By Sr. Counsel Sri v. Ramachandran

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH MONDAY, THE 6TH OCTOBER 2008 / 14TH ASWINA 1930 WP(C).No. 10316 of 2008(C) -------------------------- PETITIONER(S): -------------------- INFOPARK KERALA, KAKKANAD COCHIN 682 030,REPRESENTED BY ITS CHEIF EXECUTIVE OFFICER, SRI RADHAKRISHNAN NAIR. BY ADV. SRI.B.S.KRISHNAN (SR.) SRI.K.ANAND (A.201) SMT.LATHA KRISHNAN BY SR. COUNSEL SRI. V. RAMACHANDRAN. RESPONDENT(S): ----------------------- 1. ASISTANT COMMISSIONER OF INCOME TAX (TDS) OFFICE OF THE COMMISSIONER OF INCOME TAX KOCHI C.R. BUILDING, I.S.PRESS ROAD, KOCHI-18 2. COMMISSIONER OF INCOME TAX (TDS) OFFICE OF THE COMMISSIONER OF INCOME TAX KOCHI C.R. BUILDING, I.S.PRESS ROAD, KOCHI-18 3. UNION OF INDIA, MINISTRY OF FINANCE REPRESENTED BY ITS SECRETARY DEPARTMENT OF REVENUE CENTRAL SECRETARIAT, NORTH BLOCK, NEW DELHI-110 001. ADV. SRI.ABRAHAM THOMAS, CGC FOR R3 SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17/08/2008, THE COURT ON 06/10/2008 DELIVERED THE FOLLOWING: WPC. 10316/2008. APPENDIX PETITIONER'S EXTS: EXT. P1 : TRUE COPY OF GUIDELINES ISSUED BY THE GOVERNMENT. EXT. P2 : TRUE COPY OF NOTIFICATION UNDER SEC. 4 OF LA ACT AND SEC.6(1) OF THE SURVEY & BOUNDARIES ACT. EXT. P3 : TRUE COPY OF SALE DEED. EXT. P4 : TRUE COPY OF NOTICE NO. ACIT(TDS)/SI-12/2007-08 DT. 17.3.2008. RESPONDENTS'S EXTS: EXT. R1(A) : FREE TRANSLATION OF EXT.P1 (7 TO 9) PROCEEDINGS OF THECOLLECTOR DTED 9.1.2006. EXT.R1 (B) :FREE TRANSLATION OF EXT.P3 – SPECIMEN SALE DEEDEXECUTED BETWEEN THE PARTY AND AUTHORITY. K.M.JOSEPH, J. - - - - - - - - - - - - - - - - - - - - - - - - -WP.(C) No. 10316 of 2008 - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 6th day of October, 2008 JUDGMENT The question that falls for decision is the scope of Section 194LA of the Income Tax Act, 1961, which reads as follows: “194LA. Payment of compensation on acquisition ofcertain immovable property Any person responsible for paying to a resident any sum,being in the nature of compensation or the enhancedcompensation or the consideration or the enhancedconsideration on account of compulsory acquisition, under anylaw for the time being in force, of any immovable property(other than agricultural land), shall, at the time of payment ofsuch sum in cash or by issue of a cheque or draft or by anyother mode, whichever is earlier, deduct an amount equal to tenpercent of such sum as income-tax thereon.” Petitioner seeks to quash Ext.P4. Ext.P4 is issued to the CEO of thepetitioner advising the petitioner to take immediate steps to ensurecompliance with the statutory provisions for deduction of tax at source andremittance of the same to the Government account. 2. Petitioner is a Society established under the Travancore Cochin Societies Registration Act, 1955. It is managed by a Board WPC.10316/2008. nominated by the Government of Kerala and it is set up with the objectiveof development of Information Technology Parks. Briefly put the case ofthe petitioner is as follows: Petitioner seeks to quash Ext.P4. Ext.P4 is issued to the CEO of thepetitioner advising the petitioner to take immediate steps to ensurecompliance with the statutory provisions for deduction of tax at source andremittance of the same to the Government account. 2. Petitioner is a Society established under the Travancore Cochin Societies Registration Act, 1955. It is managed by a Board WPC.10316/2008. nominated by the Government of Kerala and it is set up with the objectiveof development of Information Technology Parks. Briefly put the case ofthe petitioner is as follows: As and when the land is identified, which is suitable for theproject, Government issues notification under Section 4 of the LandAcquisition Act, 1894 notifying the lands. A notification is also issuedunder Section 6(1) of the Survey and Boundaries Act, 1961. The price ofthe land is determined by the District Level Purchase Committee, whichconsists of District Collector as Chairman. There is an assessment of thereplacement value of the land and the recommendation of the District LevelPurchase Committee is forwarded to the Empowered Committee forapproval. The Empowered Committee consists of the Chief Secretary ofthe State as the Chairman. The other members are the Principal Secretary,Secretary (Finance), Secretary (PWD), Secretary (Law), Secretary (FTP)and any other member nominated by the Chief Secretary. It considers theproposal and would make necessary modifications. The title deeds are to beverified by the Land Acquisition Officer and there is a scrutiny of the titledeeds by Advocates and on the basis of the opinion expressed by thecounsel and the Land Acquisition Officer, recommendations are issued. Itis the further case of the petitioner that the transaction entered into by the WPC.10316/2008. petitioner for acquisition of land falls into two categories. The firstcategory consists of those transactions where the land owners arrive at anagreement and they execute the sale deed in favour of the petitioner. Thesecond category consists of cases where negotiated agreement is not arrivedat and acquisition is done under the Land Acquisition Act. According to thepetitioner, in the first category of transaction there is a sale of property,which is covered by the provisions of Transfer of Property Act and it doesnot consist of acquisition of property by the Government for the project. Ina case where there is acquisition of property by the Government, theprocedure involves issuance of a notification under Section 4, whichconstitutes a preliminary notification, declaration under Section 6 anddirection under Section 7. Thereafter, the property has to be marked unlessit is marked under Section 4. Under Section 9, the Collector issues notice tothe parties to enable the making of claims, and inquiry has to be held andfinally an award is to be passed under Section 11 of the Act. Section 48 ofthe Land Acquisition Act permits withdrawal of the Government from theacquisition except in a case covered by Section 36 of the Act, that is wherepossession has not been taken. Ext.P1 is produced as the guidelines issuedby the Government. Ext.P2 is produced as copy of the notification underSection 4 of the Land Acquisition Act and Section 6 of the Survey and WPC.10316/2008. Boundaries Act. Ext.P3 is copy of the sale deed executed by the landowner. It is while so Ext.P4 is issued. Therein, Section 194 LA of theIncome Tax Act is referred to and it is inter alia stated as follows: “From the enquiries conducted by this office, I am givento understand that acquisition of land for Infopark (Smart CityProject) is being done on the strength of the notification issuedby the Government. The mode of execution may have been through sale deeds afterreaching a negotiated agreement on the amount to be paid ascompensation, but the proceedings are carried out as aconsequence of notification issued under the Land AcquisitionAct, 1894, to acquire the specified land area. WPC.10316/2008. Boundaries Act. Ext.P3 is copy of the sale deed executed by the landowner. It is while so Ext.P4 is issued. Therein, Section 194 LA of theIncome Tax Act is referred to and it is inter alia stated as follows: “From the enquiries conducted by this office, I am givento understand that acquisition of land for Infopark (Smart CityProject) is being done on the strength of the notification issuedby the Government. The mode of execution may have been through sale deeds afterreaching a negotiated agreement on the amount to be paid ascompensation, but the proceedings are carried out as aconsequence of notification issued under the Land AcquisitionAct, 1894, to acquire the specified land area. Once a particular area has been notified by Government foracquisition for a specified purpose, there is no option for theowners but to sell. The only difference in this case is that it hasbeen brought under Fast Track Procedure to expedite theprocess of land acquisition, and consideration/compensation isdecided through the medium of District Level PurchaseCommittee and Grievance Redressal Committees. This beingthe case, even if sale deeds are executed, it is, in effect,compulsory acquisition of land within the meaning of Section194LA, and tax should therefore be deducted on all suchpayments. In respect of payments already made without deducting tax atsource, proceedings under Section 201(1)/201(1A) are WPC.10316/2008. separately being initiated.” Consequently advice is given to act in accordance with the statutoryprovisions.3. A counter affidavit is filed by the first respondent inter aliastating as follows: The sale deed is being executed in pursuance of Governmentnotification for land acquisition and Kerala Gazette Notification dated15.10.2004. It is not an ordinary sale deed as it is understood in normalproperty transaction where land is sold by free will and agreedconsideration. Here, the land owner has no choice. Either he agrees to thenegotiated price, enters into a sale deed and hands over the land or urgencyclause as per Section 17 of the Land Acquisition Act is further invoked andthe land is taken possession of by the authorities concerned. In any case, itis stated that the end result is that he has to hand over the land to the project.The element of compulsion is always present. It is clear that this is nothingbut compulsory acquisition and upto the execution of the sale deed, there isa factor of compulsion, because proceedings under the Land AcquisitionAct are on going. Upon the completion of acquisition of property noproceedings are necessary under the Act and the proceedings are to bewithdrawn. Withdrawal under Section 48 is stated to be a formality as the WPC.10316/2008. WPC.10316/2008. land has already been acquired and passed into the hands of the projectimplementing authority. It is stated that after conducting enquiries, issuingnotice under Section 201(1), hearing the petitioner and calling for detailsand materials on record, a letter was sent directing the petitioner to preventfuture defaults in tax deduction at source on such payments yet to be made.It is stated that the letter was rather a written direction to prevent futuredefault as already committed. Action under Section 201(1) has to be takenon the assessee in default, that is the petitioner in this case and it is not tobe construed as a threat but as a statutory proceeding as provided in Section201(1) and 201(1A) of the Income Tax Act. Had there been no notificationand invoking of land acquisition proceedings, the sale deed would not havebeen executed. The execution of sale deed expedites the process of landacquisition but since its very genesis is in the notification for acquisition, itcannot be termed a completely voluntary act on the part of the seller. Theprovisions of Section 194 LA apply to all cases of compulsory acquisitionof immovable property regardless of the instrument used to transfer theproperty. There would be no hardship to the petitioner to deduct tax atsource. The fact that the project is of prime importance does not absolve theconcerned authorities from dispensing their duty to deduct tax at sourcefrom payments covered by Section 194 LA. Respondents have also WPC.10316/2008. produced an annexure to the counter affidavit. 4. Reply affidavit is also filed, wherein it is inter alia stated asfollows: Sale deeds satisfied the requirements of a contract distinct from a compulsory acquisition. The price is agreed on the basis ofnegotiation. There is negotiation and the price is finally arrived at and thesale deed is executed on the basis of the agreed price. These situations arecompletely lacking in a compulsory acquisition. Reference is placed on theguidelines. The mere issuance of notification does not necessarily result inthe subsequent steps being taken particularly in so far as there are a numberof further steps to be taken to complete the process of compulsoryacquisition even after the issuance of the notification. The sale deed cannotbe equated to a compulsory acquisition. Even without a notification, therecould have been a negotiated agreement of price and an execution of a saledeed. 5. A rejoinder affidavit is filed to the reply affidavit by the firstrespondent essentially reiterating the stand in the counter affidavit. 6. I heard learned Senior Counsel Sri. V.Ramachandran, appearing on behalf of the petitioner and Sri. P.K.Raveendranatha Menon,learned Senior Counsel appearing for the Income Tax Department. WPC.10316/2008. 7. Learned counsel for the petitioner reiterates the contentionsraised in the writ petition. He would submit that the land in question wasacquired under the fast track procedure, in respect of which guidelines havebeen issued and which have been produced along with Ext.P1. He wouldsubmit that it contemplates negotiation. In this case, it is pointed out thatthere was negotiation. The matter was taken up before the EmpoweredCommittee and ultimately many of the land owners agreed for selling theirproperties and accordingly they entered into sale deeds with the petitionerand the petitioner became the owner of the said properties. On the strengthof the said title deeds it is submitted that it is inconceivable as to how thepetitioner can be saddled with the liability under Section 194LA of the Actto deduct 10% of the sale consideration. He reiterated his contentions,which I have already referred to. He also points out that there are practicaldifficulties in calling upon the petitioner to comply with the provisions ofSection 194LA of the Act. It is stated that most of the land owners wouldhave no income as to render them liable to pay tax. He also relies on thefollowing decisions: State of Madhya Pradesh v. Vishnu Prasad Sharma (AIR1966 SC 1593), Sreenivasa Shenoy v. State of Kerala (AIR 1968 Kerala WPC.10316/2008. 325), Jai Narain v. The Land Acquisition Collector, Delhi (AIR 1976Delhi 166), Jasraj v. State of Rajasthan (AIR 1977 Rajasthan 150), TheSpecial Tahsildar v. Sri.Pethavanallur Mayuranathasami Temple (AIR1978 Madras 406), Special Land Acquisition Officer v. M.s. Godrej andBoyce (AIR 1987 SC 2421) and Abdul Majeed Sahib v. DistrictCollector, Kollam (AIR 1994 Kerala 171). 8. Per contra, learned counsel appearing on behalf of therespondents 1 and 2 reiterated his contentions and pointed out that once anotification is issued under the Land Acquisition Act, there is no choice forthe land owner, whose lands are covered by the notification. His lands arefrozen. If he does not negotiate and sell the land by way of transfer,certainly his lands would come to be acquired under the Land AcquisitionAct. To call a transaction sale, there must be a real choice available to theowner of the land in the first place as to whether he wishes to sell the land toanyone. He submits that in a case as the present, where a notification isissued under the Land Acquisition Act, the land owners may have enteredinto sale deeds in the shadow and the threat of the land acquisitionproceedings being taken to their logical conclusion. Even if the land ownermay have had the freedom in the matter of the price of the land and mayhave negotiated, he is unlike a land owner, who has the freedom either to WPC.10316/2008. sell the land or not to sell the land. This fundamental factor may not be lostsight of , it is submitted. In this context, he relied on the decision of theCalcutta High Court in the decision reported in Calcutta Electric SupplyCorporation Ltd. v. Commissioner of Income-Tax (Vol.XIX ITR 406).He also submits that Section 194 LA is a provision geared to collection ofamounts towards tax payable and also he submits that the petitioner has onlyto collect the tax and remit it to the Government. 9. In this case, I am concerned with those transactions wherethe land owners have executed sale deeds on the basis of negotiations infavour of the petitioner. In this case, it is an admitted fact that Governmenthave issued proceedings under Section 48 withdrawing from the acquisitionin respect of properties where the land owners have executed sale deeds infavour of the petitioner. The effect of withdrawal of the Government fromthe notification has been noticed in various decisions. The effect ofwithdrawal under Section 48 is the effacement of the notification issuedunder Section 4(1) of the land Acquisition Act. (See AIR 1977 Rajasthan150). 10. As in every other case, the primary duty of the court is toglean the intention of the law maker. In decoding any legislative device thefirst duty cast on the court is to understand the intention of the legislature WPC.10316/2008. by looking at the plain meaning of the words used in the provision. Departure from the plain meaning of the provision would be justified ifthere is some ambiguity which arises in the interpretation of the provision.No doubt, if the literal meaning produces a palpable absurdity or manifestinjustice, the court would strive to place an interpretation which has theeffect of avoiding of the said effect. 11. Section 194 LA falls in Chapter 17, which relates to collection and recovery of tax. Section 190 reads as follows: “190.Deduction at source and advance payment (1) Notwithstanding that the regular assessment inrespect of any income is to be made in a later assessment year,the tax on such income shall be payable by deduction (orcollection) at source or by advance payment (or by paymentunder sub-section (1A) of section 192, as the case may be, inaccordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge oftax on such income under the provisions of sub-section (1) ofsection 4.” 11. Section 194 LA falls in Chapter 17, which relates to collection and recovery of tax. Section 190 reads as follows: “190.Deduction at source and advance payment (1) Notwithstanding that the regular assessment inrespect of any income is to be made in a later assessment year,the tax on such income shall be payable by deduction (orcollection) at source or by advance payment (or by paymentunder sub-section (1A) of section 192, as the case may be, inaccordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge oftax on such income under the provisions of sub-section (1) ofsection 4.” Coming to the terms of Section 194LA, the heading of the section itselfrefers to payment of compensation on acquisition of certain immovableproperty. WPC.10316/2008. 12. The crucial words in Section 194LA are “any person responsible”, “any sum being in the nature of compensation or the enhancedcompensation, or the consideration or the enhanced consideration onaccount of compulsory acquisition, under any law for the time being inforce.” No doubt, the words 'any person' supports the case of theDepartment that Section 194 LA would apply even to the petitioner at firstblush. But I find myself unable to accept the interpretation canvassed by thedepartment on considering the other parts of the section. The sum payablemust be in the nature of compensation or enhanced compensation or theconsideration or enhanced consideration on account of compulsoryacquisition. The words 'compensation' and 'enhanced compensation' areconcepts which are apparently taken from the provisions of the LandAcquisition Act. Section 9 of the Land Acquisition Act provides that theCollector shall give notice in regard to claims to compensation for allinterests in such land may be made to him. Sub section (2) also referred tothe word 'compensation'. Section 11 also referred to the word'compensation'. Section 11 enjoins that the Collector must hold an inquiryand pass an award. The award must provide for the compensation which, inhis opinion shall be allowed for the land. Sub-section (3) speaks aboutdetermination of the compensation. Section 15 speaks about matters to be WPC.10316/2008. considered and neglected in determining the amount of compensation,which is provided under Sections 23 and 24. Section 16 provides for thepower to take possession after the award is passed. Taking of possessionhas the effect of vesting absolutely the title in the Government free from allencumbrances. No doubt Section 17 speaks about the special powers incases of urgency. Possession can be taken in such cases on expiry of fifteendays from the date of publication of the notice mentioned in Section 9 and itis provided that the land will thereupon vests absolutely with theGovernment free from all encumbrances. Sub-section (2) of Section 17 alsoprovides for taking of possession in certain contingencies contemplatedtherein and it is declared that upon taking of possession of such land, it shallthereupon vest absolutely with the Government free from all encumbrances.The Collector has to offer in such cases compensation to persons interestedfor the standing crops and trees, if any, on the land and for any otherdamage. Also the Collector has to tender payment of 80% of thecompensation for such land as estimated by him. Section 18 of the Actspeaks about the right of a person interested, who has not accepted theaward, to file written application before the Collector requiring the matterto be referred to court for its determination inter alia of the amount ofcompensation. Section 19 speaks about duty of the Collector to state for the WPC.10316/2008. WPC.10316/2008. information of the court inter alia the ground on which the compensationwas determined if the objection was on the amount of compensation.Section 25 provides that the amount of compensation awarded shall not beless than the amount awarded by the Collector under Section 11. Section 28provides that the Collector can be directed to pay interest on excesscompensation. Section 29 speaks about apportionment of compensationwhen there are other persons interested. Section 30 refers to the disputerelating to the apportionment of the compensation or any part thereof, or asto the persons to whom the same or any part thereof is payable leading tothe reference of the same by the Collector to the court. Section 31 subsections (1) (3) and (4) reads as follows: “31.Payment of compensation or deposit of same in Court.- (1) On making an award under Section 11, the Collector shalltender payment of the compensation awarded by him to thepersons interested entitled thereto according to the award, andshall pay it to them unless prevented by some one or more ofthe contingencies mentioned in the next sub-section. xxxxxxxxxx (3) Notwithstanding anything in this section, the Collectormay, with the sanction of the appropriate Government, insteadof awarding a money compensation in respect of any land,make any arrangement with a person having a limited interestin such land, either by the grant of other lands in exchange, the remission of land revenue on other lands held under the sametitle, or in such other way as may be equitable having regard tothe interest of the parties concerned. (4) Nothing in the last foregoing sub-section shall beconstrued to interfere with or limit the power of the Collectorto enter into any arrangement with any person interested in theland and competent to contract in respect thereof.” Section 34 speaks about payment of interest on compensation which is not paid or deposited on or before taking of possession. Section 54 providesfor appeals to the High Court from the award or from any part of the awardof the court. It is also important to refer Section 28A. Section 28Aprovides for the right to claim excess compensation with persons who hadnot sought for reference under Section 18. The word 'compensation' occursin Section 9. The notification under Section 4 of the Act must be followed by the issuance of declaration under Section 6 of the Act. Thereafter, theCollector is obliged to issue notice under Section 9, consider the claims and pass an award fixing compensation. There can be no doubt that Section194LA of the Income Tax Act will apply to the compensation awarded bythe Collector under the Land Acquisition Act by way of passing the award.If the claimant is not satisfied with the award of the Collector and seeks avalid reference and the Collector makes a reference to the court, it is open WPC.10316/2008. to the court to award higher compensation or enhanced compensation. Ifthe claimant is still dissatisfied, he may file an appeal to the High Court andalso take the matter still to the highest court and claim enhancedcompensation. Thus the concepts 'compensation' or 'enhancedcompensation' are concepts which are drawn by the legislature bearing inmind the meaning it has come to acquire under the Land Acquisition Act.In other words, the word 'compensation' must mean compensation which isgiven under an award passed by the appropriate Collector and the words'enhanced compensation' means the enhanced compensation becomingpayable under the award of the civil court or the High Court or of the ApexCourt or under Section 28(A). WPC.10316/2008. to the court to award higher compensation or enhanced compensation. Ifthe claimant is still dissatisfied, he may file an appeal to the High Court andalso take the matter still to the highest court and claim enhancedcompensation. Thus the concepts 'compensation' or 'enhancedcompensation' are concepts which are drawn by the legislature bearing inmind the meaning it has come to acquire under the Land Acquisition Act.In other words, the word 'compensation' must mean compensation which isgiven under an award passed by the appropriate Collector and the words'enhanced compensation' means the enhanced compensation becomingpayable under the award of the civil court or the High Court or of the ApexCourt or under Section 28(A). 13. A question may arise whether the petitioner is liable tocomply with Ext.P8 in view of the use of the words 'consideration' and'enhanced consideration'. In this context, learned counsel for the petitionerwould submit that the said words are used in view of the various statutes,which provide for acquisition of assets, that is laws other than the LandAcquisition Act. For instance he relied on the Banking Companies(Acquisition and Transfer of Undertakings) Act, 1980 and the Burmah OilCompany (Acquisition of Shares of Oil India Limited and the Undertakingsin India of Assam Oil Company Limited and the Burmah Oil Company WPC.10316/2008. (India Trading) Limited Act, 1981. In the latter Act, Section 10 providesfor payment of a sum of more than Rs.21 Crores apparently in considerationof the transfer to and vesting in the Central Government of the shares of theOil Company and also the right, title and interest of each specifiedCompany in terms of its undertaking in India. Likewise, Section 6 of theBanking Companies Act also provide for payment of amount in respect ofthe transfer as was specified in such schedule. 14. I notice that both these Acts are much prior to the insertionof Section 194LA of the Income Tax Act. I notice that both the words'compensation' and 'consideration' as also 'enhanced compensation' and'enhanced consideration must be payable on account of compulsoryacquisition under any law. The words 'consideration' and 'enhancedconsideration' are to be read along with the words compulsory acquisitionunder a law. The examples of legislation canvassed by the petitionerthough anterior in time, in my view provide the answer to the question as tothe import of the words. In other words 'consideration' and 'enhancedconsideration' mean amounts payable under any law providing forcompulsory acquisition. 15. The contention of the Standing Counsel would appear tobe that there is no sale even though sale deeds may have been executed by WPC.10316/2008. certain land owners. It is his contention that there can be a sale only whenthe seller decides to sell the property as a free agent and when he has achoice either to sell or not to sell. Sri.P.K.Raveendranatha Menon wouldsubmit that it may be true that there were negotiations. But thosenegotiations, it is submitted, related only to the question of price. Therewas an element of compulsion in regard to the question of sale and thefreedom at best which the land owners enjoyed was limited to the amountand the mode of payment of the consideration. In such circumstances, hepoints out that it amounts to compulsory acquisition under a law in force. 15. The contention of the Standing Counsel would appear tobe that there is no sale even though sale deeds may have been executed by WPC.10316/2008. certain land owners. It is his contention that there can be a sale only whenthe seller decides to sell the property as a free agent and when he has achoice either to sell or not to sell. Sri.P.K.Raveendranatha Menon wouldsubmit that it may be true that there were negotiations. But thosenegotiations, it is submitted, related only to the question of price. Therewas an element of compulsion in regard to the question of sale and thefreedom at best which the land owners enjoyed was limited to the amountand the mode of payment of the consideration. In such circumstances, hepoints out that it amounts to compulsory acquisition under a law in force. 16. In Calcutta Electric Supply Corporation Ltd. v.Commissioner of Income-Tax, West Bengal (19 ITR 406) relied on bythe respondents, the question which arose was whether the transaction bywhich the Government had acquired the plant would be regarded as a salewithin the meaning of Section 10(2)(vii) of the Indian Income-Tax Act. Inthat case during the war Government requisitioned an electricity generatingplant of the assessees under Rule 83(1) of the Defence of India Rules. Theassessees were not willing to sell the plant and they requested theGovernment to review the matter. But the Government refused to rescindthe order. The amounts which the assessees eventually received as theprice or compensation exceeded the written down value of the plant by WPC.10316/2008. Rs.3,27,840/-. It is in this context that the Bench of the Calcutta High Court took the view that there was no sale. It is important to notice Section10(2)(vii)of the Indian Income Tax Act. Section 10(2)(vii) reads asfollows: “(2) Such profits or gains shall be computed aftermaking the following allowances, namely:- (vii)in respect of any ......... machinery or plant which hasbeen sold or discarded .......... the amount by which the writtendown value of machinery or plant exceeds the amount forwhich the ............ machinery or plant .......... is actually sold orits scrap value:” It was in the context of the said statutory provision the court proceeded tohold as follows: “The word “sale” is not defined in the Indian Income-tax Act and, therefore, it must be given its ordinarygrammatical meaning. According to the Oxford Dictionary“sale” means “an act of selling or making over to another for aprice.” It has also been defined as an exchange of a thing for aprice. Making over anything for a price or exchanging it for aprice suggests that the act is voluntary. The ordinaryconception of “sale” is that something is handed over for aprice as the result of negotiation and agreement. There is anagreement between the parties whereby one person known asthe seller hands over a thing or property to the other person WPC.10316/2008. known as the buyer for a consideration usually in terms ofmoney which has been agreed between the parties. That is theordinary English conception of a “sale”. xxxxxxxxxx It seems to me quite clear that the acquisition of thisplant by the Government could never be said to be a “sale” asthat word is ordinarily used in the English language. There wasnothing voluntary about the transaction. Against the wishes ofthe assessees Government requisitioned this property. Theassessees asked Government to stay their hand and cancel theorder depriving them of their property. But Governmentrefused to do so and stated that they would determine theamount payable and they were paying Rs.5,00,000/- onaccount. In short, the order of requisition deprived theassessees of property which they had no desire whatsoever tolose. Inf act, it deprived them of property which quite clearlythey wanted to retain.” xxxxxxxxxx It seems to me quite clear that the acquisition of thisplant by the Government could never be said to be a “sale” asthat word is ordinarily used in the English language. There wasnothing voluntary about the transaction. Against the wishes ofthe assessees Government requisitioned this property. Theassessees asked Government to stay their hand and cancel theorder depriving them of their property. But Governmentrefused to do so and stated that they would determine theamount payable and they were paying Rs.5,00,000/- onaccount. In short, the order of requisition deprived theassessees of property which they had no desire whatsoever tolose. Inf act, it deprived them of property which quite clearlythey wanted to retain.” In this context it is apposite to remember that the issuance of a notificationunder Section 4(1) of the Land Acquisition Act does not divest a land ownerof his title in his land unless progress is made under the Act to the stagewhere under the award passed possession is taken under Section 16whereupon the land will vest upon the Government free fromencumbrances. No doubt if possession is taken earlier under Section 17 ofthe Land Acquisition Act, 1894 also there is vesting of title. It could not be WPC.10316/2008. said that there is an actual acquisition till then under the law relating tocompulsory acquisition. In this context it is apposite to refer to thefollowing observations of the Apex Court in the decision reported inSpecial Land Acquisition Officer, Bombay v. M/s. Godrej and Boyce( AIR 1987 SC 2421): “Under the scheme of the Act, neither the notificationunder S.4 nor the declaration under S.6nor the notice under S.9is sufficient to divest the original owner of, or other personinterested in, the land of his rights therein. Section 16 makes itclear beyond doubt that the title to the land vests in theGovernment only when possession is taken by the Government.Till that point of time, the land continues to be with the originalowner and he is also free (except where there is specificlegislation to the contrary) to deal with the land just as he likes,although it may be that on account of the pendency ofproceedings for acquisition intending purchasers may be charyof coming near the land. So long as possession is not takenover, the mere fact of a notification under S.4 or declarationunder S.6 having been made does not divest the owner of hisrights in respect of the land or relieve him of the duty to takecare of the land and protect it against encroachment.” In the case before me, where, the land owners, may be in the context of thenotification under Section 4(1) have executed sale deeds in favour of thepetitioner, it cannot be held that it is still not a sale of property, the WPC.10316/2008. incidents which would be governed by the provisions of the Transfer ofProperty Act and title passed upon the registration of the sale deeds. Thedecision reported in Fazilka Electric Supply Co. Ltd. v. Commissioner ofIncome-Tax, Delhi ((1959) 36 ITR 411) is also relied on by the counsel forthe respondents. The question which arose was whether there was a salewithin the meaning of Section 10(2) (vii) of the Income Tax Act, 1922. Theassessee in the said case carried on business of generation and supply ofelectricity. Under the terms of its licence, a clause empowered theGovernment to exercise its option to purchase the undertaking. Theprice paid by the Government was in excess of the written down value ofthe assets. Therein the court proceeded to hold that a transaction whichamounts to compulsory acquisition does not come within the purview ofSection 10(2)(vii) of the Income Tax Act. I have already extracted Section10(2)(vii) of the Income Tax Act. The court proceeded to hold that if atransaction amounts to compulsory acquisition, then the transaction doesnot come under Section 10(2)(vii) of the Income Tax Act. They proceededto hold as follows: “The question arises whether the present transaction doesor does not amount to compulsory acquisition. The contentionraised on behalf of the assessee company is that it is acquisitionbecause section 7 itself describes the transaction as compulsory purchase. The learned counsel argued that “compulsorypurchase' is only another and equivalent expression for“compulsory acquisition”. This is not correct. The term“compulsory purchase” is not defined in the Electricity Act.We must therefore consider its meaning as commonlyunderstood in this country. Lord Morton of Henryton inHudson's case gave his dissenting judgment and based it on theargument that compulsory acquisition of property had beendescribed in the legislative practice of Great Britain ascompulsory sale. The Supreme Court in Dunkerley's casenoticed this argument and held that this ratio does not apply toour country (vide paragraph 32 of the judgment) and approvedof the majority view in Hudson's case to the effect that bargainis an essential element in a transaction of sale. Even in EnglandLord Simonds in Hundson's case when considering theexpression “compulsory sale' observed as follows: “There are aspects of a so-called compulsory sale whichclearly distinguish it from a sale stricto sensu and I am notsatisfied that without some context to aid it the word 'sale' in anAct of Parliament should be held to include a transaction whichis more accurately, and, I think, now more commonly,described as a compulsory acquisition ....................... It has notthose elections which in some degree assimilate a compulsorysale to a sale simpliciter and make the name, if a misnomer, atleast a convenient misnomer. It was easy to describe as apurchase or sale with the qualifying adjective 'compulsory', a WPC.10316/2008. transaction in which the parties were placed in a position tonegotiate and, apart from the power of compulsion in thebackground, were not unlike an ordinary vendor and purchaser'. It is clear from these observations that a compulsory saleis brought about by negotiations. I am, therefore, of theopinion that neither 'compulsory sale' nor 'compulsorypurchase' equates with 'compulsory acquisition'. That being sothere was no compulsory acquisition in the present case. xxxxxxxxxx Both in England and in India one of the essential factors of atransaction of sale is that there must be an agreement express orimplied to sell, i.e., there must be a mutual assent between theparties.” The court proceeded to ultimately hold that the transaction amounted to sale under Section 10(2)(vii) of the Income Tax Act. In the course of thejudgment, the court proceeded to repel the stand of the Company that theelement of mutuality is lacking in the case holding that the rules show that adraft licence has to be sent by an applicant for licence containing definiteand specific terms on which the licence is sought, which amounts to anoffer, which the Government accepts or rejects and the licence itself amountto a contract between the parties. 17. In Matajog v. H.C. Bhari (AIR 1956 Sc 44) one of the questions which arose was whether there was implied power to remove the WPC.10316/2008. obstruction caused to the discharge of his duties by the officer under the Taxation on Income (Investigation Commission) Act. The court proceededto hold as follows: “Where power is conferred or a duty imposed bystatute or otherwise, and there is nothing said expresslyinhibiting the exercise of the power or the performance of theduty by any limitations or restrictions, it is reasonable to holdthat it carries with it the power of doing all such acts oremploying such means as are reasonably necessary for suchexecution.” 17. In Matajog v. H.C. Bhari (AIR 1956 Sc 44) one of the questions which arose was whether there was implied power to remove the WPC.10316/2008. obstruction caused to the discharge of his duties by the officer under the Taxation on Income (Investigation Commission) Act. The court proceededto hold as follows: “Where power is conferred or a duty imposed bystatute or otherwise, and there is nothing said expresslyinhibiting the exercise of the power or the performance of theduty by any limitations or restrictions, it is reasonable to holdthat it carries with it the power of doing all such acts oremploying such means as are reasonably necessary for suchexecution.” Learned counsel for the respondents 1 and 2 apparently seeks to invoke theprinciple laid down in the said decision to contend that when thenotification under Section 4 is issued so that the land may be acquired, itshould be understood as also containing the implicit power to acquire theproperty by way of purchase of the property by way of execution of saledeeds and therefore the sale deeds executed in this case by the land ownersmust be treated as fulfilling the statutory manthra of they being compulsoryacquisition under the law relating to acquisition. Learned counsel also tookme through the terms of the sale deed. It is pointed out that the sale deedexecuted has the following statements: “(1) AND WHEREAS the aforesaid properties wereordered to be acquired for the development of Info Park Kerala as per Govt. Order (MS) No.46/2005 dated 10.5.2005 ITD andas per Govt. Order No.24/2005 dated 6.10.2005 the saidacquisition was included by the Govt. under Fast TrackProceedings. (2) On the basis of my agreeing to the above order fully,subject to orders, the Land Acquisition Special Tahsildar,Kochi Refineries, Vyttila, Tripunithura has taken possession ofthe said properties including the Schedule property, as perabove order, on 13.9.2007 and made over to Info park, Keralafor the development of Info Park, Kerala.” Thus it is contended that reference is made to the sale being in consequenceof the acquisition proceedings under the Land Acquisition Act and thepossession being handed over to the Tahsildar. However, it is also appositeto refer to the other portions of the sale deed, the free translation of which isproduced as Ext.R1(b). After referring to the Government Order, which Ihave already extracted, it is stated as follows: “In pursuance of this, due to the disputes raised bythe owners of the properties including the scheduledproperties, a District Level Purchase Committee headedby the District Collector was formed and the saidcommittee after holding discussions with the land ownersabout the value of land, submitted its recommendationsto the Government. However, since the land owners didnot agree to the land value so approved by the WPC.10316/2008. “In pursuance of this, due to the disputes raised bythe owners of the properties including the scheduledproperties, a District Level Purchase Committee headedby the District Collector was formed and the saidcommittee after holding discussions with the land ownersabout the value of land, submitted its recommendationsto the Government. However, since the land owners didnot agree to the land value so approved by the WPC.10316/2008. Government and thereupon a Grievance Redressal Cellheaded by the District Collector met on 19.9.2006 andsubmitted revised recommendations to the Government.Accordingly, the Grievance Redressal Cell headed by theDistrict Collector fixed a value of Rs.84,268/- ( Eightyfour thousand two hundred sixty eight) in respect of 2.40ares of land described in the schedule which has gottarred road access, which was approved by theGovernment by G.O.(MS) 26/06 vi.sa.va dated22.12.2006 and this was fully agreed to by us. In order torehabilitate the 42 residents from the acquired land theGovernment issued orders on 20.4.2007 to assign 5 centseach free of cost. But not being satisfied with this, whenthe evacuees including us resorted to agitational methodsand legal action, the District Collector submitted a newrehabilitation package to the State Level EmpoweredCommittee (SLEC) to acquire land under Fast TrackScheme and the SLEC after discussions, submitted thesame for the consideration of the Cabinet and theGovernment after examining the Scheme, canceling theearlier order to assign 5 cents to the 42 residents, issuedorder as per M.S. 12/07 vis.a.va dated 29.6.2007 whereinit was ordered to assign 6 cents of land each free of costto 59 residents including the 41 residents including usand the 18 nuclear families residing with them and toallow grant of Rs.1