Court rules in favor of petitioner, exempts compensation from tax deduction, sets aside assessment order.

The High Court set aside the assessment order and demand notice, ruling in favor of the petitioner. The Court held that the exemption under Section 96 of the Land Acquisition Act applies when compensation is paid after the owner is denied ownership or possession of the acquired property. The Court found the first respondent's interpretation impermissible and directed that tax should not be deducted at source for compensation paid under the Act, except for cases covered by Section 46.

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Issues:
Challenge to assessment order and demand notice under the Right to Fair Compensation and Transparency in Land Acquisition Act, 2013.

Analysis:
The petitioner contested the assessment order and demand notice, arguing that they were illegal and beyond the jurisdiction of the respondent. The petitioner received compensation for land acquisition by the Kochi Metro Rail Project, and the first respondent included 80% of this compensation in the petitioner's taxable income for the Assessment Year 2016-17. The petitioner relied on Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition Act, 2013 (Act 30 of 2013) for exemption from income tax. The first respondent's interpretation was challenged, asserting that the exemption under Section 96 is complete if Section 46 of Act 30 of 2013 does not apply to the acquisition. The petitioner referred to a judgment from the High Court of Andhra Pradesh and Circular No. 36/2016 from the Central Board of Direct Taxes to support their argument.

The first respondent contended that the language of Section 96 is clear and unambiguous, and there is no need to look for intention or other interpretations regarding the tax liability of the compensation received. The High Court analyzed the provisions of Section 96 and concluded that the exemption is complete when compensation is paid after the owner is denied ownership or possession of the acquired property. The Court found that the first respondent's interpretation was impermissible and set aside the assessment order. The judgment favored the petitioner, citing precedent and Circular No. 36/2016, and allowed the writ petition, directing the respondents not to deduct tax at source for compensation paid under the 2013 Land Acquisition Act, except those covered by Section 46 of the Act.

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