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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 07th DAY OF MARCH, 2018
BEFORE
THE HON’BLE MR.JUSTICE ARAVIND KUMAR
W.P.No.43215/2015 (LA-RES)
C/W W.P.Nos.26380-381/2015, 27667/2015 (GM-CPC) AND W.P.No.27668/2015 (LA-RES)
IN W.P.NO. 43215/2015
BETWEEN:
M/S. POWER GRID CORPORATION OF INDIA LIMITED, (A GOVERNMENT OF INDIA ENTERPRISE) HAVING ITS SOUTHERN REGION TRANSMISSION-II HQ, NEAR RTO DRIVING TEST TRACK SINGANAYAKANAHALLI (P.O) OFF YELAHANKA-DODDABALLAPUR ROAD, YELAHANKA HOBLI BANGALORE-560064 AND 400/220, K V SUB-STATION MAIDANAHALLI, ILAWALA SRIRANGAPATTNA ROAD, MYSORE REPRESENTED BY ITS CHIEF MANAGER FINANCE MR R SIVAKUMAR
... PETITIONER
(BY SRI.CHRISTOPHER, ADVOCATE ON BEHALF OF SRI. JOSHUA HUDSON SAMUEL, ADVOCATE)
AND:
THE ASSISTANT COMMISSIONER MYSORE DIVISION MYSORE-570005.
PUTTASWAMY @
PUTTASWAMY GOWDA DEAD BY LRS
2(a) MRS. SHIVARATHNAMMA W/O PUTTASWAMY @
PUTTASWAMY GOWDA
2(b) MR M P MANJUNATHA S/O PUTTASWAMY @
PUTTASWAMY GOWDA
2(c) MR M P PRASANNA S/O PUTTASWAMY @
PUTTASWAMY GOWDA
2(d) MRS. M P VIJAYALAKSHMI D/O PUTTASWAMY @
PUTTASWAMY GOWDA
MR. VENKATARAMANAGOWDA S/O KULLAVENKATAGOWDA
ALL ARE R/O MYDANAHALLI VILLAGE, MYSORE TALUK MYSORE DISTRICT-571130
... RESPONDENTS
(BY SRI. E.S. INDIRESH, AGA FOR R-1; SRI. P. MAHADEVA SWAMY, ADVOCATE FOR R-2(a-d) AND R-3)
THIS W.P. IS FILED UNDER ARTICLE 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER DT.30.3.2015 PASSED BY THE IV ADDL.
SENIOR CIVIL JUDGE & CJM MYSORE IN EX. CASE NO.416/2013 PRODUCED AT ANNX-D.
IN W.P.NOs. 26380-381/2015
BETWEEN:
M/S POWER GRID CORPORATION OF INDIA LIMITED, (A GOVERNMENT OF INDIA ENTERPRISE) HAVING ITS SOUTHERN REGION TRANSMISSION-II HQ, NEAR RTO DRIVING TEST TRACK, SINGANAYAKANAHALLI (P.O) OFF YELAHANKA-DODABALLAPUR ROAD, YELAHANKA HOBLI, BANGALORE-560 064. AND 400/220, K V SUB- STATION, MAIDANAHALLI, ILAWALA SRIRANGAPATTNA ROAD, MYSORE, REPRESENTED BY ITS CHIEF MANAGER FINANCE MR. R. SIVAKUMAR.
... PETITIONER
(BY SRI.CHRISTOPHER, ADVOCATE ON BEHALF OF SRI. JOSHUA HUDSON SAMUEL, ADVOCATE)
AND:
MR. B.B. MADAYA S/O BOPAIAH, AGED MAJOR
MR B BELLIAPPA S/O BOPAIAH, AGED MAJOR
MR P D APPAIAH S/O N P DEVAIAH, AGED MAJOR
ALL ARE R/AT BALALE VILLAGE, SOUTH KODAGU-571211
... RESPONDENTS
(BY SRI. KRISHNAMURTHY G HASYAGAR, ADVOCATE FOR R-1 TO R-3)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLE 227 OF CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER DTD.6.3.2015 PASSED BY THE IV ADDL. PRINCIPAL SENIOR CIVIL JUDGE & CJM MYSORE IN EXECUTION CASE NO.172/2014 VIDE ANNEX-D.
IN W.P.NO. 27667/2015
BETWEEN:
M/S POWER GRID CORPORATION OF INDIA LIMITED (A GOVERNMENT OF INDIA ENTERPRISE), HAVING ITS SOUTHERN REGION TRANSMISSION-II HQ, NEAR RTO DRIVING TEST TRACK, SINGANAYAKANAHALLI (P.O) OFF YELAHANKA-DODDABALLAPUR ROAD, YELAHANKA HOBLI, BANGALORE-560064. AND 400/220 K.V. SUB-STATION, MAIDANAHALLI, ILAWALA, SRIRANGPATTNA ROAD, MYSORE, REPRESENTED BY ITS CHIEF MANAGER FINANCE, MR.R. SIVAKUMAR.
... PETITIONER
(BY SRI.CHRISTOPHER, ADVOCATE ON BEHALF OF SRI. JOSHUA HUDSON SAMUEL, ADVOCATE)
AND:
ASSISTANT COMMISSIONER MYSURU DIVISION, MYSURU-571 001.
MRS. PANKAJA W/O LATE NINGEGOWDA, AGE MAJOR,
MRS. LAKSHMI D/O LATE NINGEGOWDA, AGE MAJOR,
MR. H N RAVI S/O LATE NINGEGOWDA,
AGE MAJOR
RESPONDENT NOS. 2 TO 4 ARE RESIDENTS OF HOSAHUNDAVANDI, BELOGALA HOBLI, SRIRANGPATTANA TALUK, MANDYA DISTRICT.
... RESPONDENTS
(BY SRI.E.S. INDIRESH, AGA FOR R-1; SRI.P.MAHADEVASWAMY, ADV., FOR R-2 TO R-4)
THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF CONSTITUTION OF INIDA PRAYING TO SET ASIDE THE ORDER DATED 6.3.2015 PASSED BY THE IV ADDL. SENIOR CIVIL JUDGE AND CJM MYSORE IN EXECUTION CASE NO. 652/2012 VIDE ANN-D.
IN W.P.NO. 27668/2015
BETWEEN:
M/S POWER GRID CORPORATION OF INDIA LIMITED (A GOVERNMENT OF INDIA ENTERPRISE) HAVING ITS SOUTHERN REGION
TRANSMISSION II HQ, NEAR RTO DRIVING TEST TRACK, SINGANAYAKANAHALLI (P O ) OFF YELAHANKA DODABALLAPUR ROAD, YELAHANKA HOBLI, BANGALORE -560064 AND 400/220, K V SUB- STATION, MAIDANAHALLI, ILAWALA SRIRANGAPATTNA ROAD, MYSORE, REPRESENTED BY ITS CHIER MANAGER FINANCE, MR. R. SIVAKUMAR
... PETITIONER
(BY SRI.CHRISTOPHER, ADVOCATE ON BEHALF OF SRI. JOSHUA HUDSON SAMUEL, ADVOCATE)
AND:
MR. SWAMY GOWDA S/O LATE NINGEGOWD, AGED MAJOR,
MR. KEMPEGOWDA S/O LATE NINGEGOWDA, AGED MAJOR,
MR. NANJEGOWDA S/O LATE NINGEGOWDA, AGED MAJOR,
MR. CHIKKANNA S/O LATE NINGEGOWDA , AGED MAJOR
MR. PUTTASWAMY S/O LATE NANGEGOWDA, AGED MAJOR,
RESPONDENTS 1 TO 5 ARE R/AT HOSAHUNDI VILLAGE, BELAGOLA HOBLI,
SRIRANGAPATNA TALUK, MANDYA DISTRICT- 571606
THE ASSISTANT COMMISSIONER MYSORE DIVISION, MYSORE -570001.
... RESPONDENTS
(BY SRI.E.S. INDIRESH, AGA FOR R-6; SRI.P.MAHADEVASWAMY, ADV., FOR R-1 TO R-3 And R-5)
THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER DATED 6.3.2015 PASSED BY THE IV ADDL. SENIOR CIVIL JUDGE AND CJM MYSORE IN EXECUTION CASE NO. 653/2012 VIDE ANN-D.
THESE WRIT PETITIONS COMING ON FOR FURTHER HEARING THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R
Short point which arises for consideration in these writ petitions relates to a claim of the petitioner deducting tax at source (hereinafter referred to as ‘TDS’) in respect of compensation awarded by the jurisdictional reference Court with statutory benefits and interest thereon and same being paid by the petitioner herein as beneficiary of the acquisition.
Facts in brief which has led to filing of these writ petitions are as under:
Government of Karnataka after issuing preliminary and final notifications, has acquired various lands for the benefit of Karnataka Power Transmission Corporation Limited (for short ‘KPTCL’) and lands so acquired has been transferred by KPTCL to the petitioner in the year 2003 for establishment of a 400/220 KV Sub-station at Mysore. Said transfer has taken place on account of petitioner – Corporation being ‘Deemed Transmission Licensee’ in the capacity of “Central Transmission Utility” as prescribed under Sections 38 & 40 of the Electricity Act, 2003.
Land losers in the respective writ petitions not being satisfied with the quantum of compensation awarded by Land Acquisition Officer, had approached the reference Court for enhancement of compensation and by different judgment and awards, reference Court enhanced the compensation amount payable to them and ordered for grant of interest on the enhanced compensation. Petitioner in terms of judgment and awards passed by reference Court has deposited the
enhanced compensation with interest after deducting TDS before reference Court as stated herein below: Sl.No. LAC No. Enhanced compensation with statutory interest ` TDS deducted
` Balance amount deposited
` 1 162/2002 1,60,67,311/- 32,13,462/- 1,28,53,849/- 2 179/2004 2,47,99,726/- 32,65,494/- 2,15,34,232/- 3 163/2002 32,30,013/- 6,46,003/- 25,84,010/- 4 164/2002 1,40,19,645/- 28,03,929/- 1,12,15,716/-
Issue relating to payment of interest on the enhanced compensation namely, as to whether it should be paid from the date of preliminary notification or from the date of possession had been assailed by petitioners in different appeals before this Court. Said issue has been laid to rest by Division Bench of this Court in the case of SHIVARUDRAPPA FAKIRAPPA UPPIN (SINCE DECEASED) BY L.Rs AND OTHERS vs THE EXECUTIVE ENGINEER, KARNATAKA HOUSING BOARD, HUBLI AND ANOTHER reported in 2010(1) KCCR 543 (DB) whereunder, it came to be held that
interest would be payable from the date of possession of the respective lands being taken and not from the date of preliminary notification by relying upon Hon’ble Apex Court judgment.
In order to enjoy the fruits of the compensation awarded by reference Court as affirmed in appeals and same having not been paid by the writ petitioners herein, land losers filed execution petitions before the jurisdictional Civil Court. Writ petitioners contended before the Executing Court that petitioner herein was not empowered or entitled to deduct tax at source on the interest amount. After considering rival contentions, executing Court has passed the impugned orders by arriving at a conclusion that judgment debtor namely, petitioner herein was in error in deducting tax at source while depositing the award amount since interest was part of the compensation and as such, judgment debtor i.e., writ petitioners could not have deducted tax at source. Executing Court has further directed the judgment debtor namely, writ petitioner
herein to make good the short fall amount namely, the amounts already deducted at source by way of TDS, by depositing the same and granting liberty to the judgment debtor to seek for refund of such amounts remitted to the TDS account of the Income Tax Department.
It is the contention of Sri.Christopher, learned Advocate appearing on behalf of Sri Joshua Hudson Samuel for petitioner that issue regarding deduction of tax at source on the interest payable in respect of the compensation awarded under the Land Acquisition Act, 1894 (for short ‘LA Act’) is no more res integra since Hon’ble Apex Court in the case of BIKRAM SINGH & OTHERS vs LAND ACQUISITION COLLECTOR AND OTHERS reported in 1997(10) SCC 243 has held that interest received on delayed payment of compensation is a revenue receipt and as such, same would be exigible to tax to be deducted at source. He would also rely upon judgment of this Court in the case of GURU RAO AND ANOTHER vs THE STATE OF
KARNATAKA, BY ITS SECRETARY TO DEPARTMENT OF REVENUE AND OTHERS reported in ILR 2012 KAR 6485. Hence, he prays for setting aside the orders passed by the Executing Court by allowing the writ petitions.
This Court had requested the learned Standing counsel appearing for Income Tax Department to assist the Court since issue of revenue relating to tax deducted at source on enhanced compensation was involved in the present writ petitions. Accordingly, Sri K V Aravind, learned Standing counsel for the Department has appeared and contended that issue involved in BIKRAM SINGH’s case was restricted to definition of ‘interest’ as found in Section 2(28-A) vis-à-vis Section 194A of the Income Tax Act,1961 and has drawn the attention of this Court to the judgment of Hon’ble Apex Court in the case of COMMISSIONER OF INCOME TAX, FARIDABAD vs GHANSHYAM (HUF) reported in (2009)8 SCC 412 to contend that though Hon’ble Apex Court in BIKRAM SINGH’s case has held that tax is
liable to be deducted on interest component, in GHANSHYAM’s case, it has been further clarified that interest as referred to under the LA Act would be referable to Section 28 as well as Section 34 and where interest is awarded under Section 34 of LA Act, then, it would not form part of compensation and as such would be exigible to tax and in the event interest is ordered to be paid on the enhanced compensation as indicated under Section 28, such interest would form part of compensation and thus, would be outside the purview of exigibility.
Sriyuths Krishnamurthy Hasyagar and Mahadeva Swamy, learned Advocates appearing for the respondents-claimants namely, decree holders have submitted that on facts, Executing Court has rightly held that interest component which has been claimed by the claimants (land losers) is on the enhanced compensation and as such, principles laid down by Hon’ble Apex Court in GHANSHYAM’s case is squarely
applicable. Hence, they have prayed for rejection of the writ petitions.
In reply, Sri.Christopher, learned Advocate appearing for petitioner would submit that in the event of this Court were to arrive at a conclusion that deduction of tax at source made by the petitioner which was based on the principles enunciated by the Hon’ble Apex Court were not applicable to the facts on hand, then, petitioner may not be driven to another round of litigation for refund of the amount already remitted to the Income Tax Department and as such, prays for suitable directions being issued in that regard.
Having heard the learned Advocates appearing for parties and on perusal of the records, it would disclose that claimants had sought for a direction to the petitioner to pay the amounts as per the memo of calculations filed before Executing Court. Even the petitioner does not dispute the break up of components claimed by the decree holders before the Executing Court. For the purpose of immediate reference and
convenience, memo of calculation as filed in Ex.case No.416/2013 which is subject matter of W.P.No.43215/2015 which relates to LAC No.162/2002 is extracted herein below. Sl.No. Description Amount 1 Compensation awarded by the Court for 5A-04G land @ rate of Rs.663772/- per acre 3385237 2 Less: Compensation amount already paid LAO @ rate of Rs.90000/- per acre 459000 3 Excess market value 2926237 4 30% Solatium due to compulsory nature (on Rs.2926237/-) 877871 5 Total (3+4) 3804108 6 12% Additional market value from dt.03.10.96 to 08.7.99 969747 7 Total (5+6) 4773855 8 9% interest dt. 03.10.96 to 02.10.97 (on Rs.4773855/-) 429647 9 15% interest dt.03.10.97 to 30.11.12 (on Rs.4773855/-) 10862809 10 Total amount 16066311 11 Advocate fee & proceeding costs as directed by Hon’ble court 1000 12 Grand Total 16067311 13 TDS (Income Tax @ 20%) 3213462 14 Net Amount 12853849
As could be seen from the above break up, interest @ 9% and interest @ 15% for the period mentioned therein has been claimed on the enhanced
compensation which is inclusive of 12% additional market value. Hon’ble Apex Court in the case of BIKRAM SINGH referred to supra has held that amended definition of “interest” was not intended to exclude revenue receipt of interest on delayed payment of compensation from taxability. It came to be held: “10. But the question is whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would not be exigible to income-tax? It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of "interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under Section 28 or 31 of the Acquisition Act is a taxable event. Therefore, we hold that it is a revenue receipt exigible to tax under Section 4 of the Income-Tax Act. Section 194-A of
the Act has no application for the purpose of this case as it encompasses deduction of the income at the source. However the appellants are entitled to spread over the income for the period for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year.”
Thus, it will have to be examined in facts of each case as to whether interest claimed is an “interest” forming part of compensation or as whether it would be an “interest” payable on delayed payment falling under Section 34 of the Act. Hon’ble Apex Court in GHANSHYAM’s case referred to herein supra, has held that compensation payable under the Land Acquisition Act constituting solatium, additional compensation and interest under Section 28 of the Land Acquisition Act, 1894 would be “compensation” as defined under Section 45(5) of the Income Tax Act, 1961 and while explaining the words “enhanced compensation/consideration” it has been held that interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it would form part
of enhanced compensation or consideration which is not the case with interest under Section 34 of the Land Acquisition Act, 1894. It came to be held in GHANSHYAM’s case by Hon’ble Apex Court as under: “33. The award of interest under Section 28 of the 1894 Act is discretionary. Section 28 applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases interest on that excess alone is payable. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector. The compensation awarded by the Court includes the additional compensation awarded under Section 23(1-A) and the solatium under Section 23(2) of the said Act. This award of interest is not mandatory but is left to the discretion of the Court.
To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for the delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section 34.
It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23(1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act.”
In the light of the authoritative pronouncement of Hon’ble Apex Court in GHANSHYAM’s case, interest awarded under Section 28 of Land Acquisition Act, 1894 would partake the component of enhanced compensation and when applied to the facts on hand, it would not detain this Court too long to arrive at a conclusion that interest that has been awarded by reference Court in exercise of the discretion vested in it by virtue of Section 28, is interest awarded under Section 28 and not under Section 34 of the Land Acquisition Act, 1994. In that
view of the matter, order passed by the Executing Court holding that petitioner was not entitled to deduct tax at source on the interest payable on the enhanced compensation cannot be found fault with.
At the same time, petitioner cannot be left in the lurch or in other words, it cannot be made to seek for repayment of the amount already deposited by it particularly in the background of petitioner having taken umbrage in the light of the law as explained in BIKRAM SINGH’s case by the Hon’ble Apex Court and as such it cannot be left with no remedy. In other words, further direction also requires to be issued by reserving liberty to the petitioner to approach the Income Tax Department for refund of the tax already deducted at source and which has been remitted to the TDS account and as such petitioner would be at liberty to file an application or revised return before the appropriate authority in this regard, if not already filed. In the event of such return or application being filed, Income tax Department and/or jurisdictional
Commissioner of Income Tax shall take immediate steps to process said revised return or application and refund the amount to the petitioner to which it would be entitled to expeditiously at any rate within six months from the date of receipt of certified copy of the order.
Petitioner shall deposit the amount which has been deducted by it as TDS and which has been now ordered to be deposited by the Executing Court within an outer limit of eight weeks from today. Accordingly, writ petitions stand disposed of.
This Court places on record its appreciation for the services rendered by Sri K.V.Aravind, learned Standing Counsel appearing for Income Tax Department. Registry is hereby directed to forward a copy of this order to the Commissioner of Income Tax, TDS, HMT Bhavan, Ballari Road, Ganganagar, Bengaluru – 560 032.
SD/- JUDGE *sp