No TDS on Compensation Received u/s 96 of LARR Act Even If Land was Non-agricultural Land | HC

Case Details: Sharanappa v. Deputy Commissioner - [2023] 153 taxmann.com 685 (Karnataka)

Judiciary and Counsel Details

• • Suraj Govindaraj, J.
  • Mahantesh Patil, Adv. for the Petitioner.
  • Shivakumar R. Tengli, AGA for the Respondent.

Facts of the Case

Assessee’s land was acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR Act). Compensation, along with interest, was fixed with respect to such acquisition. Subsequently, the Principal District and Sessions Judge directed withholding of 30% of the amount on the accrued interest in accordance with section 194LA.

Aggrieved by the order, the assessee filed a writ petition to the Karnataka High Court.

High Court Held

The Court held that section 194LA requires any person responsible for paying to the resident any sum being in the nature of compensation or enhanced compensation, or consideration or enhanced consideration on account of compulsory acquisition of immovable property other than agricultural land at the time of payment of such sum, has to deduct an amount equivalent to 10% as income tax.

Further, the second proviso to section 194LA clearly makes out an exemption from the levy of income tax in cases when the land has been acquired, and compensation is covered under section 96 of the LARR Act. The proviso does not make any difference between agricultural or non-agricultural land.

Section 96 of the Act of 2013 makes it abundantly clear that no income tax or stamp duty shall be levied on any award or agreement made under the Act except under section 46, which relates to the purchase of land through private negotiations, which necessarily means otherwise than through acquisition.

Thus, any land acquired and compensation paid as per section 96 of the LARR Act would not attract any income tax. When the compensation itself is exempted from income tax, the question of deducting tax at source on such exempted income would also not arise. Hence, as long as the award is made under the LARR Act, the compensation paid would not be liable for any tax.