TaxTMI 
TaxTMI 
2017 (4) TMI 662
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.... petitions owned certain lands. Those lands were acquired by the Government for the proposed Viaduct and Stations Alignment of Metro Rail under the Hyderabad Metro Rail Project. Admittedly, the acquisition was in terms of the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, hereinafter referred to as the 2013 Act. 4. After awards were passed, the competent authority started disbursement of compensation, without deducting tax at source under Section 194LA of the Income Tax Act, 1961. Tax was not deducted at source in view of Section 96 of the Act 30 of 2013. 5. But the Commissioner of Income Tax (TDS) issued a Circular dated 05-11-2015 to the District Collector calling upon him to deduct tax at source while making payment of compensation under the 2013 Act, on the ground that as per the decision of the Kerala High Court in Kochi Metro Rail Ltd. v. Union of India, Section 96 of the 2013 Act would not override the provisions of Section 194LA of the Income Tax Act, 1961. Therefore, challenging the said Circular of the Commissioner of Income Tax (TDS), dated 05-11-2015, the land owners have come up with t....
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....n Bhawani Cotton Mills Ltd. v. State of Punjab AIR 1967 SC 1616, (f) that any doubt that the respondents had about the impact of Section 96 of the 2013 Act stands cleared by the Circular issued by the CBDT dated 25-10-2016, which has a binding effect upon the revenue, as held by the Supreme Court in Collector of Central Excise, Vadodra v. Dhiren Chemical Industries (2002) 2 SCC 127 and Union of India v. Arviva Industries India Ltd , and (g) that since what is ordained to be deducted under Section 194LA is actually income-tax, there cannot be a collection unless the amount was liable to tax under the Income Tax Act, 1961. 10. Supplementing the above arguments, it is contended by Mr. K.S. Murthy, learned counsel for the petitioners in the 3rd writ petition that even Section 190(1) of the Income Tax Act contains a clue as to the fact that what is sought to be deducted at source is actually income-tax and hence in the teeth of Section 96 of the 2013 Act, Section 194LA itself will have no application. 11. In response to the above contentions, Ms.K.Mamata, learned Standing Counsel appearing for the Department, submitted (a) that the benefit conferred under Section 96 of the 2....
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.... The 3rd contention of Mr. Anand Kumar Kapoor, learned counsel for the petitioners, that the decision of the Single Judge of the Kerala High Court in Kochi Metro Rail Ltd., has been overturned by the Division Bench of the Kerala High Court does not appear to be correct. In Kochi Metro Rail Ltd., the person liable to pay compensation under the 2013 Act namely Kochi Metro Rail Ltd., filed a writ petition challenging its liability to deduct tax at source under Section 194LA. The learned Judge dismissed the writ petition holding that the obligation under Section 194LA is upon the payer, who is nowhere in the picture under Section 96 of the 2013 Act. This decision of the learned Single Judge in W.P.(C) No.21478 of 2015, dated 09-9-2015, does not appear to be the subject matter of any decision by the Division Bench. On the contrary, two cases came to be decided by two different Division Benches of the very same Kerala High Court. The first was in W.A.No.1422 of 2015 decided on 18-01-2016 in K.Sreekumar v. The District Collector. What was in issue before the Division Bench in the said case was as to whether the award passed in that case was under the 2013 Act or under the 1894 Act. There ....
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....ly irrelevant. 19. The 5th contention revolves around Article 265 of the Constitution of India. Under Article 265, no tax shall be levied or collected except by authority of law. The contention of the learned counsel for the petitioners is that there can be no collection of income-tax, when there was no levy on the compensation payable under the Land Acquisition Act. Reliance is placed in this regard upon the observation of the Constitution Bench of the Supreme Court in paragraph-21 of its decision in Bhawani Cotton Mills Ltd., wherein it was pointed out that if a person is not liable for payment of tax at all at any time, the collection of a tax from him with a possible contingency of refund at a later stage, will not make the original levy valid, because if particular sales or purchases are exempt from taxation altogether they can never be taken into account at any stage for the purpose of calculating or arriving at the taxable turnover and for levying tax. 20. But the observations of the Supreme Court in paragraph-21 of its decision cannot be seen in isolation. We must remember that the TDS regime came at least a couple of decades after the decision of the Supreme Court in....
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....nsation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income- tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961. 24. Therefore, the contention that the above Circular steers clear of any controversy, is born out of a complete misunderstanding of the scope of the Circular. 25. That takes us to the last contention, a part of which revolves around the language employed in the last line of Section 194LA....
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....ision contained in Chapter-XVII of the Income Tax Act could be invoked. The emphasis under Section 190(1) is on the tax on such income. What follows from Sections 192 onwards are actually deduction or collection at source or advance payment of tax on income. Once this is clear, we will have no difficulty in concluding that Section 96 of the 2013 Land Acquisition Act makes Section 194LA of the Income Tax Act, 1961, inapplicable to the compensation paid under the award. 30. Section 194LA of the Income Tax Act, 1961 reads as follows: 194LA. Payment of compensation on acquisition of certain immovable property. Any person responsible for paying to a resident any sum, being in the nature of compensation 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 wher....
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....ave to admit that Section 194LA uses the expression any sum and not the expressions income, payment or amount. In T.Raj Kumar v. Union of India [W.P.No.17241 of 2015 and batch, dated 12-4-2016] decided by a Division Bench of the Madras High Court to which one of us (VRS, J.) was a party, the Court provided a tabular statement listing out different words/expressions used in the Income Tax Act, 1961 such as sum, income and amount and the Sections in which they are used. The tabular statement is as follows: Word Used Provision in Chapter XVII Sum 191 [Direct Payment] 194C [Payments to Contractors 194IA [Transfer of Immovable Property] 194J [Fees for professional or technical services] 194L [Acquisition of Capital Asset] 194LA [Acquisition of certain Immovable Property] 195 [Other Sums] 196 [Payable to Government, Reserve Bank or certain corporations] Income 190, 193 [Interest on Securities] 194-I [Rent], 194A [Other Interest] 194B [Winnings from Lottery] 194BB [Winnings from Horse Race] 194D [Insurance Commission] 194DA [Payments for Life Insurance] 194E [Payment to n....