Karnataka H.C : Deduction of IT on interest payable under s. 28 or 34 of the Land Acquisition Act is not permissible and the objections raised by the JDR-petitioner herein was rejected

High Court Of Karnataka

Registrar, University Of Agricultural Science vs. Fakiragowda & Ors.

Section 28, 34

N.K. Patil, J.

Civil Revision Petn. Nos. 1122, 1157-70 of 2004

7th February, 2008

Counsel appeared :

S.J. Puranik, for the Petitioner : Smt. Asha M. Kumbargerimath, H.E. Betsur, Suresh P. Huddegaddi and Mahantesh Hosur, for the Respondents

JUDGMENT

N.K. Patil, J. :

In all these 15 civil revision petitions the petitioner being aggrieved by the common order dt. 8th June, 2004 passed in Execution Case Nos. 9 of 2004, 10 of 2004, 11 of 2004, 18 of 2004, 34 of 2003, 41 of 2003, 42 of 2003, 43 of 2003, 50 of 2003 and 51 of 2003, 78 of 2004, 79 of 2004, 80 of 2004, 81 of 2004 and 82 of 2004 on the file of Principal Civil Judge (Senior Division), Dharwar, has presented the instant civil revision petitions.

The respondents herein filed execution petitions on the file of the Principal Civil Judge, (Senior Division), Dharwar, as referred to above. The said matter had come up for consideration before the execution Court on 8th June, 2004. The execution Court after hearing both the sides and after considering the material available on record has passed a common order in respect of 15 execution petitions as referred to above, by holding that deduction of IT on interest payable under s. 28 or 34 of the Land Acquisition Act is not permissible and the objections raised by the JDR-petitioner herein was rejected. Assailing the correctness of the impugned common orders passed by the execution Court as stated supra, the petitioner being a beneficiary of the acquisition felt necessitated to present the instant revision petitions.

Learned counsel appearing for the petitioner in all these cases Sri S. J. Puranik and the learned Government pleader at the outset submitted that the impugned common order passed by the execution Court is liable to be set aside at the threshold on the ground that the execution Court has committed a grave error and has passed the order contrary to the statutory provisions of s. 194A r/w s. 194 of the IT Act. The Court below ought not to have held that the deduction of IT on the interest payable under s. 28 or 34 of the Land Acquisition Act is not permissible as the same is one without jurisdiction and contrary to the statutory provisions. To substantiate the said submission Sri S. J. Puranik placed reliance on the judgment of the apex Court in the case of Bikram Singh vs. Land Acquisition Collector (1997) 139 CTR (SC) 475 : (1997) 224 ITR 551 (SC) : (1997) 10 SCC 243 and submitted that it is settled law that the interest received on delayed payment of the compensation is a revenue receipt exigible to income-tax. When once the claimants are made to pay the income-tax, that portion of the amount should be deducted and thereafter the remaining amount may be paid to the claimants as provided under the relevant provisions of the IT Act. Inadvertently, the learned counsel representing the petitioner and the Government pleader appearing for the respondent-LAO, have not brought to the notice of the Court below, the settled proposition of law as referred to above. Further, he submitted that following the judgment of the apex Court and the Division Bench of Delhi High Court in the case of Shankar vs. Union of India (2002) 178 CTR (Del) 26 : (2003) 260 ITR 284 (Del), the Court below has held that the respondents-claimants are liable to pay income-tax on the belated payment of interest received thereon. Therefore, the Court below held that the respondents-claimants are liable to pay income-tax regarding the belated payment of interest received by them. Therefore, he submitted that the impugned common order passed by the execution Court is liable to be set aside.

The respondents are served unrepresented, except in Civil Revision Petn. No. 1166 of 2004. In the said cases Sri Suresh P. Hudedagaddi, appears for respondents Nos. 1 to 3. I have heard the learned counsel for the petitioner and the learned counsel appearing for the respondents in Civil Revision Petn. No. 1166 of 2004 as also the learned Government pleader. The remaining respondents are served unrepresented.

After a careful perusal of the impugned order passed by the execution Court it is manifest on the basis of the order that the execution Court has committed a grave error of law much less material irregularity and proceeded to pass the order contrary to the relevant provisions of the IT Act, as it is s. 194A r/w s. 194L proviso. It is worthwhile to extract s. 194L proviso wherein it is provided that no deduction shall be made under the said section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed one thousand rupees.

In the instant case, as rightly pointed out by the learned Government pleader, appearing for the Asstt. CIT/LAO, that all the claimants who have received a sum of Rs. 1,00,000 are liable to pay income-tax towards belated payment of interest. It is significant to note that the trial Court has placed reliance on the judgment of apex Court reported in CIT vs. All India Tea & Trading Co. Ltd. (1996) 132 CTR (SC) 225 : (1998) (1) LACC 339 : (1996) 219 ITR 544 (SC) and another judgment reported in Rana Pratap Singh vs. Land Acquisition Officer (1998) Tax LR 1032 (AP) : (1998) (2) LACC 674 of the Andhra Pradesh High Court while dealing with s. 23 of the Land Acquisition Act and s. 194 of the IT Act. After careful perusal of the relevant extract of the judgment at para 14 wherein it is held by the Andhra Pradesh High Court that the Courts cannot give order for deduction of income-tax at source from the amount of compensation. Provisions of s. 194 of the IT Act are not applicable to the compensation amount payable under the Land Acquisition Act. The said reliance placed by the learned counsel for the respondent has been accepted and therefore the award passed by the trial Court is without reference to the relevant provisions which is applicable to the instant case as it is s. 194A of the IT Act. He further placed reliance on the judgment of the apex Court as referred to above reported in CIT vs. All India Tea & Trading Co. Ltd. (supra). The said decision has no application to the facts of this case. It is a well settled principle of law that the interest received on delayed payment of compensation is a revenue receipt exigible to income-tax. However, it was held that the amended definition of interest was not intended to exclude the Revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the IT Act, the Revenue receipt is exigible to tax. The aforesaid provision is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under s. 28 or 34 of the Land Acquisition Act is a taxable event. Therefore, it is a revenue receipt exigible to tax under s. 4 of the IT Act.

After careful perusal of the judgment of the apex Court as referred to above, it is clear that the apex Court has held in unequivocal terms that the interest received on belated payment of compensation is a revenue receipt exigible to income-tax and it is income and the claimants are liable to pay the tax as provided under the relevant provisions of the IT Act.

The execution Court further committed a grave error in not considering the relevant provisions which are applicable to the case pending adjudication before the Court below. Secs. 194A and 194L have not been referred to except the judgment of the apex Court and the Andhra Pradesh High Court as referred to above. In those cases what has been held and considered is regarding deduction of income-tax at source from the amount of compensation. But in those cases, whether the claimants are liable to pay tax has not been considered nor decided. If that is so, the Court below ought not to have rejected the objection raised by the petitioner and the respondent, the Asstt. CIT and the Land Acquisition Officer. Therefore, the finding recorded by the trial Court cannot be sustained. Therefore, it is liable to be set aside.

In the light of the facts and circumstances of the case as stated above, I pass the following order. All the 15 civil revision petitions are allowed.

The impugned common order dt. 8th June, 2004 passed in Execution Nos. 9 of 2004, 10 of 2004, 11 of 2004, 18 of 2004, 34 of 2003, 41 of 2003, 42 of 2003, 43 of 2003, 50 of 2003 and 51 of 2003, 78 of 2004, 79 of 2004, 80 of 2004, 81 of 2004 and 82 of 2004 on the file of Principal Civil Judge (Senior Division), Dharwar are hereby set aside.

[Citation : 325 ITR 239]

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