TaxTMI 
TaxTMI 
2026 (5) TMI 484
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.... Suresh Walmikrao Munde. Advocate for Respondent No. 2: Mr. Rahul Bagul. Advocate for Respondent No. 2 : Mr. N. T. Bhagat. Advocate for Respondent No. 1: Mr. Akshay Kulkarni. Learned Counsel Mr. Chandak, Appointed to Assist the Court. JUDGMENT : 1. Rule. Rule made returnable forthwith. By consent of the parties, the Writ Petitions are taken up for final hearing. 2. Heard the learned Counsel Mr. Chandrakant P. Patil for the petitioner; learned Counsel Mr. S. J. Rahate for respondent No. 1 in Writ Petition No. 914 of 2026; learned Counsel Mr. Rahul Bagul for respondent No. 2 in Writ Petition No. 914 of 2026, Writ Petition No. 2231 of 2026, Writ Petition No. 2240 of 2026, and Writ Petition No. 2242 of 2026; learned Counsel Mr. D. P. Madkar holding for Mr. D. S. Manorkar for the respondent - NHAI; learned Counsel Mr. S. W. Munde for respondent No. 2 in Writ Petition No. 2232 of 2026; learned Counsel Mr. N. T. Bhagat for respondent No. 2 in Writ Petition No. 2241 of 2026; learned Counsel Mr. Akshay Kulkarni for respondent No.1 in Writ Petition No. 2241 of 2026; and learned Counsel Mr. R. D. Sanap for respondent No. 2 in Writ Petition No. 2243 of 2026. Also heard lea....
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.... tax at source under the Income-tax Act, 1961. He further submits that the decretal amount is required to be paid in its entirety and no deduction towards TDS can be made therefrom. 8. Learned Counsel Mr. Chandak, who is appointed to assist the Court, submits that the issue involved in the present writ petitions pertains to the applicability of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 to the compensation awarded for acquisition of agricultural land under the National Highways Act, 1956, and whether such compensation, including the interest thereon, is exempt from deduction of tax at source under the Income-tax Act, 1961. 9. He submits that under the 2013 Act, the cost of acquisition includes the entire amount payable to the land loser, including enhanced compensation and interest, and that the entire amount is not liable to payment of income tax in view of Section 96 of the said Act. 10. He further submits that CBDT Circular No.36/2016 dated 25/10/2016 clarifies that compensation received under an award made in terms of the 2013 Act is exempt from income tax. He also submits that a proviso ....
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....er Section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same." 14. A reference may be made to the Division Bench Judgment of the High Court of Andhra Pradesh in C. Nanda Kumar vs. Union of India (Writ Petition No.7874 of 2016 and connected matters, decided on 13/03/2017), wherein it has been observed that the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (Central Act 30 of 2013) is a welfare legislation which marks a significant departure from the provisions of the Land Acquisition Act, 1894. The object of the 2013 Act is not merely to provide just and fair compensation, but also to ensure rehabilitation and resettlement of affected families. The Preamble indicates that land losers are to be treated as stakeholders in the development process. 15. It has further been held that Section 96 of the 2013 Act is intended to secure these objectives and, therefore, it cannot be contended that Section 194 LA of the Income-tax Act, 1961 would override or dilute the said welfare provision. Any interpretation which requires deduction of tax at source and thereafter ....
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....espect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013)." (ii) In the present case, the arbitral award is dated 22/04/2014, i.e., after the coming into force of the Act of 2013. Section 96 of the said Act expressly provides that no income tax shall be levied on any award or agreement made under the Act. Thus, the statutory exemption operates in full force. A proviso introduced on 01/04/2017 to Section 194LA of the Income-tax Act, 1961 further clarifies that no deduction of tax at source shall be made where the compensation is exempt from levy of income tax under any law for the time being in force. Even prior to the said clarification, CBDT Circular No.36/2016 dated 25/10/2016, it is clarified that compensation received under an award made under the 2013 Act is exempt from income tax. Though taxability and deduction at source are distinct concepts, once the income itself is exempt in view of the judgment in C. Nanda Kumar (supra), there remains no occasion to deduct tax at source under the beneficial legisl....
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....compensation in lieu of salary, after the decree, the amount loses its original character. It was further held that there is no provision under the Income-tax Act enabling a judgment debtor to deduct income tax at source from a decretal amount, in the absence of any specific direction in the decree. In All India Reporter Ltd. vs. Ramchandra D. Datar (supra), it has been clearly held that the decretal amount must be paid in its entirety and no deduction towards income tax can be made therefrom by the judgment debtor. A similar view qua deduction of TDS on arbitral award considering the same as 'Judgment Debt' has been taken by the Calcutta High Court in M/s Neo Built Corporation vs. Union of India (EC 272 of 2022). 19. Applying the aforesaid principle, once the compensation is crystallized in the form of an arbitral award, it partakes the character of a 'Judgment Debt' and must be paid in its entirety, without any deduction towards TDS. 20. In view of the aforesaid legal position, the impugned order, to the extent it directs deduction of TDS, cannot be sustained. The Competent Authority for Land Acquisition (CALA) is directed to redeposit the amount deducted towards TDS bef....