M/S SRI BALAJI CORPORATE SERVICES vs. UNION OF INDIA MINISTRY OF FINANCE

1 IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 21ST DAY OF APRIL, 2022

BEFORE

THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR

WRIT PETITION No.43206 OF 2018 C/W WRIT PETITION NO.53718 OF 2017 (LA-KIADB)

IN W.P.NO.43206 OF 2018

BETWEEN:

AND:

DEPARTMENT OF REVENUE 146-C,

NORTH BLOCK,

NEW DELHI -110 001.

REP BY ITS SECRETARY (REVENUE)

2 2. CENTRAL BOARD FOR DIRECT TAXES GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, ITA-II DIVISION, NORTH BLOCK, NEW DELHI -110 001

CENTRAL REVENUE BUILDING, QUEENS ROAD,

BENGALURU- 560 032

NO. 56, HMT BHAVAN, 4TH FLOOR, BELLARY ROAD,

GANGANAGAR,

BENGALURU -560 032

IV AND V FLOORS, KHANIJI BHAVAN,

NO. 49, RACE COURSE ROAD,

BANGALORE 560 001.

REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER AND EXECUTIVE MEMBER

HAVING ITS OFFICE AT 3RD FLOOR,

BMTC COMPLEX, KH ROAD,

SHANTINAGAR, BANGALORE 560 027.

REPRESENTED BY ITS MANAGING DIRECTOR

…RESPONDENTS (BY SRI MADANAN PILLAI, CGC FOR R1 SRI K.V.ARAVIND, ADVOCATE FOR R2 TO R4 SRI G.V.SHASHIKUMAR, AGA FOR R5 SRI ASHOK N.NAYAK, ADVOCATE FOR R6 & R7 SRI K.KRISHNA, ADVOCATE FOR R8)

3 THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DECLARE THAT THE BENEFIT OF EXEMTION FROM PAYMENT OF INCOME TAX ON COMPENSATION AMOUNT FOR ACQUISITION OF LAND PROVIDED UNDER SECTION 96 OF THE RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION, REHABILITATION AND RESETTLEMENT ACT, 2013 EXTENDS OF ACQUISITION OF LANDS UNDER KARNATAKA INDUSTRIAL AREAS DEVELOPMENT ACT, 1966 AND ETC.

IN W.P.No.53718 OF 2017

BETWEEN:

PETITIONERS 1 TO 4 ARE ALL R/AT NO.76, RANGA RAO ROAD, SHANKARAPURAM, BENGALURU-560 004.

AND:

4 DEPARTMENT OF REVENUE, 146-C, NORTH BLOCK, NEW DELHI-110 001, REPRESENTED BY ITS SECRETARY (REVENUE)

NO.59, HMT BHAVAN, 4TH FLOOR,

BELLARY ROAD, GANGANAGAR,

BENGALURU-560 032.

4TH & 5TH FLOORS, EAST WING,

KHANIJA BHAVAN, NO.49, RACE COURSE ROAD,

BENGALURU-560 001,

REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER & EXECUTIVE MEMBER.

5 (METRO RAIL PROJECT), MAHARSHI ARVIND BHAVAN, 1ST FLOOR, NRUPATHUNGA ROAD, BENGALURU-560 001.

(BY SRI K.V.ARAVIND, ADVOCATE FOR R2 TO R4 SRI MADANAN PILLAI, CGC FOR R1 SRI G.V.SHASHIKUMAR, AGA FOR R5 SRI B.B.PATIL, ADVOCATE FOR R6 TO R8 SRI K.KRISHNA, ADVOCATE FOR R9)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DECLARE THAT R-7 IS NOT REQUIRED TO DEDUCT ANY TAX AT SOURCE IN RESPECT OF THE COMPENSATION AMOUNT FOR ACQUISITION OF THE LANDS OF THE PETITIONER IN SY.NO.10/2 AND CONSEQUENTLY THE DEDUCTION MADE AS PER OFFICIAL MEMORANDUM DATED 6.10.2017 AT ANNEXURE-A IS WITHOUT THE AUTHORITY OF LAW AND ETC.

THESE PETITIONS COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:-

ORDER

In W.P.No.43206/2018, petitioners have sought for the following reliefs:-

(i) DECLARE that the benefit of exemption from payment of income tax on compensation amount for acquisition of land provided under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 extends to acquisition of lands under Karnataka Industrial Areas Development Act, 1966.

(ii) Declare that the 7th respondent is not required to deduct any tax at source in respect of the compensation amount for acquisition of the property of the Petitioners under the Karnataka Industrial Areas Development Act, 1966.

(iii) Declare that for all acquisitions on or after 1.1.2014 under KIAD Act the payment of compensation & benefits shall be as per the provisions of 2013 Act and thereby put an end to discrimination in perpetuity & resolve large number of litigations;

(iv) Issue a writ of certiorari setting aside the Endorsement bearing No.KIADB/4445/2018-19 dated 19.09.2018 issued by the 7th Respondent and consequently issue a writ of mandamus directing the 7th Respondent to disburse compensation amount to the Petitioners without deducting tax at source;

(v) (iv-a) To direct the 5th to 7th respondents to modify the awards dated 25.10.2018 (Annexures AC and AD) made in respect of the petitions properties bearing No.RIE,235 and No.RIE.235A, determine the compensation by applying sections 26 to 30, 69, 80 & 96 of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 and grant all monetary and other benefits that flow from such application within a time frame as may be stipulated by this Hon’ble Court.

(vi) PASS such other order/s of this Hon’ble Court deems fit, including the award of costs, in the interest of justice and equity.

In W.P.No.53718/2017, petitioners have sought for the following reliefs:-

(i) DECLARE that the 7th respondent is not required to deduct any tax at source in respect of the compensation amount for acquisition of the lands of the petitioner in Sy.No.10/2 and consequently the deduction made as per Official Memorandum dated 06.10.2017 (Annexure-A) is without the authority of law.

(ii) ISSUE a writ of mandamus directing the respondents to refund the amount deducted towards tax at source with interest at the rate of 18% P.A. from the date of deposit till the date of refund.

(iii) DECLARE that the petitioners are not required to pay any tax/advance tax in respect of the compensation amount paid to them by the 7th respondent as per Official Memorandum dated 06.10.2017 (Annexure-A) in view of the exemption granted under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

(iv) PASS such other order/s of this Hon’ble Court deems fit, including the award of costs, in the interest of justice and equity.

8 Main Road, Bengaluru. The subject properties have been developed by the petitioners into a business complex and a luxury boutique hotel.

2.1 Petitioners contend that the subject properties were acquired by the respondents for the purpose of Bangalore Metro Rail Project – Phase-II. Among the properties, subject property bearing property identification No.R1E-235 was acquired vide preliminary notification under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966 (for short ‘the KIAD Act’) issued on 22.09.2015 and the final notification dated 04.04.2016 was issued under Section 28(4) of the KIAD Act, pursuant to which, the impugned General Award at Annexure-AC was passed on 25.10.2018. Similarly, subject property bearing identification No.R1E-235A was acquired vide preliminary notification dated 16.12.2017 and final notification dated 25.05.2018, pursuant to which, the impugned General Award at Annexure-AD was passed on 25.10.2018.

9 identification No.R1-171 and R1E-171 situated at Hoodi Village, K.R.Puram-3 Hobli, Bangalore East Taluk, Bangalore Urban District. It is contended that the subject properties were acquired by the respondents for the purpose of Bangalore Metro Rail Project – Phase-II. Among the properties, subject property bearing property identification No.R1-171 was acquired vide preliminary notification issued on 27.04.2015 and final notification dated 29.12.2015, while subject property bearing property identification No.R1-E-171 was acquired vide preliminary notification issued on 03.07.2017 and final notification dated 25.05.2017. But, no award has been passed so far; however, the KIADB has issued an Official Memorandum dated 06.07.2017 directing payment of compensation in favour of the petitioner under the Land Acquisition Act, 1894.

10 the respondents herein insofar as the same relate to payment of compensation for acquisition of the subject properties viz., in relation to the quantum of compensation, deduction of income tax at source(TDS) on the compensation and non-grant of exemption from payment of income tax on the compensation.

(i) The writ petitions are maintainable, despite availability of remedy seeking enhancement of the compensation amount before the reference court which has been availed of by the petitioners and the contention of the respondents in this regard is liable to be rejected.

(ii) The petitioners are entitled to compensation under the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (for short ‘the said Act of 2013’), which came into force w.e.f. 01.01.2014 and not under the

11 Land Acquisition Act, 1894 (for short ‘the said Act of 1894’) and that the action of the respondents in not paying compensation to the petitioners under the said Act of 2013 is illegal, arbitrary, discriminatory and not justifiable in law. (iii) The respondents are not entitled to deduct the tax at source (TDS) on the compensation amount and the action of the respondents in deducting the tax at source was illegal, discriminatory, arbitrary and contrary to the provisions of the said Act of 2013 as well as the provisions of the Income Tax Act, 1961 (for short ‘the I.T.Act’) in view of Section 96 of the said Act of 2013 and the Circular dated 25.10.2016 issued by the Central Board for Direct Taxes as well as Section 194-LA of the I.T.Act w.e.f 01.04.2017. (iv) The compensation payable in favour of the petitioners is also exempt from payment of income tax and action of the respondents in not granting exemption and demanding payment of income tax was also illegal, discriminatory, arbitrary and contrary to Section 96 of the said Act of 2013 as well as the CBDT Circular dated 25.10.2016 and the provisions of Section 194-LA of the I.T. Act.

12 6. In addition to reiterating the various contentions urged in their statement of objections and referring the material on record, learned Senior counsel for the BMRCL and the other counsel for the respondents made the following submissions:- (i) The writ petitions are not maintainable, in view of availability of equally efficacious and alternative remedy of seeking enhancement of compensation before the reference court, which has been availed of by the petitioners. (ii) That the said respondents were fully justified in awarding compensation under the said Act of 1894 and not under the said Act of 2013, which was not applicable to KIADB acquisitions and the various contentions urged by the petitioners in this regard are untenable and devoid of merit. (iii) That the deduction of tax at source (TDS) on the compensation amount was correct and proper and in accordance with law. (iv) That the compensation payable in favour of the petitioners was not exempt from payment of income tax

13 and the demand for the said payment by the revenue was legal and valid.

(i) Whether the writ petitions are maintainable in view of the remedy of seeking enhancement of compensation before the reference court being available to the petitioners, who have already sought for such reference?

(ii) Whether the petitioners are entitled to compensation under the Land Acquisition Act, 1894 OR under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, in respect of their lands acquired pursuant to preliminary notification issued after 01.01.2014 under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966?

(iii) Whether the compensation payable in favour of the petitioners is exempt from payment of tax deduction at

14 source(TDS) and also from payment of income tax in view of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and Section 194-LA of the Income Tax Act amended vide Finance Act 67 of 2017 w.e.f 01.04.2017 as well as the CBDT Circular dated 25.10.2016?

Re. Point No.1:-

15 seek enhancement of compensation before the reference court; both claims/contentions are distinct, different and mutually exclusive and independent of each other and merely because petitioners are entitled to seek / have sought for reference, the said circumstance cannot be made the basis to come to the conclusion that the present petitions are not maintainable as held in Union of India vs. Pushpavathi & others - (2018)3 SCC 28, Smt.Channarajammanni vs. Union of India & others - AIR 1988 KAR 49 (DB) and the LAO Hanmakonda vs. Pittala Saranga Pani- 1998 +(2) APLJ 20.

9.1 As held in the aforesaid decisions, merely because the remedy to seek enhancement before the reference court is available to the petitioners and they have sought for reference, there is no bar/prohibition for the petitioners to contend that they are entitled to compensation under the said Act of 2013 and not under the said Act of 1894; in other words, the right to seek compensation under the said Act of 2013 on the ground that the same was applicable and not the said Act of 1894 is completely different, distinct and mutually exclusive and

16 independent from the right to seek reference on the ground that the compensation awarded under either of the enactments is meager and inadequate and deserves to be enhanced. Under these circumstances, I am of the considered opinion that notwithstanding the availability of the remedy in favour of the petitioners to seek enhancement before the reference court which they had already sought for, the present petitions seeking awarding of compensation under the said Act of 2013 and not under the said of 1894 under which the impugned awards have been passed are maintainable.

Point No.1 is accordingly answered in favour of the petitioners by holding that the present petitions are maintainable. Re: Point No.2:

17 that the respondents are to be directed to pass awards in favour of the petitioners under the said Act of 2013.

10.1 In this context, in addition to reiterating that it is an undisputed fact that the acquisition proceedings insofar as the petitioners are concerned were initiated after 01.01.2014, my attention is invited to the Board Resolution dated 27.08.2016 passed in 343rd Board meeting of the KIADB, wherein it was decided and resolved that the provisions of the said Act of 2013 would be applicable for the purpose of determination of compensation where lands were acquired pursuant to notifications issued under Section 28(1) of the KIAD Act after 01.01.2014. It is pointed out that the said resolution has not only been recognised, accepted, confirmed and affirmed by the respondents but also by this Court in various litigations subsequently and awards have been passed by the respondents directing payment of compensation under the said Act of 2013.

10.2 Secondly, it is contended that by applying and invoking the doctrine/principles of parity, petitioners were entitled to compensation under the said Act of 2013 and not under the said Act of 1894 which would amount to

18 discrimination and be violative of Article 14 of the Constitution of India.

10.3 Thirdly, it is contended that Section 30 of the KIAD Act (prior to amendment vide Karnataka Act No. 20 of 2022 w.e.f 05.04.2022) which provided for payment of compensation for KIADB acquisitions under the said Act of 1894 was legislation by reference and not legislation by incorporation and consequently, upon repeal of the said Act of 1894 and enactment of the said Act of 1894, petitioners were entitled to compensation under the said Act of 2013, since the impugned awards were passed / to be passed after 01.01.2014 when the said Act of 2013 came into force.

10.4 Fourthly, it is contended that Karnataka Industrial Areas Development (Amendment) Act, 2022 (Karnataka Act No. 20 of 2022) amended Section 30 of the KIAD Act w.e.f 05.04.2022 whereby the earlier Section 30 stood substituted with retrospective and retroactive effect from 01.01.2014 by making the provisions relating to compensation under the said Act of 2013 applicable to KIAD acquisitions and on this score also, petitioners were

19 entitled to compensation under the said Act of 2013 and not under the said Act of 1894 which was not applicable to KIADB acquisitions after 01.01.2014 when the said Act of 2013 came into force.

10.5 The respondents have disputed all the aforesaid contentions urged by the petitioners and have contended that the petitioners are entitled to compensation under the said Act of 1894 and not under the said Act of 2013.

10.6 The material on record discloses that in its 343rd Board meeting dated 27.08.2016, the KIADB passed an unanimous resolution resolving and deciding as under:- “26.10 The matter was considered in detail and after detailed deliberations, it was resolved that affidavits to the effect that determination of compensation shall be as per schedule ‘I’ of LARR Act for the purpose of section 29(3) of the KIAD Act be filed in the Hon’ble High Court of Karnataka, in cases wherein notifications under Section 3(1) and 28(1) of the KIAD Act, 1966 have been issued on & after 01-01- 2014.”

In W.P.Nos.48824-840/2015 – Smt.Puttalakshmamma vs. Union of India and others, the KIADB filed its statement of objections dated 14.09.2016 as hereunder:

20 “the repugnancy in the KIAD Act, 1966 with the New Act, 2013 are in connection with only the provision relating to the compensation accorded to the land loser. It is submitted that dwelling upon the said issue the Board constituted under the KIAD Act in its 343rd meeting held on 24.08.2016 has resolved that the compensation as regards lands acquired under the KIAD Act,1966 shall be in tune with the New Act, 2013. A copy of the said resolution is herewith produced and marked as Annexure-R1.”

Similarly, in W.P.Nos.11209-11212/2019 - Smt. S.Jalaja &others vs. Union of India & others, the KIADB filed its statement of objections on 13.03.2019 reiterating its stance as under: “the repugnancy in the KIAD Act, 1966 with the New Act, 2013 are in connection with only the provision relating to the compensation accorded to the land loser. It is submitted that dwelling upon the said issue the Board constituted under the KIAD Act in its 343rd meeting held on 24.08.2016 has resolved that the compensation as regards lands acquired under the KIAD Act,1966 shall be in tune with the New Act, 2013.”

10.7 Though several other issues arose for consideration in Jalaja’s case supra including the vires of

21 Sections 28(4) and (5) of the KIAD Act, insofar as payment of compensation was concerned, in the final order dated 05.04.2019, the learned Single Judge of this Court while disposing of the said W.P.Nos.11209-11212/2019 held as under:-

"27. The genesis of the challenge to the provisions of the KIAD Act vis-à-vis the notifications issued under Section 28[1] and 28[4] of the KIAD Act relates to the visible distinction inasmuch as award of compensation under the two enactments and apprehension of denial of the higher compensation which otherwise the petitioners are legitimately entitled to, under the Act, 2013. This grievance of the petitioners is addressed by the Board wherein, a specific stand has been taken in the Statement of Objections filed by the Board, in paragraph 17, that the Board constituted under the KIAD Act, in its meeting has resolved that the compensation as regards lands acquired under the KIAD Act, shall be in tune with the New Act, 2013. The said paragraph is quoted hereunder for ready reference: “17. Without prejudice to the aforementioned the doctrine of Severability is applicable where though an enactment as a whole is within the legislative competence of a legislature, particular provisions of the enactment go outside the scope of the legislative entry under which the legislature enacted the law. It is submitted that the repugnancy in the KIAD Act, 1966 with the New Act, 2013 are in connection with only the provisions relating to the compensation accorded to the land loser. It is submitted that dwelling upon the said issue the Board constituted under the KIAD Act, 1966 in its meeting has resolved that the compensation as

22 regards lands acquired under the KIAD Act, 1966 shall be in tune with the New Act, 2013.”

23 notifications under Section 3[1] and 28[1] of the KIAD Act have been issued on and after 01.01.2014. The learned Senior Counsel appearing for the Board placing reliance on this resolution, submitted that the petitioners herein are entitled to compensation in terms of Act 2013 as admitted by the Board in Paragraph 17 of the statement of objections in pursuant to the said resolution of the Board dated 24.08.2016. In view of the primary grievances of the petitioners being redressed by the Board as aforesaid, the grounds urged by the petitioners in as much as discrimination in resorting to the provisions of the KIAD Act, does not survive for consideration.

24 [iii] The petitioners are entitled to compensation in terms of the Act, 2013 as per the undertaking given by the KIADB before this Court in the event the petitioners are not agreeable for a consent award under Section 29[2] of the KIAD Act. With the aforesaid observations and directions, writ petitions are dismissed. In view of the dismissal of the writ petitions, all the pending I.As stand disposed of.

10.8 As can be seen from the operative portion paragraph No.30(iii) of the aforesaid order, this Court came to the conclusion that the land losers are entitled to compensation under the said Act of 2013.

10.9 The aforesaid order was carried in appeal in W.A.No.1105/2019 & connected matters and a submission was made on behalf of the KIADB and recorded in the Daily Order dated 24.06.2019 as under:-

“The learned senior counsel appearing for the third respondent on instructions states that the third respondent has accepted the impugned judgment and especially the direction contained in clause (iii) of paragraph 30. The learned Additional Government Advocate seeks time to take instructions on the question whether the State intends to challenge the impugned judgment.”

10.10 The said stance of the KIADB that the land losers are entitled to compensation under the said Act of 2013 was also reiterated and re-affirmed by the State Government in its letter bearing No. CI 176 SPA 2019 dated 08.08.2019 addressed by the Principal Secretary to the Additional Government Advocate.

10.11 Subsequently, in its final order dated 24.08.2021, the Division Bench of this Court dismissed the said W.A.No.1105/2019 and connected matters inter alia confirming the order of the learned Single Judge; in paragraph 6 of the order, the submission made by the learned Advocate General that the land losers would be entitled to compensation under the said Act of 2013 was noted and held in paragraph 51 as under:-

26 appended to the 2013 Act for computation of market value of the land in respect of land which has to be acquired under 1966 Act. It is therefore submitted that grievance of the owners of land insofar as it pertains to challenge to provisions pertaining to determination of compensation in fact does not survive. It is also urged that 1966 Act is a self contained code. In support of aforesaid submissions, reliance has been placed on the decisions of Supreme Court in 'MAGANLAL CHHAGANLAL (P) LTD. V. MUNICIPAL CORPORATION OF GREATER BOMBAY AND ORS.', (1974) 2 SCC 402 AND 'GIRNAR TRADERS V. STATE OF MAHARASHTRA AND ORS.', (2011) 3 SCC 1. It is also contended that issue with regard to applicability of Section 24(2) of the 2013 Act to the proceeding under 1966 Act is no longer res integra and it has been held that Section 24(2) does not apply to the proceeding under 1966 Act. In this connection, reference has been made to decision of Supreme Court in 'SPECIAL LAND ACQUISITION OFFICER, MYSORE V. ANASUYA BAI', (2017) 3 SCC 313. 51. By the aforesaid Amendment Act, the state government has been granted the power to exempt the projects mentioned therein from the application of Chapter II and III of the Act. The KIADB vide its resolution dated 27.08.2016 has resolved to determine the amount of compensation in respect of the land which may

27 be acquired under 1966 Act as per Schedule I of 2013 Act. Therefore, the grievance of the owners of the land in so far as it pertains to payment of lesser compensation under 1966 Act does not survive. It has been urged on behalf of the owners of the land that the provisions of the Karnataka Amendment Act 2019 are arbitrary and are opposed to all canons of law and violative of Article 21. However, except for making such a statement no material has been brought on record to show as to how the provisions of Amendment Act are either arbitrary, violative of Article 21 of the Constitution of India or unconstitutional. The provisions of the Amendment Act cannot also be said to be in violation of Section 108 of 2013 Act which provides an option to the affected families to avail better compensation an rehabilitation and resettlement, if state law or policy so provides. Thus, it is held that provisions of 2013 Act have been validly amended by the State legislature. Accordingly the issue No.5 is answered.

10.12 Though the aforesaid order dated 24.08.2021 passed in W.A.No.1105/2019 and connected matters has been challenged before the Apex Court in SLP(C) No.20912/2021 and connected matters, the subject matter of challenge is with regard to other issues including validity of acquisition, provisions of the KIAD Act etc., and

28 not with regard to payment of compensation by the respondents under the said Act of 2013; in other words, the order of the Division Bench(supra) has attained finality and become conclusive and binding upon the State and KIADB. It is also relevant to state that the respondents have proceeded to pass awards and have paid compensation in favour of the land losers under the said Act of 2013 in respect of the lands which were the subject matter of the aforesaid litigations as can be seen from the award at Annexure-AL dated 14.06.2019 and award at Annexure-AN dated 30.01.2020.

10.13 The cumulative effect of the aforesaid facts and circumstances make it unmistakably clear that not only the respondents have unequivocally and unambiguously decided, resolved, accepted and acquiesced to the fact that the land losers were entitled to payment of compensation under the said Act of 2013 in respect of KIADB acquisitions initiated pursuant to notification issued under Section 28(1) of the KIAD Act after 01.01.2014, but the respondents have also passed awards and paid compensation to such land losers under the said Act of 2013. Further, as stated supra,

29 the entitlement of the land losers to receive compensation under the said Act of 2013 and the liability of the respondents to pass awards and pay the same has same has been recognised, accepted, confirmed and affirmed by this Court in the aforesaid litigations which have has attained finality and become conclusive and binding upon the State and KIADB.

10.14 Under these circumstances, I am of the considered opinion that in the light of the undisputed fact that the subject lands of the petitioners have been acquired pursuant to notification issued under Section 28(1) of the KIAD Act after 01.01.2014 when the said Act of 2013 came into force, petitioners would be entitled to compensation under the said Act of 2013 and not under the said Act of 1894 which was clearly not applicable for the purpose of payment of compensation in favour of the petitioners.

10.15 Insofar as the other contentions urged by the petitioners with regard to payment of compensation under the said Act of 2013 are concerned, viz., parity in payment of compensation under different enactments, Section 30 of the KIAD Act (prior to amendment) being legislation by

30 reference and not legislation by incorporation, amendment to Section 30 of the KIAD Act by the Karnataka Industrial Areas Development (Amendment) Act, 2022 (Karnataka Act No. 20 of 2022) being retrospective in nature and operation etc., are concerned, in view of the aforesaid facts and circumstances and my findings above that since the subject lands were notified for acquisition under Section 28(1) of the KIAD Act subsequent to 01.01.2014 when the said Act of 2014 came into force and the petitioners are entitled to compensation from the respondents under the said Act of 2013, the other contentions urged by both sides need not be gone into in the fact situation obtaining in the instant case, in particular the undisputed fact that the lands have been notified for acquisition under Section 28(1) of the KIAD Act subsequent to 01.01.2014. Under these circumstances, the aforesaid other contentions urged by both sides with regard to applicability of the said Act of 2013 in relation to compensation payable to the land losers are not gone into and the same are left / kept open to be decided in an appropriate case.

Point No.2 is answered in favour of the petitioners by holding that they are entitled to compensation under the said Act of 2013 and not under the said Act of 1894 and consequently, the impugned awards, endorsements, orders, communications, official memorandums etc., issued/passed by the respondents deserve to be quashed and the respondents are to be directed to pass fresh awards and do all such necessary acts, deeds and things etc., for the purpose of paying compensation to the petitioners towards acquisition of the subject lands under the said Act of 2013. Re. Point No.3:-

“96. Exemption from income-tax, stamp duty and fees.–No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under

32 any such award or agreement shall be liable to pay any fee for a copy of the same.”

11.1 On 25.10.2016, the Central Board of Direct Taxes issued the following Circular clarifying and confirming that though there was no specific provision under the I.T.Act, Section 96 of the said Act of 2013 provides exemption from payment of taxes and deduction of TDS in respect of compensation paid under the said Act of 2013. The said CBDT Circular reads as under:-

Circular No.36/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ITA.II Division, North Block, New Delhi, the 25* of October, 2016

Sub : Taxability of the compensation received bythe land owners for the land acquired under the Right of Fair Compensation & Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLAAR Act) Reg.

Under the existing provisions of the Income-tax Act, 1961 ('the Act') an agricultural land which is not situated in specified urban area, is not regarded as a capital asset. Hence, capital gains arising from the transfer. (including compulsory acquisition) of such agricultural land is not taxable. Finance (No.2) Act, 2004 inserted Sec.10(37) in the Act from 01.04.2005 to provide specific exemption to the capital gains arising to an Individual or a HUF from compulsory acquisition of an agricultural land situated in specified urban-limit subject

33 to fulfillment of certain conditions for specified urban land)

11.2 Subsequently, Section 194-LA of the I.T. Act was amended vide Finance Act 67 of 2017 w.e.f 01.04.2017 by inserting a second proviso. After the amendment, the section reads as under:- "194LA. Any person responsible for paying to a resident any sum, being in the nature of compensation

34 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 per cent 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). (emphasis added)

Explanation. — For the purposes of this Section, — (i) "agricultural land" means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub- clause (iii) of clause (14) of section 2; (ii) "immovable property" means any land (other than agricultural land) or any building or part of a building.

It is profitable to extract Section 10(37) of the I.T.Act, which reads as follows:-

35 person, any income falling within any of the following clauses shall not be included-

(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head “Capital gains” arising from the transfer of agricultural land, where-

(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2;

(ii) such land, during the period of two years immediately preceding, the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or a after the 1st day of April, 2004.

Explanation – For the purposes of this clause, the expression “compensation or consideration” includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority;

11.3 A conjoint reading and the cumulative effect of Section 96 of the said Act of 2013, the CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T.Act make it abundantly clear that compensation payable

36 in respect of the awards passed subsequent to 01.01.2014 when the said Act of 2013 came into force would be exempt from payment of income tax as well from deduction of tax deduction at source(TDS). In the instant case, the subject lands were acquired pursuant to preliminary notifications issued under Section 28(1) of the KIAD Act subsequent to 01.01.2014 which were followed by the impugned awards as well as the impugned endorsements, official memorandums, communications, orders, actions, etc., also undisputedly issued after 01.01.2014.

11.4 Under these circumstances, having regard to Article 265 of the Constitution of India, I am of the considered opinion that compensation payable in favour of the petitioners, whose lands were notified for acquisition subsequent to 01.01.2014 would be exempt from payment of income tax as well as exempt from deduction of tax deduction at source(TDS) and the impugned endorsements, communications, orders, actions, etc., issued/passed by the revenue are illegal, arbitrary and without jurisdiction or authority of law and liable to be quashed.

11.5 Under similar circumstances in relation to lands acquired for Metro Railways, a Learned Single Judge of the Kerala High Court in the case of Viswanathan M vs. The Chief Commissioner and others - 2020 (2) KLJ 309 and a Division Bench of the Andhra Pradesh High Court in the case of C.Nanda Kumar v. Union of India and others - 2017 SCC Online Hyd 55 have held that compensation payable to land losers would be exempt from payment of income tax.

11.6 It is sought to be contended by the learned counsel for the revenue that Section 96 of the said Act of 2013, CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T. Act are applicable only to the lands acquired under the said Act of 2013 and not to the lands acquired under the KIAD Act. It is pointed out that Section 96 of the said Act of 2013 Act employs the language “award or agreement made under this Act” and not “award or agreement made as per this Act” and therefore, in view of the express language employed by the legislature, the benefit of exemption from payment of income tax or tax deduction at source (TDS) cannot be

38 claimed by the petitioners. The said contentions urged by the revenue cannot be accepted for more than one reason:-

(i) Firstly, while dealing with Point No.2 with regard to the question as to whether the compensation was payable to the petitioners under the said Act of 2013 or under the said Act of 1894, I have already come to the conclusion that the petitioners are entitled to compensation under the said Act of 2013. (ii) Secondly, having regard to the aims and objects of the said Act of 2013 which is a beneficial piece of legislation, so long as compensation itself is made payable under the said Act of 2013, it makes no difference whether award or agreement is made “under the Act” or “as per the Act”. (iii) Thirdly, the material on record discloses that undisputedly, all awards made and compensation paid by the respondents in relation to KIADB acquisitions after 01.01.2014 are under the said Act of 2013 by granting/giving complete exemption from payment of income tax and from tax deduction at source(TDS) as can be seen from the awards vide Annexure-AL dated

39 14.06.2019 and Annexure-AN dated 30.01.2020 passed in Jalaja’s case and connected matters (supra). (iv) Fourthly, the KIAD Act does not have any specific provision enabling passing of an award and Section 30 (prior to amendment) envisaged passing of an award under the said Act of 1894; however, as held by me while answering question No.2, the said Act of 1894 was not applicable to awards and compensation in respect of KIAD acquisitions subsequent to 01.01.2014, to which the said Act of 2013 was applicable; it follows there from that awards and compensation cannot be passed and made under the said Act of 1894 in respect of KIAD acquisitions after 01.01.2014 and the same can be passed and made only under the said Act of 2013. Consequently, since all awards and compensation subsequent to 01.01.2014 would be under the said Act of 2013 which would be applicable to the same, the aforesaid provisions, viz., Section 96 of the said Act of 2013, the CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T.Act would also be applicable to all awards and compensation subsequent to 01.01.2014, all of which, would be entitled to

40 the benefit of exemption from payment of income tax and from tax deduction at source(TDS). (v) Lastly, I have already come to the conclusion that the impugned awards, endorsements, orders, communications, official memorandums, actions etc., of the respondents directing payment of income tax and tax deduction at source (TDS) on the subject compensation amounts are illegal, arbitrary and without jurisdiction or authority of law and that the same deserve to be quashed and the respondents are to be directed to pass fresh / modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013. As noted supra, Karnataka Industrial Areas Development (Amendment) Act, 2022 (Karnataka Act No. 20 of 2022) amended Section 30 of the KIAD Act w.e.f 05.04.2022, whereby the provisions relating to compensation under the said Act of 2013 have been made applicable to KIAD acquisitions. Consequent upon the passing of the present order, the respondents would necessarily have to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the

41 petitioners under the said Act of 2013 which has been made applicable to KIADB acquisitions in view of the amendment to Section 30 of the KIAD Act w.e.f 05.04.2022. 11.7 Viewed from this angle also, though the question as to whether the said amendment to Section 30 is prospective or retrospective has not been gone into in the present order and the same is left open to be decided in an appropriate case, in the light of the undisputed fact that the respondents would necessarily have to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013, Section 96 of the said Act of 2013, CBDT Circular dated 25.10.2016, Section 194-LA and Section 10(37) of the I.T.Act would become applicable to the petitioners who would be entitled to the benefit of exemption from payment of income tax and from tax deduction at source(TDS) in respect of the awards and compensation in their favour. 11.8

In view of the aforesaid facts and circumstances, the contentions urged on behalf of the

42 revenue cannot be accepted. I am therefore of the considered view that all awards and compensation payable / paid subsequent to 01.01.2014 when the said Act of 2013 came into force would be exempt from payment of income tax and also exempt from tax deduction at source (TDS) and the land losers would not be liable to pay income tax in respect of the said awards and compensation. Point No.3 is also answered in favour of the petitioners by holding that the impugned awards, endorsements, orders, communications, actions etc., of the respondents directing payment of income tax and tax deduction at source(TDS) on the subject compensation amounts are illegal, arbitrary and without jurisdiction or authority of law and that the same deserve to be quashed and the respondents are to be directed to pass fresh/modified awards and do all such necessary acts, deeds and things etc., in favour of the petitioners under the said Act of 2013 by exempting the petitioners from payment of income tax and tax deduction at source(TDS) on the compensation amounts paid/payable in their favour.

(i) All awards passed and compensation payable / paid in favour of land losers pursuant to preliminary notification under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966, issued subsequent to 01.01.2014 would have to be under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and not under the Land Acquisition Act, 1894.

(ii) All awards passed and compensation payable / paid in favour of land losers under the awards or by way of agreement subsequent to 01.01.2014 in respect of KIADB acquisitions would be exempt from payment of income tax.

(iii) All awards passed and compensation payable / paid in favour of land losers under the awards or by way of agreement subsequent to 01.01.2014 in respect of KIADB acquisitions would also be exempt from tax deduction at source (TDS).

ORDER

(i) W.P.No.43206/2018 and W.P.No.53718/2017 are hereby allowed;

(ii) The impugned awards in W.P.43206/2018 at Annexure-AC dated 25.10.2018 and Annexure-AD dated 25.10.2018 are hereby quashed;

(iii) The impugned Endorsement in W.P.43206/2018 at Annexure-S dated 19.09.2018 is hereby quashed;

(iv) The impugned Official Memorandum at Annexure-A in W.P.No.53718/2017 dated 06.10.2017 is hereby quashed and respondents are directed to refund the amount deducted from the petitioners towards tax deduction at source(TDS) together with applicable from the date of deposit till the date of refund;

(v) It is declared that the petitioners in both the petitions are entitled to compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013;

(vi) It is also declared that the compensation payable in favour of the petitioners in both the petitions is exempt

45 from payment of income tax as well as exempt from tax deduction at source(TDS) under the Income Tax Act, 1961;

(vii) The respondents are directed to pass fresh/modified awards in favour of the petitioners in both the petitions and do all such appropriate acts, deeds and things and pass/issue suitable orders, communications etc., for the purpose of payment of compensation in favour of the petitioners under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and by granting/giving exemption from payment of income tax as well as exemption from tax deduction at source(TDS) under the Income Tax Act, 1961 as expeditiously as possible and at any rate, within a period of three months from the date of receipt of a copy of this order;

(viii) The respondents are directed to disburse/pay the compensation already deposited by them as per the impugned awards as expeditiously as possible in favour of the petitioners who would be entitled to receive/withdraw the same without prejudice to their rights and contentions;

(ix) It is further directed that the amount(s) deposited by the respondents before this Court shall be released in favour of the petitioners who would be entitled to receive/withdraw the same without prejudice to their rights and contentions.

Sd/- JUDGE

Srl.