IMPORTANT POINT
Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition Act, 2013, exempts income tax only for compensation under this Act, not for acquisitions under other statutes.

JUDGMENT :

Krishna S. Dixit, J.

The Commissioner of Income Tax (TDS) has preferred these intra court appeals, for laying a challenge to a common judgment dated 12.04.2023 entered by a learned Single Judge of this Court whereby, land-losers’ W.P.No.103377/2017 c/w other identical cases, having been favoured, they have been relieved off from the levy of income tax on the compensation paid for the acquisition of their lands. This relief, he has granted principally in terms of section 96 of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

2. Learned Senior Panel Counsel appearing for the Revenue urged the following points for voiding the impugned judgment:

2.1. Section 96 of 2013 Act providing for exemption from income tax on the amount payable as compensation, is invocable only when acquisition of private lands for public purpose has been accomplished under the provisions of this very Act and not under any other statutes such as the Karnataka Highways Act, 1964, to be specific.

2.2. Section 96 of 2013 Act enacts a part of law relating to Income Tax; the Parliament in its wisdom has exempted from tax the compensation payable for the land acquisition done under the provisions of this Act only, as a matter of policy and that such a provision has to be construed literally, there being no room for its otherwise interpretation.

2.3. What income should be taxed and what should be exempted are a matter of legislative wisdom; by employing the said wisdom, Parliament has enacted Income Tax Act, 1961 providing for levy on the compensation payable for compulsory purchase of land, done under the provisions of 2013 Act alone and not any other statute. There being no challenge to section 96 of the new Act, court by interpretative process cannot restrict or widen its scope & application.

3. Learned Senior Advocate Mr. S.M. Chandrashekar appearing for the land-losers per contra made the following submission for resisting these appeals:

3.1. The provisions of all local statutes such as the Karnataka Highways Act, 1964, Karnataka Industrial Areas Development Act, 1966, Bangalore Development Authority Act, 1976, Karnataka Urban Development Authorities Act, 1987, etc, stand impliedly repealed by the enactment of 2013 Act and therefore, section 96 of this new Act exempting compensation from the income tax comes to the rescue of his clients, even when the acquisition of their lands was under the local laws.

3.2. Regardless of multiple statutes providing for acquisition of private land for public purpose, all land-losers constitute one homogenous class for bane or benefits and therefore, the exemption from income tax enacted u/s 96 of 2013 Act is available to all of them; if necessary, the provision should be read down to accord with rule of equality constitutionally enshrined in Article 14.

3.3. The Government Order dated 14.11.2014 makes 2013 Act applicable ‘to all cases of acquisition where compensation awards or agreements are not made by 31.12.2013’. This very G.O mandates ‘The land acquisition for the project will follow the process of Land Acquisition under the Karnataka State Highways Act, 1964 as to be amended to include the provisions and process of the RTFCTLARR Act, 2013…’

3.4. Article 265 of the Constitution of India empowers levy and collection of tax by authority of law and accordingly, the Finance Act (No.2) of 2004 provided for levy of tax to be deducted at source u/s 194LA of the 1961 Act on the compensation payable for compulsory acquisition of land ‘under any Enactment’. However, by virtue of enactment of section 96 of 2013 Act, ‘…Parliament in its wisdom disallowed the levy of tax on compulsory acquisition…’

3.5. The State Government itself has undertaken to reimburse the income tax component in respect of compensation payable to the land-losers and therefore, the Revenue is not entitled to levy & recover any amount by way of income tax from them.

3.6. These appeals have been rendered in