. The petitioner particularly relied upon Mahender Pal Narang Vs Central Board of Direct Taxes (Punjab and Haryana High Court), which treated interest on compensation/enhanced compensation as income from other sources, as well as Guru Rao v. State of Karnataka and Sham Lal Narula (Dr.) v. CIT.
