The court ruled that compensation received under the National Highways Act is exempt from income tax under Section 96 of the RFCTLARR Act, emphasizing the equal treatment principle enshrined in Article 14.

ORDER :

S.R. Krishna Kumar, J.

In this petition, petitioner seeks for the following reliefs:-

“a) Issue a writ of mandamus or any other appropriate writ declaring that Section 96 of the RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION, REHABILITATION AND RESETTLEMENT ACT , 2013 ('RFCTLARR Act') applies to the compensation received by the Petitioner for acquisition of her lands under the National Highways Act, 1956;

b) In the alternative, if this Hon'ble Court is not inclined to interpret Section 96 of the RFCTLARR Act, 2013 as applicable to acquisitions under the National Highways Act, 1956, then, to declare that the limitation of tax Act to only acquisitions under that Act, while exemption under Section 96 of the RFCTLARR denying the same benefit to similarly situated landowners whose lands are acquired under the National Highways Act, 1956, is unconstitutional as violating Article 14 of the Constitution; and

c) Consequently, extend the benefit of tax exemption under Section 96 of the RFCTLARR Act to the Petitioner whose lands were acquired under the National Highways Act, 1956, a statute listed in the Fourth Schedule to the RFCTLARR Act, 2013;

d) Direct that no income tax shall be levied on the compensation received by the Petitioner;

e) Direct refund of tax deducted at source in respect of the Award passed by the Special Land Acquisition Officer and Competent Authority on 29-Jan-2021;

f) Pass such other Order or direction as this Hon'ble Court may deem fit in the facts and circumstances of this case.”

2. A perusal of the material on record will indicate that the lands of the petitioner having been acquired under the National Highways Act, 1956, the 6^th respondent – SLAO passed an award dated 29.01.2021 awarding compensation in favour of the petitioner, in whose favour compensation was paid by deducting income tax (TDS) to an extent of 16 lakhs. The petitioner filed an application seeking enhancement of compensation before the Arbitrator and thereafter, before the District Court and the same is currently pending before this Court under Section 37 of the Arbitration and Conciliation Act, 1996. It is contended that while the inadequacy of the compensation awarded in favour of the petitioner is pending consideration, petitioner is before this Court assailing the deduction of income tax from the compensation (TDS) and for exemption from payment of income tax on the compensation amount and for other reliefs.

3. The respondents have filed their statement of objections and have contested the proceedings.

4. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.

5. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner submitted that the compensation awarded in favour of the petitioner (including enhanced compensation) is exempt from payment of income tax / TDS under the Income Tax Act, 1961 and that the present petition deserves to be allowed and the respondents 2, 3, 4 and 8 are to be directed to refund the income tax deducted at source by issuing appropriate directions in this regard. In support of his submissions, learned counsel placed reliance upon the following judgments;-

(i) Smt.C.M.Uma vs. Chief Commissioner of income tax – W.P.No.19197/2024 dated 08.08.2024;
(ii) M/s.Sri.Balaji Corporate Services vs. Union of India & others – W.P.No.43206/2018 dated 21.04.2022;
(iii) BMRCL vs.M/s.Sri.Balaji Corporate Services – W.A.No.890/2022 dated 27.09.2023;
(iv) BMRCL vs. Sri.P.Narayanappa & others – W.A.No.39/2023 dated 09.11.2023;
(v) BMRCL vs. L.Ven