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Section 96 Overrides Income Tax for Post-2014 Land Acquisitions

Case Law Details

TaxGuru Citation
2025 taxguru.in 12545
Case Name
Smt. Supriya S. Shetty Vs Union of India (Karnataka High Court)
Date of Judgement/Order
Only available for paid members
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Smt. Supriya S. Shetty Vs Union of India (Karnataka High Court)

NH Land Acquisition Compensation Fully Exempt: Karnataka HC Says No Tax & No TDS After 01.01.2014- Section 96 Wins Again: HC Quashes TDS Demands on Highway Acquisition Compensation

Background & Context

  • Petitioner Supriya S. Shetty challenged the action of authorities in deducting / demanding TDS on compensation paid for acquisition of land for National Highway purposes.
  • The acquisition proceedings were conducted by NHAI / Competent Authority but awards were passed after 01.01.2014, the date on which the RFCTLARR Act, 2013 (Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation & Resettlement Act) came into force.
  • Authorities treated the acquisition as taxable under Income-tax Act & insisted on TDS u/s 194LA, prompting the writ petition.

Core Legal Issue

  • Whether compensation paid for NH acquisition after 01.01.2014 is exempt u/s 96 of the RFCTLARR Act, 2013?
  • Whether authorities can deduct TDS u/s 194LA when RFCTLARR Section 96 bars levy of income-tax?

Petitioner’s Key Arguments

  • Once the 2013 RFCTLARR Act is applicable, Section 96 prohibits levy of income-tax, including TDS, on compensation.
  • NH Act (1956) now incorporates provisions of RFCTLARR Act through amendments; hence NHAI must issue awards only under the 2013 Act, not under the repealed 1894 Act.
  • CBDT Circular dated 25.10.2016 also clarified that no TDS is deductible when compensation is exempt.
  • Cited earlier High Court decisions including:

-Balaji Corporation Solutions,

– KIADB acquisition cases where authorities themselves treated compensation as exempt & did not deduct TDS.

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Author Info

CA Vijayakumar Shetty
Qualification: CA in Practice
Company: Shetty & Co, Chartered Accountants, Mangalore
Location: Mangalore, Karnataka
Articles Published: 6,941

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