Landowners entitled to compensation under 2013 Act despite acquisition under Section 28(1) of 1966 Act

The Karnataka HC held that landowners whose property was acquired through preliminary notification issued after 01.01.2014 under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966 are entitled to compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The court rejected contentions that compensation should be calculated under the 1966 Act, noting that the acquisition notification itself stated compensation would be paid under the 2013 Act. The court emphasized that differential compensation standards cannot be applied to similarly situated landowners, citing Article 14 protection against discrimination.

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Issues Involved:
1. Maintainability of the writ petitions.
2. Entitlement to compensation under the Land Acquisition Act, 1894 or the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
3. Exemption from payment of income tax and deduction of tax at source on compensation.

Summary:

Issue 1: Maintainability of the Writ Petitions
The court considered whether the writ petitions were maintainable given the alternative remedy of seeking enhancement of compensation before the Reference Court. The learned Single Judge concluded that the writ petitions were maintainable, as the respondents/petitioners had already sought such a reference.

Issue 2: Entitlement to Compensation under Act, 1894 or Act, 2013
The respondents/petitioners contended they were entitled to compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (Act, 2013) rather than the Land Acquisition Act, 1894 (Act, 1894). The learned Single Judge ruled in favor of the respondents/petitioners, holding that all awards passed and compensation payable for land acquisitions pursuant to notifications issued after 01.01.2014 must be under Act, 2013, not Act, 1894. This was supported by the resolution of the Karnataka Industrial Areas Development Board (KIADB) passed in its 343rd meeting held on 27.08.2016, which stated that compensation for acquisitions under the KIAD Act, 1966 where preliminary notifications were issued on or after 01.01.2014 should be paid as per Act, 2013.

Issue 3: Exemption from Payment of Income Tax and Deduction of Tax at Source
The respondents/petitioners argued that the compensation payable was exempt from income tax under Section 96 of Act, 2013 and the CBDT Circular dated 25.10.2016. The learned Single Judge agreed, stating that compensation awarded under Act, 2013 is exempt from income tax and from deduction of tax at source. This was further supported by the amendment to the Income Tax Act, 1961, specifically Section 194-LA, and the CBDT Circular, which clarified that compensation received under Act, 2013 is not taxable.

Appeals and Conclusion
The appeals filed by the Bangalore Metro Rail Corporation Limited and the Central Board of Direct Taxes were dismissed. The court upheld the learned Single Judge's decision that the respondents/petitioners are entitled to compensation under Act, 2013 and that such compensation is exempt from income tax and deduction of tax at source. The court also noted that there was no challenge to the validity of the KIADB resolution, which had been accepted and reiterated by the State Government.

The court directed the Registry to delink CCC No. 1047/2022 to be tried and adjudicated separately.

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