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Issues: (i) Whether lands acquired under the Karnataka Industrial Areas Development Act, 1966 pursuant to notifications issued after 01.01.2014 were to be compensated under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; (ii) whether the compensation so payable was exempt from income tax and deduction of tax at source.
Issue (i): Whether lands acquired under the Karnataka Industrial Areas Development Act, 1966 pursuant to notifications issued after 01.01.2014 were to be compensated under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
Analysis: The notifications themselves stated that compensation would be paid in terms of the 2013 Act. The Board's 343rd resolution had resolved that where notifications under the KIAD Act were issued on or after 01.01.2014, compensation would be determined as per Schedule I of the 2013 Act. That position had already been accepted and acted upon in earlier cases, and the land losers could not be treated differently merely because the acquisition was for the Metro Rail project. The challenge based on the KIAD Act and the cited precedents did not dislodge the parity-based conclusion reached on the facts.
Conclusion: The compensation was payable under the 2013 Act, not under the 1894 Act, and the finding was in favour of the respondents.
Issue (ii): Whether the compensation so payable was exempt from income tax and deduction of tax at source.
Analysis: Once compensation was held payable under the 2013 Act, the statutory exemption under Section 96 had to be given full effect. The CBDT circular of 25.10.2016 clarified that compensation under an award or agreement exempted by Section 96 would not be taxable. The later income-tax provisions on deduction at source did not alter the position where the compensation was determined under the 2013 Act. The benefit of the exemption therefore extended to both income tax and tax deduction at source.
Conclusion: The compensation was exempt from income tax and from deduction of tax at source, and the finding was in favour of the respondents.
Final Conclusion: The writ appeals failed, and the order granting compensation under the 2013 Act together with the attendant tax exemption was upheld.
Ratio Decidendi: Where acquisition notifications issued after 01.01.2014 expressly or effectively proceed on the footing of the 2013 compensation regime, similarly situated land losers cannot be denied that regime on the ground of the acquiring project, and the statutory tax exemption attached to compensation under the 2013 Act must be applied in full.
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