Kerala H.C : This Court committed an error in calculating the amount due to the claimant under s. 23(1A) of the Land Acquisition Act (“Act” for short) and the interest payable to the claimant on such amount

High Court Of Kerala

State Of Kerala vs. Mariyamma & Ors.

Sections 194A, 194L, 194LA

K. Padmanabhan Nair, J.

Civil Revn. Petn. No. 2034 of 2003

23rd March, 2005

Counsel Appeared

Mohan C. Menon, for the Petitioner : T.V. George, for the Respondent No. 1 : P.K. Raveendranath Menon & George K. George, for the Respondent Nos. 2 & 3

ORDER

K. Padmanabhan Nair, J. :

This Court by order dt. 26th Nov., 2004 disposed off the civil revision petition by setting aside the impugned order and remanding the execution proceedings to the executing Court for fresh consideration. The decision is reported in State of Kerala vs. Mariyamma (2005) 193 CTR (Ker) 393 : ILR 2005 (1) Ker 40 : 2005 (1) KLT 173. The matter arose from an order passed by the Subordinate Judge, Thiruvananthapuram, in execution of an award passed in L.A.R. No. 120 of 1993 of that Court. This Court considered the principles to be followed while calculating the amounts due to a decree-holder in a land acquisition case, the obligation on the Land Acquisition Officer (LAO) to deduct income-tax from the amounts to be deposited, the method of calculating the interest awardable under different heads and also the principles to be followed while adjusting the part payments effected by the judgment-debtor. After the pronouncement of the order, it was noticed that this Court committed an error in calculating the amount due to the claimant under s. 23(1A) of the Land Acquisition Act (“Act” for short) and the interest payable to the claimant on such amount. Since the findings of this Court on those points were against the decisions of the apex Court, this Court suo motu decided to hear that matter again so as to correct its own records in the final order in exercise of the powers conferred on this Court under Art. 215 of the Constitution of India. Accordingly, the matter was heard.

The learned counsel appearing for the decree-holder has argued that the findings of this Court that the decree- holder is entitled to get only simple interest and that the provisions of Order XXI, r. 1, are not applicable while adjusting the decree debt deposited by the State in execution of the award passed by the Land Acquisition Court are also wrong. This Court had only followed the principles laid down by the Supreme Court regarding the nature of the interest payable and the applicability of Order XXI, r. 1 of the CPC. Hence, those points do not require any reconsideration. The findings of this Court regarding the nature of the amount due to the claimant under s. 23 (1A) of the Act and the right of the claimant to get interest on such amount are against the principles laid down by the Supreme Court. So, such portions of the order dealing with the nature of the amount due to the claimant under s. 23(1A) of the Act and interest are to be reviewed. Paras 10, 11, 13 and 32 of the order are to be reviewed. No other paragraphs of the order reported above require any change. Since the review of those findings will materially affect the order, this revised order is passed in the case incorporating the reviewed portions. This civil revision petition is filed challenging an order passed by the executing Court proclaiming 50 cents of property comprised in Survey No. 874/B of Thycaud Village, wherein the Government rest house situate for sale in public auction. One hectare and 11.28 ares of dry land comprised in Survey No. 303/25 of Kazhakkuttam Menamkulam Village was acquired for a public purpose by the State. The notification under s. 4(1) of the Land Acquisition Act was issued on 14th May, 1985. The award was passed by the LAO on 31st March, 1986. The land was taken possession on 4th Feb., 1986. The LAO fixed the land value at Rs. 2,340 per are.

The LAO referred the matter to the Subordinate Judge’s Court, Thiruvananthapuram, for considering the claim put forward by the claimants for enhancement of compensation. The case was numbered as L.A.R. No. 120 of 1993. The learned Sub-Judge passed a judgment and decree on 9th March, 1994 fixing the land value at the rate of Rs. 10,000 per are. The total land value was fixed as Rs. 11,12,800. From that amount, an amount of Rs. 2,60,395.20 already paid by the LAO in terms of the award was deducted. The enhanced land value awarded was fixed as Rs. 8,52,404.80. The learned Sub-Judge found that the decree-holder was entitled to get 30 per cent solatium. It was also found that the decree-holder is entitled to get additional increase at the rate of 12 per cent per annum on the enhanced amount from 14th May, 1985 till 31st March, 1986. It was further found that for one year from the date of taking possession, i.e., from 4th Feb., 1986, the decree-holder was entitled to get interest at the rate of 9 per cent and from 4th Feb., 1987 at the rate of 15 per cent per annum and also proportionate cost. The State filed an appeal before this Court as L.A.A. No. 196 of 1995 challenging the judgment of the Subordinate Court. This Court by judgment dt. 24th Aug., 1998 dismissed the appeal confirming the enhancement of land value awarded by the Subordinate Judge’s Court. The cross-objection filed by the claimant was also dismissed. While the land acquisition appeal was pending, the State deposited an amount of Rs. 13,64,228 on 17th Jan., 1996 as per cheque No. 3155 before the Sub-Court. The State also remitted an amount of Rs. 84,783 towards income- tax on 16th Jan., 1996. According to the State, the balance to be deposited was Rs. 9,71,562. Subsequently, the State deposited an amount of Rs. 9,68,905 on 15th Feb., 2000. An amount of Rs. 1,08,854 was also remitted on the same day towards income-tax. On 1st Dec., 2001, the decree-holder filed a statement to the effect that she is entitled to get an additional amount of Rs. 16,37,806. The judgment-debtor filed objections contending that the entire amount due to the decree-holder was already deposited. The executing Court found that the amount of Rs.5,88,747 was still due to the decree-holder and directed the State to deposit that amount. The judgment-debtor filed E.A. No. 572 of 2003 to review the order fixing the balance amount. It was contended that the judgment- debtor had deposited an amount of Rs. 1,06,197 in excess of the amount due to the decree-holder and hence no further amounts were due to the decree-holder. That review petition is still pending. The decree-holder filed a petition for attachment and sale of 50 cents of land. That prayer was allowed and the property was attached and proclaimed for sale. This civil revision petition is filed challenging those orders.

The learned counsel appearing for the respondent decree-holder raised a preliminary objection that the civil revision petition challenging an order of sale alone is not maintainable. It is argued that the executing Court by order dt. 19th Oct., 2002 found that an amount of Rs. 5,88,747 was still due to the decree-holder after adjusting all amounts deposited by the revision petitioner and posted the execution petition for deposit of that amount to 19th Nov., 2002. It is argued that the State had not filed any civil revision petition against the order dt. 19th Oct., 2002 and the attempt of the State is to challenge that order also in this civil revision petition, which cannot be allowed. It is argued that the order dt. 19th Oct., 2002 fixing the amount due had already become final and conclusive and that decision will operate as res judicata. Sri Mohan C. Menon, the senior Government Pleader, has argued that the amount fixed by the executing Court on 19th Oct., 2002 is only an interim order in a pending execution petition and in view of the amendment to s. 115 of the CPC, it is not necessary to file any civil revision petition against the order dt. 19th Oct., 2002 as the same is only an interim order. It is argued that the judgment-debtor is entitled to challenge that order also in this revision petition. It is argued that the petitioner had filed E.A. No. 572 of 2002 to review the order fixing the amount due to the decree-holder and attaching the property. It cannot be said that the order passed on 19th Oct., 2002 has become final and conclusive so as to operate as res judicata. There was dispute regarding the amount payable to the decree-holder. A perusal of the records shows that the decree-holder as well as the judgment-debtor had filed a number of statement of accounts. The records show that originally the decree-holder filed statement of accounts on 20th March, 1999 claiming that as on 27th March, 1999 an amount of Rs. 23,01,601.25 was due to the decree-holder. On 28th March, 2000 she filed another statement to the effect that as on 27th March, 2000 she was entitled to get Rs. 14,90,946.39. Subsequently on 16th March, 2001 the decree-holder filed another statement contending that as on 15th March, 2001 the judgment- debtor was liable to pay a further amount of Rs. 5,86,662.71. On 1st Dec., 2001 the decree-holder filed another statement contending that as on 1st Dec., 2001 the decree-holder was entitled to get an amount of Rs. 16,37,806.93. The revision petitioner had also filed statement of accounts on 25th March, 2003 contending that the State had already deposited excess amount and the decree-holder is liable to return an amount of Rs. 1,06,197 back to the State. In the review petition filed on 25th June, 2003 also a statement of accounts was filed by the judgment-debtor claiming that an amount of Rs. 1,06,197 was due to the judgment-debtor from the decree-holder.

The quantification of the amount due to the decree-holder is only an interim stage of the E.P. proceedings and that order is not a final order so far as the E.P. is concerned. So, there is no merit in the preliminary objection raised by the decree-holder that there is a finality to the order passed by the executing Court determining the amount due to the decree-holder and as such that order cannot be challenged in this civil revision petition. Since that order is only an interlocutory order, State is entitled to challenge that order also in this civil revision petition. So, I hold that the contention of the State that excess amounts were paid to the decree-holder is not barred by res judicata and the State is entitled to raise the contention that the quantum of the amount found to be due to the decree- holder is not correct in this civil revision petition. It is well settled position of law that an executing Court cannot go behind the decree. But the executing Court can construe the decree. In this case the reference was made in the year 1993. The Subordinate Judge’s Court passed a judgment and decree on 30th Sept., 1994. That judgment was passed after the amendment of the Land Acquisition Act. The land value was enhanced to Rs. 10,000 per are. The operative portion of the decree reads as follows : “xxxxxxxx the enhanced land value comes to Rs. 8,52,404.80 rounded to Rs. 8,52,405; the claimant is entitled to get 30 per cent solatium; he is also entitled to get additional increase at the rate of 12 per cent per annum from the date of notification on 14th May, 1985 till the date of award on 31st March, 1986; for one year from the date of possession on 4th Feb., 1986, 9 per cent interest will be given; from 4th Feb., 1987 onwards till realisation the claimant is entitled to get interest at the rate of 15 per cent per annum; and he is also entitled to get proportionate cost.”

In this case the LAO had paid the amount due under the award. On 17th Jan., 1996, the State had deposited an amount of Rs. 13,64,228 towards the decree debt and deducted an amount of Rs. 84,783 towards the income-tax payable by the decree-holder at source. So, on 17th Jan., 1996, the State had deposited an amount of Rs. 14,49,011. On 15th Feb., 2000, the State had deposited an amount of Rs. 9,68,905 to be paid to the decree-holder and an amount of Rs. 1,08,854 remitted towards income-tax. So, on that day the judgment-debtor had deposited an amount of Rs. 10,77,759. Thus, the total amount deposited by the judgment-debtor on two dates comes to Rs. 25,26,770. The simple question arising for consideration is how to adjust the amounts deposited by the judgment- debtor and also whether the amount which the State remits towards income-tax can be ignored by the executing Court while calculating the amount due to the decree-holder. Before dealing with the provisions of the CPC, it is necessary to refer to the provisions for determining the compensation under the Land Acquisition Act. Sec. 23(1) of the Land Acquisition Act provides that the market value of the land as on the date of the publication of the notification is to be fixed. Sub-s. (1A) of s. 23 provides for awarding of additional amount payable at the rate of 12 per cent on such market value. Sub-s. (1A) reads as follows : “(1A). In addition to the market value of the land, as above provided, the Court shall in every case award an amount calculated at the rate of twelve per centum per annum on such market value for the period commencing on and from the date of the publication of the notification under s. 4, subs. (1), in respect of such land to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier. Explanation : In computing the period referred to in this sub-section, any period or periods during which the proceedings for the acquisition of the land were held up on account of any stay or injunction by the order of any Court shall be excluded.” Sub-s. (2) of s. 23 provides for payment of solatium. It reads as follows : “(2). In addition to the market value of the land, as above provided, the Court shall in every case award a sum of thirty per centum on such market value, in consideration of the compulsory nature of the acquisition.” Sec. 28 provides for interest on the enhanced compensation.

It reads as follows : If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of nine per centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court : Provided that the award of the Court may also direct that where such excess or any part thereof is paid into Court after the date of expiry of a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of such excess or part thereof which has not been paid into Court before the date of such expiry.” So, the compensation determined by the reference Court consists of the following components : (i) Market value of the land acquired as on the date of notification. (ii) The amount of 12 per cent per annum on the market value of the land determined under first clause of sub-s. (1) of s. 23 for the period between the date of publication of notification under s. 4 (1) and the date of award of the Collector or the date of taking possession of land, whichever is earlier. (iii) Solatium as provided under sub-s. (2) of s. 23. (iv) Interest on the amount awarded by the Court in excess of the amount fixed by the Collector under s. 28 of the Act. (v) Interest on the solatium in case the same is awarded in the decree.

In this connection, the provisions of s. 30 of the Land Acquisition (Amendment) Act, 1984, which deals with the transitional provisions are also relevant. Sec. 30(1) of the Amendment Act, 1984, deals with 12 per cent awardable by the Subordinate Judge under s. 23(1A) of the principal Act. Sec. 30(2) deals with the commencement of the provisions of s. 23(2). So, if the award of the Collector was made before the date mentioned in s. 30(1) of the Amendment Act of 1984, the claimant is not entitled to get the benefit of additional amount calculated at the rate of 12 per cent per annum on the amount already awarded by the Collector as provided under s. 23(1A). There is no provision in the Land Acquisition Act which contemplates payment of compound interest. The judgment- debtor is liable to pay only simple interest. Sec. 28 also does not contemplate award of compound interest. It also contemplates only payment of simple interest. So, only simple interest need be paid on the various amounts payable on the excess amount awarded by the Collector. No further interest will accrue on the interest. In Priya Vart & Anr. vs. Union of India (1995) 5 SCC 437, the apex Court has held that s. 28 contemplates only simple interest and not any compound interest. So, no claimant is entitled to claim compound interest or further interest on the interest once accrued under s. 28 of the Land Acquisition Act or on solatium. The learned counsel appearing for the first respondent has relied on a decision reported in Santha vs. State of Kerala 2002 (1) KLJ 769. It is argued that in that case it was held that the claimant decree-holder is entitled to interest on the amount awarded under s. 23(1A) also. In Santha’s case (supra) a review petition was filed by the decree-holder to review the judgment passed by the High Court in view of the decision of the apex Court in Sunder & Ors. vs. Union of India 2001 (2) KLJ 449. A learned Single Judge of this Court reviewed the judgment.

In P. Ram Reddy vs. Land Acquisition Officer (1995) 2 SCC 305 the apex Court found that additional amount payable under sub-s. (1A) and solatium under sub-s. (2) refer to market value of land awardable under first clause of s. 23(1) and solatium is not payable in respect of amount awardable under sub-s. (1A). It was held as follows : “It has also to be noted that solatium under sub-s. (2) is not payable in respect of the amount awardable under sub- s. (1A), in that, sub-s. (2) says that in addition to the market value of the land, as above provided, the Court shall in every case award a sum of thirty per centum on such market value, in consideration of the compulsory nature of the acquisition.” In Sunder & Ors. vs. Union of India (supra), the apex Court held as follows : “There can be no doubt that all the three heads specified in the three sub-sections in s. 23 are the sums to be ‘awarded by the Court’. Hence the words ‘every award under this part’ cannot be treated as the award after delinking the amounts awarded under sub-s. (1A) or sub-s. (2) of s. 23.” It was further held that the compensation awarded would include not only the total sum arrived at as per sub-s. (1) of s. 23, but the remaining sub-sections thereof as well. In Nagpur Improvement Trust vs. Vasant Rao (2002) 7 SCC 657, the Supreme Court followed the principle laid down in Sunder’s case (supra) and found that the claimants are entitled to interest on the amount payable to them under sub-s. (1A) of s. 23 of the Act and judgment-debtors were directed to compute and pay the interest payable to the claimants in accordance with law as enunciated in Sunder’s case (supra). So, the claimants are entitled to interest on the additional amount calculated at the rate of 12 per centum per annum awarded.

21. In Mir Fazeelath Hussain & Ors. vs. Special Dy. Collector (1995) 3 SCC 208 the apex Court held that the solatium is not part of the award and no interest is claimable thereon. The principle laid down in that decision was overruled by a Constitution Bench of the Supreme Court consisting of five Judges in Sunder & Ors. vs. Union of India (supra) in which it was held that solatium is also part of the award and interest is payable on that amount. After the pronouncement of the decision in Sunder’s case (supra), the parties are entitled to get interest on solatium also. But the executing Court shall consider whether the decree in a given case allows the decree-holder to claim interest on solatium. It is well settled position of law that the parties to the case are governed by the terms of the decree. If the decree does not provide for payment of interest on solatium, the claimant cannot claim interest on solatium. That position was clarified in the decision reported in K.R. Amrith Raj vs. Special Tahsildar 2002 (2) KLJ 151.

22. The next question arising for consideration is how the amount deposited by the State in a land acquisition case is to be adjusted. According to the decree-holder, the entire amount due as on the date of deposit of the amount has to be calculated and any amount deposited will have to be adjusted towards interest first and after wiping of the entire interest if any further amount is deposited, that has to be adjusted towards the principal amount. According to the claimant, the LAO is not entitled to deduct any amount towards the amount payable under the IT Act. The learned senior Government Pleader has argued that the adjustment of the amount deposited towards interest first in view of the provisions contained in Order XXI, r. 1, of the CPC is not applicable to a deposit made in a land acquisition case. It is submitted that the proper method is to calculate the five components payable on the date of deposit and adjust the amount deposited towards the land value, additional amount and solatium first. It is argued that if the amount deposited is sufficient to discharge the land value, additional amount and solatium, thereafter the claimant can only claim the interest accrued as on that day. It is argued that the claimants are not entitled to claim any interest on the interest already accrued on additional compensation and solatium. It is also argued that a statutory duty is cast upon the LAO to deduct the income-tax due on the amount payable by way of compensation and the remedy available to the claimant is to get a certificate from the competent officer and produce the same before the IT Department and if he is entitled to claim exemption or refund of any amount, such a claim is to be made before the ITO.

23. Sri Mohan C. Menon, learned senior Government Pleader, has contended that the learned Sub-Judge went wrong in not giving credit to the amounts, deposited by the LAO towards income-tax. It is argued that the LAO has no other option but to deduct the amount due towards income-tax from the amount due to the decree-holder under the decree in view of the provisions of IT Act. Deduction of income-tax from the decree debt :

24. The learned counsel appearing for the respondent has argued that if the IT Department has got any claim, it is for them to take appropriate action for recovery and the LAO has no authority to deduct any amount towards income-tax. It is further argued that if as a matter of fact any amount is to be paid to the IT Department, the State ought to have raised a contention regarding that claim before the passing of the judgment and decree and necessary provisions ought to have been made in the decree itself. It is argued that, in fact, the action of the LAO deducting amounts towards income-tax in violation of the order of the executing Court by which the State was directed to deposit the entire amount in the Court is nothing but contempt of Court and he is liable to be proceeded under the provisions of Contempt of Courts Act. It is true that there is no provision in the decree and judgment passed in this case which allows the LAO to deduct any amount towards income-tax at source. Neither the LAO nor the IT Department had made any claim before the executing Court that any amount is to be deducted by way of income-tax. Can the LAO deduct income-tax from the amounts due under the decree to the decree-holder in the absence of provision to that effect in the decree is the point to be considered. The IT Act is a central Act. Chapter XVII of the IT Act, 1961, casts an obligation on the authorities concerned to deduct tax at source. For deducting tax at source, no special or specific orders of any Court is necessary. If there is a decree of a competent Court to pay enhanced compensation on account of the acquisition of any land, the competent authority has an obligation to deduct tax at source from those amounts. In Smt. Rama Bai, Etc. vs. CIT (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC), the Supreme Court has held that interest on enhanced compensation for the land compulsorily acquired under the provisions of the Land Acquisition Act awarded by a Court on reference under s. 18 of the Land Acquisition Act is exigible to income-tax. In Bikram Singh vs. LAO (1997) 139 CTR (SC) 475 : (1997) 224 ITR 551 (SC), the apex Court held the interest received on delayed payment of compensation under the Land Acquisition Act was revenue receipt exigible to tax under s. 194A of the IT Act. A learned Single Judge of this Court in Kumaran vs. State of Kerala (1999) 239 ITR 848 (Ker) following the principles laid down in Rama Bai’s case (supra) held that tax has to be deducted at source on such interest. Since a statutory duty is cast on the LAO to deduct income-tax, no specific provision need be made in the decree authorising him to deduct income-tax.

In Lt. Col. K.D. Gupta vs. Union of India (1989) 79 CTR (SC) 119 : (1990) 181 ITR 530 (SC) the apex Court held that if the income-tax is to be deducted from the amount, the same has to be deducted and for withholding of amounts towards income-tax, contempt proceedings cannot be initiated against the officer who deducted the same. The principle laid down in Lt. Col. K.D. Gupta’s case (supra) was followed in Kedarnath Jute Mfg. Co. Ltd. vs.

Prasad Ranjan Ray (2004) 266 ITR 677 (Cal). The counsel for Government of India (Taxes) has filed a statement stating that the amounts payable as income-tax is to be deducted from the amounts to be paid to the claimants in the land acquisition case. He had made available a Circular No. CC/CHN/PR/151/2003-04, dt. 23rd March, 2004, issued by the Chief CIT, Kochi, to the District Collector, Ernakulam. The learned Government Pleader has made available a Circular No. LR 82/4726/2000, dt. 26th June, 2000 issued by the Commr. of Land Revenue, Thiruvananthapuram, to the District Collectors and LAOs of Kerala as to how the amount due under the decree in a land acquisition case has to be calculated. In that circular also it is stated that income-tax is to be deducted at source. Sec. 194A of the IT Act deals with interest. Sec. 194A reads as follows: “194A. (1) Any person, not being an individual or an HUF, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. (2) xxxxxxx (3) The provisions of sub-s. (1) shall not apply— (i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-s. (1) to the account of, or to, the payee, does not exceed five thousand rupees.” So, the interest payable on the enhanced compensation, additional amount of 12 per cent awarded under s. 23(1A) and solatium are liable to be charged to income-tax if the amount of interest is more than Rs. 5,000. So, if the amount of interest payable to the claimants in any land acquisition case exceeds Rs. 5,000, a statutory duty is cast upon the LAO to deduct tax at source.

30. So far as the payment of compensation on account of capital assets, originally the same was not liable for any tax. But, the IT Act was amended and w.e.f. 1st June, 1999, s. 194L of the Act reads as follows : “194L. 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 capital asset 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 on income comprised therein : Provided that no deduction shall be made under this 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 hundred thousand rupees. Provided further that no deduction shall be made under this section from any payment made on or after the 1st day of June, 2000.” The above section was introduced by Finance Act, 1999. So, for any amount which was deposited from 1st June, 1999 to 1st June, 2000 when s. 194L was in force, the claimant was liable to pay income-tax on the land value and the LAO ought to have deducted such amounts also.

31. The IT Act was again amended by Finance Act (No. 2) of 2004. Sec. 194LA was introduced w.e.f. 1st Oct., 2004. Sec. 194LA 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 where the amount of such payment or, as the case may be, the aggregate amount to such payments to a resident during the financial year does not exceed one hundred thousand rupees. Explanation.—For the purposes of this section,— (i) ‘agricultural land’ means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-cl. (iii) of cl. (14) of s. 2; (ii) ‘immovable property’ means any land (other than agricultural land) or any building or part of a building.” So, if the aggregate amount exceeds rupees one hundred thousand and the land acquired is not an agricultural land, a statutory duty is cast upon the LAO to deduct tax at source on the amount of compensation on the market value payable to the claimants also w.e.f. 1st Oct., 2004. When exactly the liability to pay income-tax arises ? The wordings of ss. 194A, 194L and 194LA are very clear. The tax is to be deducted at the time of payment of the amounts by cash or draft, etc. So even if the land was acquired much prior to the introduction of s. 194L or s. 194LA, the liability to deduct tax arises on the date on which the amounts are paid or deposited in Court to be paid to the claimants. Interest payable under the decree is exigible to income-tax. If any amount was paid or deposited between 1st June, 1999 and 1st June, 2002, income-tax ought to have been deducted for the land value and solatium as provided under s. 194L. Thereafter the liability to deduct income-tax on the land value arises only if the amounts are paid or deposited on or after 1st Oct., 2004. So, if any amount is paid after 1st Oct., 2004, income-tax as provided under s. 194LA is to be deducted. So, the relevant date for fixing the tax liability is the date on which the amount is paid to the claimant or deposited in the Court. For calculating the income-tax payable, the interest portion of the amount and compensation or enhanced compensation shall be calculated separately. Income-tax on the interest is to be deducted in accordance with the provisions of s. 194A and the income-tax, if any, due on the amount of compensation is to be deducted in accordance with the provisions contained in s. 194L or 194LA with reference to the date of deposit.

Who is the competent authority to deduct income-tax ? In some cases land is acquired either for a public company or for local bodies. In such cases, the compensation amount is always made available by the requisitioning authority. Even if land is acquired for a local authority or company and necessary funds are also made available to the LAO by such authorities, the liability to pay income-tax is with the LAO, who initiated proceedings under the Land Acquisition Act and actually pays the compensation amount and interest to the claimants. In Baldeep Singh vs. Union of India (1992) 106 CTR (P&H) 162 : (1993) 199 ITR 628 (P&H), it was held that the real person for paying income-tax is the LAO. In Shanker & Ors. vs. Union of India (2002) 178 CTR (Del) 26, also it was held that the LAO should deduct the tax at source. The principle laid down in Baldeep Singh’s case (supra) was followed in Kranti Kumar Saxena, In re (2002) 178 CTR (MP) 455, and held that the Court is not liable to deposit the tax by challan or issue TDS in Form No. 25A and the real person responsible for paying income-tax on interest is the LAO or Collector who has the money in his possession. So, in every case, whether the acquisition is for the Central Government, State Government or other agencies, it is the duty of the LAO to deduct the income-tax due to the IT Department from the amount of compensation and interest in accordance with the provisions of s. 194A or 194LA, as the case may be. Of course, if in a particular case the claimant is not liable to pay income-tax or if he is entitled to pay tax at lower rates, he will have to obtain necessary tax deduction certificate from the LAO and claim such benefit before the competent authority under the IT Act. It is well settled position of law that whenever any authority deducts income-tax at source, he is bound to issue a tax deduction certificate to the claimant. So, the claimant is entitled to get a certificate of tax deducted at source or tax paid under sub-s. (1A) of 194A by the LAO. Under r. 31(1) a certificate shall be issued within the time fixed under the Rules and in the form prescribed. If the compensation and interest due under a decree is to be divided among a number of claimants, income-tax has to be deducted from the share found due to each claimant and separate tax deduction certificates issued to each of them.

In every case while depositing money due under the decree under a land acquisition reference, the LAO shall state before the Land Acquisition Court as to what amounts are liable to be deducted as income-tax. The Land Acquisition Court shall allow the LAO to deduct the income-tax due and deposit only the balance amount for payment to the claimant. In case any deduction is made by way of income-tax, the LAO shall issue tax deduction certificate direct to the party or produce the same before Court to be given to the claimants in accordance with the rules framed under the IT Act.

36. In view of the provisions contained in the IT Act and Rules, the action of the LAO deducting the amount found due on the amount claimed in the E.P. is legal and proper and if the claimant has got a case that he is not liable to pay such amount, his remedy is to claim refund from the IT Department after obtaining necessary certificate from the LAO and he cannot be allowed to raise a contention that the LAO is not entitled to deduct amount payable under the IT Act. Adjustment of the amount deposited

37. The learned counsel appearing for the respondent, relying on the decisions reported in Meghraj & Ors. vs. Mst. Bayabai & Ors. (1969) 2 SCC 274 : AIR 1970 SC 161 and I.C.D.S. Ltd. vs. Smithaban H. Patel AIR 1999 SC 1036, has argued that whenever the judgment-debtor under the decree deposits amount in Court, the decree- holder is entitled to appropriate the same towards interest and cost and balance towards principal. In Meghraj’s case (supra), the decree passed was for sale of a mortgaged house. The principal amount awarded was Rs. 33,866.51 and an amount of Rs. 746.30 was awarded as interest. The judgment-debtor raised a contention that the amount deposited shall be adjusted towards principal first. It was held that unless the decree-holder was informed that the amount deposited shall be adjusted towards principal first and the balance towards interest and cost and the decree-holder agrees to such a suggestion, the judgment-debtor is not entitled to raise a contention that the amount deposited shall be adjusted towards principal first.

38. In I.C.D.S.’s case (supra) also the apex Court after interpreting the provisions of Order XXI, r. 1(2) held as follows : “The general rule of appropriation of payments towards a decretal amount is that such an amount is to be adjusted firstly strictly in accordance with the directions contained in the decree and in the absence of such direction, adjustments, be made firstly in payment of interest and costs and thereafter in payment of the principal amount. Such a principle is, however subject to one exception, i.e. that the parties may agree to the adjustment of the payment in any other manner despite the decree.”

39. But, the principles laid down in the abovestated decisions have no application to the decree passed in a land acquisition case. In Prem Nath Kapur vs. National Fertilizers Corporation of India Ltd. (1996) 2 SCC 71, a Bench of three Judges held that the principle contained in Order XXI, r. 1, has no application to a decree passed under the provisions of the Land Acquisition Act. It was held as follows : “It is clear from the scheme of the Act and the express language used in ss. 23(1) and (2), 34 and 28 and now s. 23(1A) of the Act that each component is a distinct and separate one.” It was further held as follows : “The right to make appropriation is indicated by necessary implication, by the award itself as the award or decree clearly mentions each of the items. When the deposit is made towards the specified amounts, the claimant/owner is not entitled to deduct from the amount of compensation towards costs, interest, additional amount under s. 23(1A) with interest and then to claim the total balance amount with further interest. ……………. Order 21, r. 1 being inconsistent with the express provisions contained in ss. 34 and 28 of the Act, it cannot stand extended to the cases covered by the Land Acquisition Act.” The principle laid down in Prem Nath Kapur’s case (supra) was noted by the Constitution Bench in Sunder’s case (supra); the Constitution Bench held as follows : “Another three Judge Bench in Prem Nath Kapur & Anr. vs. National Fertilizers Corporation of India Ltd. & Ors. (1996) 2 SCC 71, while considering the question whether an awardee is entitled to appropriate amount of compensation first towards cost and then towards cost and then towards interest, etc.,…….” The principle laid down in Prem Nath Kapur’s case (supra) that when any amount is deposited it shall be adjusted towards compensation firstly was not overruled in Sunder’s case (supra). The non- entitlement of the claimant to get interest on solatium alone was overruled and hence the subordinate Courts are bound to follow the principle laid down in Prem Nath Kapur’s case (supra) so far as it relates to the adjustment of the amount deposited. In Mathunni Mathai vs. State of Kerala 1998 (1) KLT 812, a learned Single Judge of this Court after considering the principles laid down in Prem Nath Kapur’s case (supra) held as follows : “The Supreme Court held that the ratio in Meghraj’s case (1969) 2 SCC 274 is equally inapplicable to the appropriation of debt under the Land Acquisition Act and the same is applicable only to a debtor and creditor in an ordinary civil suit governed by the provisions of the CPC. The Supreme Court held that the applicability of CPC to the proceedings under the Act stands excluded under s. 53 of the Land Acquisition Act which shall prevail. When the deposit is made towards the specified amounts, the claimant/owner is not entitled to deduct from the amount of compensation towards cost, interest, additional amount under s. 23(1A) with interest and then to claim the total balance amount with further interest.”

So, the law regarding adjustment of the decree amount deposited by the State in execution of a decree passed in a land acquisition reference is clear and settled. The decree-holder shall calculate the various amounts due to him under ss. 23(1), 23(1A), 23(2) and 28 of the Act. They are the following : (i) The amount of compensation awarded by the LAO. (ii) The amount of 12 per cent per annum on the market value of the land determined under first clause of sub-s. (1) of s. 23 for the period between the date of publication of notification and the date of award of the Collector or the date of taking possession of land, whichever is earlier. (iii) Solatium due under s. 23(2) of the Act. (iv) Simple interest payable to the claimants on the above three heads in accordance with law as enunciated in Sunder’s case (supra). The State shall also file a statement showing the split-up details of each component separately at the time of deposit of the amount under the decree. If any amount is deducted as income- tax, necessary tax deduction certificate shall be either given to the party directly or produced before Court to be handed over to the decree-holder. The executing Court shall first adjust the amount deposited towards compensation due to the claimant under s. 23(1), (1A) and (2) and thereafter towards the interest payable under s.

28. If the amount deposited is sufficient to discharge the amounts awarded under s. 23(1), (1A) and (2) of the Act, no further interest will accrue on such amounts. If the amount deposited is not sufficient to discharge additional compensation awarded under s. 23(1), (1A) and (2) of the Act, simple interest for the balance amount alone is payable. But, no further interest will accrue on the interest payable under s. 28 of the Act.

40. A perusal of the order impugned in this civil revision petition shows that it is not a speaking order. The learned Sub-Judge had simply accepted the statements filed by the decree-holder and passed orders. So, I am of the view that the entire matter requires reconsideration. In the result, the civil revision petition is allowed. The impugned orders passed by the executing Court dt. 19th Oct., 2002 quantifying the amount due to the claimant decree-holder and also the order proclaiming the property for sale are hereby set aside. The E.P. is remanded to the executing Court. The learned Sub-Judge shall calculate the amount in accordance with law and pass appropriate orders. The parties are directed to suffer their costs. I.A. No. 2411 of 2003 shall stand dismissed. The Registry shall forward copies of this revised order to all Subordinate Judges’ Courts for information and compliance. Registry need not forward the copies of the order dt. 26th Nov., 2004, if not already forwarded.

[Citation : 280 ITR 225]

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