From The Above Discussion, It Can Clearly Be Seen Thatcompensation On A Depreciable Asset Cannot Be Said To Be Covered Bysection 96 Of The Rfctlaar Act.” v. Union Of India In W.p.(C)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI FRIDAY, THE 31ST DAY OF MAY 2019 / 10TH JYAISHTA, 1941 WP(C).No.1908 of 2019 PETITIONER/S: MADAPARAMBIL VARKEY VARGHESE AGED 62 YEARS MADAPARAMBIL HOUSE, K.P.VALLON ROAD, KADAVANTHARA, KOCHI - 682 020, PAN- . RESPONDENT/S: SR. ADV. SRI. ABRAHAM MARKOS., SC SRI. CHRISTOPHER ABRAHAM., SRI. JOS WINSON THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 31.05.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT Heard Mr. Abraham Markos, the learned senior counsel for the petitioner and Mr.Christopher Abraham, the learned StandingCounsel the Income Tax Department for respondents. 2.The petitioner challenges Ext.P8 assessment order andExt.P9 demand notice as illegal, beyond the jurisdiction ofrespondent no.1 and quash Exts.P8 and P9. On 22.01.2019 thelearned Standing Counsel sought time to get instructions and theCourt granted interim suspension of Exts.P8 and P9 for eightweeks. The interim orders are extended from time to time. Therespondents have not filed counter affidavit or statementopposing the writ prayers. 3.The point for consideration in the instant writ petitionsubstantially arises under Section 96 of the Right to FairCompensation and Transparency in Land Acquisition,Rehabilitation and Resettlement Act, 2013 (for short ‘Act 30 of2013’). The circumstances relevant for disposing of the writpetition are stated thus: 4.The Special Tahsildar (LA), Kochi -1 made Award No.A3-31/12 LAC - 58/15 dated 30.10.2015 under Act 30 of 2013. Thecompensation awarded for the acquisition of land, buildings etc ofthe petitioner by Kochi Metro Rail Project is Rs.7,54,24,705/-.During the Assessment Year 2016-17 the petitioner has received80% of the compensation determined through Award dated30.10.2015. Through Ext.P8, the first respondent while computingthe net taxable income of the petitioner-assessee has included thecompensation amount of 80% received in the subject AssessmentYear and assessed the income of the petitioner. Hence the writpetition. 5.The first respondent in Ext.P8 while dealing with thecontention of petitioner that the compensation received underAct 30 of 2013 is completely exempt from any liability under theIncome Tax Act, Stamp duty and fees etc has recorded a fewfindings. I have taken note of all the findings and the followingconclusion is reproduced for ready reference: “The main intention of the section is to spare the poor farmer thefurther burden of Income-tax, who has already suffered loss of livelihood, replacement, emotional trauma etc. This is clear from theconcluding lines of the Section 96. It says that “no person claimingunder any such award or agreement shall be liable to pay fee for a copyof the same”. The Act here envisages a poor agriculturist, for whomeven paying a few rupees of copying fees, which cannot possibly exceedRs.100/- considering the number of pages, shall be a huge economicburden. From the above discussion, it can clearly be seen thatcompensation on a depreciable asset cannot be said to be covered bySection 96 of the RFCTLAAR Act.” 6.Mr.Abraham Markos appearing for petitioner contends that the first respondent failed to appreciate the purpose, purportand object of exemption under Section 96 of Act 30 of 2013.According to him, the exemption is complete if Section 46 of Act30 of 2013 is not attracted to an acquisition under Act 30 of 2013.There is no need to search for intention or subject Section 96 toany other mode of interpretation except giving effect to the plainor literal construction the section permits. He refers to theDivision Bench judgment of High Court of Andhra Pradesh inC. Nanda Kumar v. Union of India in W.P.(C) No.7874 of 2016 andbatch (Ext.P7) and states that the ratio of the said decision is applicable in all fours, in support thereof he relies on thefollowing paragraphs: 6.Mr.Abraham Markos appearing for petitioner contends that the first respondent failed to appreciate the purpose, purportand object of exemption under Section 96 of Act 30 of 2013.According to him, the exemption is complete if Section 46 of Act30 of 2013 is not attracted to an acquisition under Act 30 of 2013.There is no need to search for intention or subject Section 96 toany other mode of interpretation except giving effect to the plainor literal construction the section permits. He refers to theDivision Bench judgment of High Court of Andhra Pradesh inC. Nanda Kumar v. Union of India in W.P.(C) No.7874 of 2016 andbatch (Ext.P7) and states that the ratio of the said decision is applicable in all fours, in support thereof he relies on thefollowing paragraphs: “7. Subsequently, the Central Board of DirectTaxes(CBDT) issued a Circular bearing No.36/2016, dated25.10.2016, clarifying that the compensation receivedunder an award exempted from the levy of income taxunder Section 96 of the 2013 Act shall not be taxable,even if there is no specific provision for exemption underthe Income Tax Act, 1961. Therefore, one set of landowners whose lands were acquired have come up withthe 3rd writ petition W.P.(C)No.44382 of 2016 seeking amandamus not to deduct tax at source, in terms of theCircular of the CBDT". "18. But we do not know why the petitioners raise thiscontention. We are concerned in this case with theimpact of Section 194LA of the Income Tax Act, 1961upon Section 96 of the 2013 Land Acquisition Act. Thereis no ambiguity either in Section 96 of the 2013 LandAcquisition Act or in Section 194 LA of the Income TaxAct. Therefore, this contention is completely irrelevant." "23. There is no dispute about the fact that the Circularsissued by the Central Board are binding upon therevenue. But in the Circular dated 25.10.2016, there is no whisper about the implication of Section 96 of the2013 Land Acquisition Act upon Section 194 LA of theIncome Tax Act, 1961. This can be appreciated from theoperative portion of Circular No.36/2016, which reads asfollows:- 3. As no distinction has been made betweencompensation received for compulsory acquisition ofagricultural land and non-agricultural land in the matterof providing exemption from income-tax under theRFCTLARR Act, the exemption provided under Section 96of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions ofIncome-tax Act, 1961. This has created uncertainty inthe matter of taxability of compensation received oncompulsory acquisition of land, especially those relatingto acquisition of non-agricultural land. The matter hasbeen examined by the Board and it is hereby clarified thatcompensation received in respect of award or agreementwhich has been exempted from levy of income-tax videSection 96 of the RFCTLARR Act shall also not be taxableunder the provisions of Income-tax Act, 1961 even ifthere is no specific provision of exemption for suchcompensation in the Income-tax Act, 1961. 26. Similarly, the entire scheme of Chapter-XVII of theIncome Tax Act, 1961, as indicated by Section 190(1) isthe payment of tax on income, by way of deduction orcollection at source. Therefore, the last contention is thatSection 194LA of the Income Tax Act, 1961, cannot bepressed into service on an income which is not liable totax under Section 96 of the 2013 Land Acquisition Act. 28. Therefore, it is clear that Chapter-XVII in entirety isabout deduction or collection and recovery of tax. This iswhy Section 190(1) of the Act speaks only about tax onincome. Section 190(1) of the Income Tax Act, 1961reads as follows: 26. Similarly, the entire scheme of Chapter-XVII of theIncome Tax Act, 1961, as indicated by Section 190(1) isthe payment of tax on income, by way of deduction orcollection at source. Therefore, the last contention is thatSection 194LA of the Income Tax Act, 1961, cannot bepressed into service on an income which is not liable totax under Section 96 of the 2013 Land Acquisition Act. 28. Therefore, it is clear that Chapter-XVII in entirety isabout deduction or collection and recovery of tax. This iswhy Section 190(1) of the Act speaks only about tax onincome. Section 190(1) of the Income Tax Act, 1961reads as follows: 190. Deduction at source and advance payment.(1)Notwithstanding that the regular assessment in respect ofany income is to be made in a later assessment year, thetax on such income shall be payable by deduction orcollection at source or by advance payment or bypayment under sub-section (1A) of section 192, as thecase may be, in accordance with the provisions of thisChapter. 29. If there can be no tax on a particular income byvirtue of some special provisions contained in anenactment other than the Income Tax Act, 1961, it is not known how any provision contained in Chapter-XVII ofthe Income Tax Act could be invoked. The emphasisunder Section 190(1) is on the tax on such income. Whatfollows from Sections 192 onwards are actually deductionor collection at source or advance payment of tax onincome. Once this is clear, we will have no difficulty inconcluding that Section 96 of the 2013 Land AcquisitionAct makes Section 194LA of the Income Tax Act, 1961,inapplicable to the compensation paid under the award. 33. Section 96 mandates that no income-tax shall belevied on any award made under the Act except underSection 46. Section 46 deals with the purchase of land bya person other than a specified person through privatenegotiations. The benefit of Section 96 is not availablewhen a land is purchased through private negotiations bya person other than a specified person under Section46(1). 34. Therefore, in cases other than those covered bySection 46 of the 2013 Land Acquisition Act, the levy ofincome-tax is barred by Section 96 and as aconsequence, the deduction or collection under Section194LA of the Income Tax Act, 1961, is impermissible. 39. We cannot lose sight of the fact that Central Act 30 of 2013 is a welfare legislation, which made a quantumleap from the provisions of the 1894 Land Acquisition Act.The object of the 2013 Act is not merely to provide justand fair compensation but also to make provisions for therehabilitation and resettlement of the families of the landlosers. The preamble to the Act shows that the Act wasintended to look at land losers as persons who canbecome partners in the development of the country.Section 96 of the 2013 Act was intended to be a tooltowards securing the laudable objectives of the 2013 Act.Therefore, it can never be contended that Section 194LAof the Income Tax Act will make in roads into the welfareprovision contained in the 2013 Land Acquisition Act.There is no use in giving effect to the provisions ofSection 96 of the 2013 Act by first asking the LandAcquisition authority to deduct tax under Section 194LAand then driving the poor land losers from pillar to post toget a refund of the amount from the Income TaxDepartment. An interpretation that will lead the farmersand land losers to go from the Collectorate to the IncomeTax Officer, is antithetic to the objects and reasons of the2013 Act. Hence, the second contention of the learnedstanding counsel for the Department is liable to be rejected. Accordingly, it is rejected. rejected. Accordingly, it is rejected. 40. Therefore, in fine, the writ petitions are allowed andthere shall be a direction to the respondents not todeduct tax at source, whenever any compensation is paidfor the acquisition of a land under the 2013 LandAcquisition Act, except those covered by Section 46 of the2013 Act. In cases where by way of an interim order thetax deducted at source was directed to be kept in a FixedDeposit in the name of the Registrar(Judicial) of thisCourt, the Registry shall either liquidate the deposit andtransfer the funds to the account of the petitioners ormakeover/transfer the Fixed Deposit in the name of theconcerned petitioners to enable them to encash the same.The miscellaneous petitions, if any, pending in these writpetitions shall stand closed. No costs." He prays for allowing the writ petition. 7.Mr.Christopher Abraham submits that the language of Section 96 is clear and unambiguous and there is no need to referto intention or find out other ways and means to include thecompensation received by the petitioner for any purpose of taxliability including the capital gains. 8.I have perused Exts.P8 and also the ratio laid down by the Division Bench of High Court of Andhra Pradesh in C. Nanda Kumar v. Union of India. The language of Section 96 is clear,plain and simple. The exemption is complete if the compensationis paid under an Award after the owner is deniedownership/possession of land, building etc pursuant tocompulsory acquisition under Act 30 of 2013. The exemptiongranted by the Parliament, this Court is of the view, is deniedthrough an impermissible interpretation adopted by the firstrespondent. The point is covered in favour of petitioner both bythe precedent and circular No.30/2016 referred in Ext.P7. 9.For the above reasons, Ext.P8 is set aside. The writpetition is accordingly allowed. Sd/- S.V.BHATTI JUDGE Ac APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1TRUE COPY OF THE CBDT CIRCULAR NO.36/2016DATED 25/10/2016. EXHIBIT P2TRUE COPY OF THE RETURN DATED 29/07/2016 FOR AY 2016-17 FILED BY THE PETITIONER.FOR AY 2016-17 FILED BY THE PETITIONER. EXHIBIT P3TRUE COPY OF THE NOTICE DATED 24/07/2017 ISSUED UNDER SECTION 143(2) OF THE INCOMETAX ACT.ISSUED UNDER SECTION 143(2) OF THE INCOMETAX ACT. EXHIBIT P4TRUE COPY OF THE OBJECTIONS FILED BY THE PETITIONER.PETITIONER. EXHIBIT P5TRUE COPY OF THE LETTER DATED 17/10/2018 REPOSTING THE MATTER FOR HEARING ON 29/10/2018.REPOSTING THE MATTER FOR HEARING ON 29/10/2018. EXHIBIT P6TRUE COPY OF THE OBJECTIONS FILED BY THE PETITIONER DATED 19/11/2018.PETITIONER DATED 19/11/2018. EXHIBIT P7TRUE COPY OF THE JUDGMENT DATED 12/08/2015 OF THIS HONOURABLE COURT IN W.P(C) NO.24549 OF 2015.12/08/2015 OF THIS HONOURABLE COURT IN W.P(C) NO.24549 OF 2015. EXHIBIT P7 ATRUE COPY OF THE JUDGMENT OF THE DIVISIONBENCH OF THE ANDHRA PRADESH HIGH COURT INW.P.NO.7874 OF 2016.BENCH OF THE ANDHRA PRADESH HIGH COURT INW.P.NO.7874 OF 2016. EXHIBIT P8TRUE COPY OF THE ASSESSMENT ORDER DATED 22/12/2018 PASSED BY THE 1ST RESPONDENT.22/12/2018 PASSED BY THE 1ST RESPONDENT. EXHIBIT P9TRUE COPY OF THE DEMAND NOTICE DATED 22/12/2018 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER.22/12/2018 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER. RESPONDENT'S/S EXHIBITS: NIL //TRUE COPY// PA TO JUDGE