Compensation And Transparency In Land Acquisition,Rehabilitation And Resettlement Act, 2013 (Hereinafterreferred To As ‘The Act, 2013”) Specifcally Exemptspayme v. Taxmann.com 84 (Sc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1049 OF 2021 Seema Jagdish Patil,704-705, Saya Park, Pakhadi, Kharigaon, Kalwa, Thane – 400 605.…PetitionerVersus 1. The National Hi-Speed Rail Corporation Ltd., 1105-1106 Universal Magestic, P. L. Lokhande Marg, Chembur (West), Mumbai- 400 013. 2. The Principle Commissioner of Income Tax-1, Thane; having offce at 6[th] Floor, Asher IT park, Road No.16, Wagle Ind. Estate, Thane (West), Thane – 400604. 3. The Commissioner of Income Tax (TDS)-2, Mumbai, having offce at Ayurved Prachar Sanstha Building, Charni Road, Mumbai – 400 012. 4. Union of India, Through the Secretary, Ministry of Railways, Government of India, North Block, New Delhi - 110001 …Respondents Mr. Devendra Jain, Advocate for the Petitioner.Adv. Akshaya Puthran, Adv. Nayantara Bhattacharyya i/b.S. K. Singhi & Co., LLP Advocates, Advocate for theRespondent No.1/National High Speed Rail Corporation.Mr. Suresh Kumar a/w. Ms. Sumandevi Yadav, Advocate forthe Respondent Nos.2 and 3. CORAM:S.V. GANGAPURWALA & M. G. SEWLIKAR, JJ. RESERVED ON : MAY 4, 2022PRONOUNCED ON : JUNE 9, 2022 JUDGMENT : ( Per – S.V.GANGAPURWALA, J.) 1.Rule. Rule made returnable forthwith by consent ofthe parties. 2.The petitioner assails an action on the part of therespondent No.1 in deducting income tax at source from thecompensation paid to the petitioner by the respondent No.1for the acquisition of his land. 3.The petitioner claims to be the owner of certain plotsof land situated at Bhiwandi, Thane. The respondent No.1acquired the land of the petitioner purportedly under anagreement. The respondent No.1 deducted income tax atsource from the compensation paid to the petitioner. Thesame appears to have been deducted on 23[rd] October 2019.On or about 8[th] May 2020, a supplementary deed wasentered into between the petitioner and the respondentunder which some additional amount was paid to thepetitioner and income tax was deducted at source from thesaid part of the compensation also. On or about 4[th]December 2020, the petitioner requested the respondentNo.1 to reverse the tax deducted at source on the groundthat no tax was deductable. On or about 24[th] December2020, the respondent No.1 replied to the petitioner thatexemption from income tax is not applicable in case of theland acquired from the petitioner and in any case, theincome tax deducted at source from the petitioner was dulydeposited with the Income Tax Department. 4.The learned Advocate for the petitioner submits thatSection 96 read with Section 46 of the Right to Fair Compensation and Transparency in Land Acquisition,Rehabilitation and Resettlement Act, 2013 (hereinafterreferred to as ‘the Act, 2013”) specifcally exemptspayment of income tax on an amount of compensation paidunder the award and/or agreement. 5.The learned Counsel submits that Section 46 of theAct, 2013 is not applicable in the present matter as the landis not purchased by a specifed person. The learned Counselsubmits that the respondent No.1 ought not to havededucted the tax at source because the deduction of tax atsource is applicable only where the amount is taxable in thehands of the recipient. 4.The learned Advocate for the petitioner submits thatSection 96 read with Section 46 of the Right to Fair Compensation and Transparency in Land Acquisition,Rehabilitation and Resettlement Act, 2013 (hereinafterreferred to as ‘the Act, 2013”) specifcally exemptspayment of income tax on an amount of compensation paidunder the award and/or agreement. 5.The learned Counsel submits that Section 46 of theAct, 2013 is not applicable in the present matter as the landis not purchased by a specifed person. The learned Counselsubmits that the respondent No.1 ought not to havededucted the tax at source because the deduction of tax atsource is applicable only where the amount is taxable in thehands of the recipient. 6.The learned Counsel further submits that nodistinction is made between the compulsory acquisitionresorting to the provisions of the Act, 2013 by issuingnotifcation or by an acquisition through an agreement. Thelearned Counsel to buttress his submission relied upon thejudgment of the Apex Court in the case of BalkrishnanVersus Union of India[1]. Further reliance is placed on thejudgment of the Division Bench of Kerala High Court in thecase of K. Sreekumar Versus District Collector[2]. Reliance isalso placed upon the CBDT Circular dated 25[th] October 2016to contend that the Central Board has also clarifed that thecompensation received in respect of award or agreement isexempted from levying of income tax vide Section 96 of theAct, 2013 and shall not be taxable under the provisions ofthe Income Tax Act, 1961 (hereinafter referred to as, “ITAct”), even if there is no specifc provision of exemption for 1(2017) 80 taxmann.com 84 (SC). 2Writ Application No. 1422 of 2015, dt. 18[th] January 2018. such compensation in the IT Act. It is further submittedthat as the respondent No.1 was not supposed to deduct thetax at source, it is the respondent No.1 who should furnish acorrection statement for rectifcation of the mistake. Thelearned Counsel relies upon Section 200 (3) of the IT Act.According to him, under Section 200(3), the deductor canfurnish a correction statement for rectifcation. Section200A (1) of the IT Act provides for processing of statementof tax deducted at source furnished by the deductor. Sub-clause (d) of Clause (1) of Section 200A of the IT Act,further provides for refund of excess tax deducted at sourceby the deductor. It is submitted that after processing thestatement or correction statement furnished by thedeductor, the refund can be granted. The respondent No.1be directed to furnish the correction statement of the taxdeducted at source and the amount deducted be paid to thepetitioner. 7.The learned Advocate for respondent No.1 submitsthat amount received by the petitioner pursuant to anagreement is taxable. The acquisition is by an agreementbetween the parties and cannot be said to be compulsoryacquisition under the Act, 2013. Hence, the income tax atsource is deductable. The learned Advocate further submitsthat the sale deed was entered between the petitioner andrespondent No.1 by negotiation through direct purchasemethod, the tax was duducted as per the Income Tax Rules.The deducted tax has already been deposited in the IncomeTax Department. The TDS certifcate [Form 16(b)] is alsoprovided to the petitioner. 7.The learned Advocate for respondent No.1 submitsthat amount received by the petitioner pursuant to anagreement is taxable. The acquisition is by an agreementbetween the parties and cannot be said to be compulsoryacquisition under the Act, 2013. Hence, the income tax atsource is deductable. The learned Advocate further submitsthat the sale deed was entered between the petitioner andrespondent No.1 by negotiation through direct purchasemethod, the tax was duducted as per the Income Tax Rules.The deducted tax has already been deposited in the IncomeTax Department. The TDS certifcate [Form 16(b)] is alsoprovided to the petitioner. 8.The learned Counsel for respondent Nos.2 and 3 alsosubmits that Section 96 of the Act, 2013 is not applicable tothe acquisition under direct purchase. Section 96 wouldapply if the acquisition is through declaration of an awardby the Collector under Section 23 or 23A of the act, 2013and not by an execution of sale deed. The petitioner andrespondent No.1 have entered into an agreement byexecuting the sale deed. It is further submitted that aclassifcation of the two groups of people has been made viz.the class whose land is acquired by direct purchase throughdirect negotiations and the other class whose land isacquired under the Act, 2013 through Collector. In case ofacquisition under the Act, 2013, the TDS and tax is waived,but not in case of direct purchase. Such classifcation islegitimate and permissible. The reliance is placed on thejudgments of the Apex Court in the case of BudhanChoudhari and Ors. Versus State of Bihar[3] and KoneElevator India Pvt. Ltd. Versus State of Tamil Nadu & Ors.[4] 9.The learned Counsel for respondent No.1 furthersubmits that for claiming refund of the TDS deducted, thepetitioner has to fle a return. It is not for the deductor tofle return under the provisions of the Income Tax Act. It isupon the return being fled, the petitioner can claim refundof the tax deducted at source. It is submitted that if a taxpayer has to make a claim of refund, then the claim shouldbe made in Form No.30. However, with effect from 1[st]September 2019, the Finance Act, 2019 has been amendedand the refund can be claimed only by fling of return of 3AIR 1955 SC 191.4(2014) 7 SCC 1.4(2014) 7 SCC 1. income within the time prescribed under Section 139. 10.We have considered the submissions. 11.It appears that the public notice was issued foracquisition of land through direct purchase and privatenegotiations by the offce of the Sub Divisional Offcer,Bhiwandi Division, Bhiwandi for implementing the projectviz. Mumbai-Ahmedabad Hi-Speed Rail Project. As per thesaid public notice, while purchasing the land directly for theproject, the compensation will be fxed by giving 25%enhanced amount of the total compensation beingcalculated for the land concerned as per the provisions ofSections 26 to 33 and Schedule-I of the Act, 2013.Undisputedly, the land was acquired for a public project.Policy decision has been taken by the State Governmentunder its Government Resolution dated 12[th] May 2015 foracquiring the property by private negotiations andpurchases for implementation of public project.Methodology is also provided. The computation ofcompensation has to be under the provisions of the Act,2013. The same is introduced to expedite the acquisitionfor the implementation of the project. If the parties wouldnot agree with the negotiations and direct purchase, thenthe compulsory acquisition under the provisions of the Act,2013 has to be resorted to. The Act, 2013 also recognizesthe acquisition through an agreement. The reference can behad to the judgment of the Apex Court in the matter ofBalkrishnan Versus Union of India (supra). In the said case,though an award was passed and the compensation wasfxed on Rs.14,36,616/-, the said amount of compensation was not acceptable to the petitioner therein. At that stage,some negotiations took place between the parties and it wasagreed that the Company for whom the property wasacquired shall pay a sum of Rs.38,42,489/-. After the samewas agreed upon between the parties, the petitioner agreedto execute the sale deed of the property in question infavour of the Company and the sale deed was executed andregistered. While disbursing the amount of saleconsideration, the Company deducted 10% of amount ofTDS. In that view of the matter, the Apex Court observedthat merely because the compensation amount is agreedupon would not change the character of acquisition fromthat of compulsory acquisition to the voluntary sale. TheApex Court further observed that “it may be mentioned thatthis is now the procedure which is laid down even under theAct, 2013 as per which the Collector can pass rehabilitationand resettlement award with the consent of the parties.Nonetheless, the character of the acquisition remainscompulsory.” The Kerala High Court also in case ofViswanathan M. Versus The Chief Commissioner, IncomeTax Department[5]observed that the language of Section 96of the Act, 2013 does not leave any doubt in the mind that ifthe land either acquired or the result of an agreement, itcould not fall within the mischief of IT Act, in other words,exemption is liable to be granted. 12.The Central Board of Direct Taxes under CircularNo.36 of 2016 dated 25[th] October 2016 also has clarifedthat “the matter has been examined by the board and it ishereafter clarifed that compensation received in respect of 5Writ Petition (C) No. 3227 of 2020 dt. 18[th] February 2020. award or agreement which has been exempted from levy ofincome tax vide Section 96 of the Act, 2013 shall also not betaxable under the provisions of the IT Act.”. It alsorecognizes acquisition by award or agreement. Section 96of the Act, 2013 unequivocally provides that no income taxor duty shall be levied on any award or agreement madeunder the Act except under Section 46. Section 46 wouldnot be attracted in the present case. Section 46 would applyto the specifed persons. The specifed persons includes anyperson other than (i) Appropriate Government (ii)Government Company, (iii) Association of persons or Trustor Society as registered under the Societies RegistrationAct, wholly or partially aided by the appropriateGovernment or controlled by the Appropriate Government.The respondent no.1 is not a specifed person within themeaning of Section 46. In view of that, as the exemptionunder Section 96 would squarely apply, no income tax canbe levied in the present matter for the amount ofcompensation, inter alia respondent No.1 could not havededucted amount of TDS from the amount of compensationpaid to the petitioner. 13.This takes us to the next question as to the manner inwhich the TDS as deducted by respondent No.1 can berefunded to the petitioner. The petitioner has relied uponRule 37BA of the Income Tax Rules, 1962 (hereinafterreferred to as “the Rules, 1962”) which provides that creditfor tax deducted at source and paid to the CentralGovernment in accordance with provisions of Chapter XVIIshall be given to the person to whom payment has been made or credit has been given. (hereinafter referred to as“deductee”) on the basis of information relating to deductionof tax furnished by the deductor to the Income TaxAuthority. Rule 37BA (3) (i) of the Rules, 1962 furtherprovides that the credit for tax deducted at source and paidto the Central Government shall be given for the assessmentyear for which such income is assessable. made or credit has been given. (hereinafter referred to as“deductee”) on the basis of information relating to deductionof tax furnished by the deductor to the Income TaxAuthority. Rule 37BA (3) (i) of the Rules, 1962 furtherprovides that the credit for tax deducted at source and paidto the Central Government shall be given for the assessmentyear for which such income is assessable. 14.Further, proviso to Section 200(3) of the IT Actprovides that the person may also deliver to the prescribedAuthority the correction statement for rectifcation of anymistake in the statement delivered under the said sub-section in such form and verifed in such manner as may beverifed by the Authority. Clause (d) of Sub-section (1) ofSection 200A of the IT Act inter alia provides fordetermination of the sum payable by, or the amount ofrefund due to, the deductor. It is the case of the petitionerthat her income is exempted from tax and as such shecannot fll Schedule TDS-2 and hence cannot make anapplication under Section 199 of the IT Act read with Rule37BA (3)(i) of the Rules, 1962 whereas according to therespondent, the petitioner has to fle an income tax returnand claim refund. The return would be assessed. Referenceis made by the respondent to Section 139 of the IT Act tosubmit that the refund can be claimed only through fling ofreturn of income within the time prescribed under Section139. 15.In the present matter, we are not aware whether thepetitioner is liable to fle return as required under Section139 of the IT Act. There are various instances under Section 139 wherein a person is required to fle return. Allthose circumstances and instances enumerated therein arenot before the Court. In absence thereof, it is not possiblefor this Court to arrive at a conclusion as to whether thepetitioner is required to fle return or not before the IncomeTax Department. 16.We have already held that the income received by thepetitioner on account of the property acquired byrespondent No.1 by private negotiations and sale deed isexempted from tax. The respondent No.1 has alreadydeducted the TDS which it ought not to have deducted. Inlight of that, we pass the following order : ORDER (i)The respondent shall fle correction statement asprovided under provisio to Sub-Section (3) ofSection 200 of the IT Act, 1961 within a period ofone month from today to the effect that the TDSdeducted by the respondent No.1 was not liable tobe deducted.provided under provisio to Sub-Section (3) ofSection 200 of the IT Act, 1961 within a period ofone month from today to the effect that the TDSdeducted by the respondent No.1 was not liable tobe deducted. (ii) The Income Tax Department shall process thestatement including the correction statement thatmay be fled under Section 200A more particularlyClause (d) thereof.statement including the correction statement thatmay be fled under Section 200A more particularlyClause (d) thereof. (iii) The parties shall thereafter take steps for refund ofthe amount in accordance with the provisions ofIncome Tax Act and Rules.the amount in accordance with the provisions ofIncome Tax Act and Rules. (iv) Rule is made absolute in above terms. No costs. (M. G. SEWLIKAR, J.) (S.V. GANGAPURWALA, J.)