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2024 Supreme(Online)(KAR) 37700

HIGH COURT OF KARNATAKA
Krishna S. Dixit, Vijaykumar A. Patil, JJ
Commissioner Of Income Tax (Tds) – Appellant
Versus
Tushira Industries – Respondent
WRIT APPEAL NO.100568/2023 | WRIT APPEAL NO.100611/2023 | WRIT APPEAL NO.100638/2023 | WRIT APPEAL NO.100644/2023 | WRIT APPEAL NO.100647/2023

Advocates:
For the Appellants/Petitioners: M. Thirumalesh, Roopa Anvekar
For the Respondents: C.M. Chandrashekar, J.M. Anil Kumar, V.S. Kalasurmath

Tax exemptions provided in fiscal legislation are construed strictly according to their plain text. A tax exemption limited to acquisitions under a specific central statute cannot be judicially extended to cover land acquisitions performed under separate state or provincial laws.

Headnote:(A) Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Section 96 - Exemption from income tax - Applicability to land acquisition under external statutes - The tax exemption provision in the central legislation is expressly restricted to awards or agreements made under the provisions of that specific Act and cannot be extended to land acquired under other provincial or state statutes. (Paras 4.1, 4.3)

(B) Income Tax Act, 1961 - Section 2(47), 45(5), 194LA - Capital gains - Compulsory acquisition - Compensation received for compulsory acquisition constitutes a transfer of capital asset - Such compensation, including enhanced amounts, is subject to tax under the head of capital gains - Executive orders cannot bypass constitutional legislative competence concerning tax levy and collection. (Paras 4.2, 4.9.1)

(C) Statutory Interpretation - Fiscal Legislation - Strict construction - In a taxing statute, courts must interpret provisions according to the plain language used by the legislature - Doctrine of reading down or expanding the scope of a fiscal exemption is impermissible when the legislative intent is clear and unambiguous. (Para 4.6)

Facts of the case:
The appeals arose from lower court judgments that extended tax exemption benefits prescribed in the central land acquisition legislation to claimants whose lands were acquired under various state-specific statutes. The revenue authority challenged these decisions, asserting that the tax exemption under the central act applies exclusively to acquisitions initiated and completed under that specific legislative framework.

Findings of Court:
The court held that the central land acquisition act does not impliedly repeal state-specific statutes. Furthermore, the legislative intent behind the tax exemption was limited to the central act, and the court rejected attempts to broaden this scope to other legislations. The court clarified that the state executive lacks the power to grant tax exemptions through government orders where such competence lies with the parliament.

Issues: The main issues were whether the tax exemption provision under the central land acquisition act covers compensation for land acquired under separate state laws and whether the judicial process can be used to extend tax exemptions through the doctrine of reading down in the absence of a legislative challenge.

Ratio Decidendi: Tax exemptions in fiscal statutes must be construed strictly. Because the central act explicitly qualifies the tax exemption to awards made under its own provisions, the court cannot extend this benefit to acquisitions governed by other laws. Legislative clarity precludes the invocation of the doctrine of reading down to include external statutes within the scope of fiscal protection.

Result: Appeals allowed; impugned orders of the learned Single Judge set aside.

THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE ORDER IN PARA NOS.21 TO 23 PASSED BY THE LEARNED SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103378 OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER THE INCOME TAX ACT, 1961 & ETC.,

THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE ORDER IN PARA NOS.21 TO 23 PASSED BY THE LEARNED SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103379 OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER THE INCOME TAX ACT, 1961 & ETC.,

THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE ORDER IN PARA NO.21 TO 23 PASSED BY THE LEARNED SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103376 OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER THE INCOME TAX ACT, 1961 AND ETC.,

THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THAT PART OF THE ORDER IN PARA NO.21 TO 23 PASSED BY THE LEARNED SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103375 OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER THE INCOME TAX ACT, 1961 AND ETC.,

THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURTACT, 1961, PRAYING TO, SET ASIDE THAT PART OF THE ORDER IN PARA NO.21 TO 23 PASSED BY THE LEARNED SINGLE JUDGE DATED 12.04.2023 PASSED IN WP NO.103377 OF 2017 TO THE EXTENT REFUND OF THE TDS MADE UNDER THE INCOME TAX ACT, 1961 AND ETC.,

THESE APPEALS HAVING BEEN RESERVED FOR JUDGMENT ON 26.09.2024 COMING ON FOR PRONOUNCEMENT, THIS DAY, KRISHNA S.DIXIT J., DELIVERED THE FOLLOWING:

CORAM: THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT AND THE HON'BLE MR. JUSTICE VIJAYKUMAR A.PATIL

CAV JUDGMENT

(PER: THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT)

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.

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.

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 enactmen

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2024 Supreme(Online)(KAR) 37700

HIGH COURT OF KARNATAKAKrishna S. Dixit, Vijaykumar A. Patil, JJCommissioner Of Income Tax (Tds) – AppellantVersusTushira Industries – RespondentWRIT APPEAL NO.100568/2023 | WRIT APPEAL NO.100611/2023 | WRIT APPEAL NO.100638/2023 | WRIT APPEAL NO.100644/2023 | WRIT APPEAL NO.100647/2023

Tax exemptions provided in fiscal legislation are construed strictly according to their plain text. A tax exemption limited to acquisitions under a specific central statute cannot be judicially extended to cover land acquisitions performed under separate state or provincial laws.

Cases Referred (10)

HIGH COURT OF KARNATAKA
Krishna S. Dixit, Vijaykumar A. Patil, JJ
Commissioner Of Income Tax (Tds) – Appellant
Versus
Tushira Industries – Respondent
WRIT APPEAL NO.100568/2023 | WRIT APPEAL NO.100611/2023 | WRIT APPEAL NO.100638/2023 | WRIT APPEAL NO.100644/2023 | WRIT APPEAL NO.100647/2023