Point of Law: Land Acquisition – Deduction of tax – Applicability of - Lands having been purchased by Government, on basis of negotiated settlements, there is no compulsory acquisition and hence Section 194LA of Act was not applicable.

JUDGMENT :

[WA Nos.1250/2014, 1295/2014, 1296/2014, 1538/2014, 1539/2014, 1728/2014, 1729/2014, 1818/2014, 1819/2014 & 170/2015]

Bechu Kurian Thomas, J.

The issue that arises for consideration in this batch of writ appeals relate to the question whether tax is liable to be deducted at source for amounts paid as compensation arrived at under negotiated settlements during acquisition of property. The learned Single Judge held that tax cannot be deducted at source under Section 194LA of the Income Tax Act, 1963 (for short, 'the Act') in respect of compensation paid to the land owners which was arrived at based on negotiated settlements.

2. The above question springs from proceedings for acquisition of land initiated under Section 11 of the Land Acquisition Act, 1894 (for short, 'the LA Act') for implementing the Kochi Metro Rail Project. After proceedings were initiated for the acquisition of property under the L.A. Act, negotiations were held and settlements were arrived at with the respective land owners by the District Level Purchase Committee. In effect consent awards were passed by the District Collector under Section 11(2) of the LA Act, pursuant to the agreement between the parties on the price payable for the land acquired as compensation. The writ petition was filed contending that the lands having been purchased by the Government, on the basis of negotiated settlements, there is no compulsory acquisition and hence Section 194LA of the Act was not applicable. Reliance was placed on the decisions reported in Info Park Kerala v. Asst. Commissioner of Income Tax [2008 (4) KLT 782] as well as in Thomas v. District Collector [2013 (3) KLT 941].

3. The learned Single Judge upheld the claim of the writ petitioners and allowed the writ petitions by restraining the revenue officials from deducting any tax at source under Section 194LA of the Act, in respect of the compensation paid to the writ petitioners.

4. The learned counsel for the appellant at the threshold submitted that the issue involved in these appeals was considered by the Supreme Court in the decision reported in Balakrishnan v. Union of India and Others [(2017) 3 SCC 634] and held in favour of the appellants.

5. Before we consider the aforesaid submission of the learned counsel for the appellant, we wish to mention that the impugned judgment was rendered on 03.06.2014 and even though the appeal was admitted in 2014, there was no stay of operation of the judgment and accordingly the compensation amounts would have already been disbursed to the writ petitioners, in tune with the impugned judgment.

6. Be that as it may, Section 194LA was inserted in the statute book by Finance Act 2004 With effect from 01-10-2004. The section reads as below:

S.194LA. Payment of compensation on acquisition of certain immovable property:-

Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten percent of such sum as income-tax thereon.

Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed two lakh and fifty thousand rupees:

Provided further that no deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013).

Explanation-For the purposes of this section,-

(i) “agricultural land” means agricultural land in In