Court Remands Case for Reconsideration on Tax Deduction for Land Compensation
In a significant ruling, the Andhra Pradesh High Court has set aside previous orders that allowed income tax deductions on compensation awarded for land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act). The judgment was delivered by Mr. Justice Tarlada Rajasekhar Rao, who presided over the Civil Revision Petitions filed by the petitioners against the imposition of tax deductions on their compensation.
The petitioners, who were decree holders in Land Acquisition Original Petitions, sought execution of applications for the transfer of compensation amounts into their accounts through the CFMS online system. The Special Deputy Collector, Somasila Project, opposed these applications, arguing that income tax must be deducted at source for compensation awarded for structures on the land, citing Section 194LA of the Income Tax Act.
However, the court highlighted that according to Section 96 of the RFCTLARR Act, compensation for compulsory land acquisition, excluding those under Section 46, is exempt from income tax. This aligns with the proviso to Section 194LA of the Income Tax Act, which also exempts such compensation from tax deductions. The court referred to a Circular from 2016, supporting the petitioners' position that no tax should be levied on such compensation.
The previous order by the Executing Court allowed for partial relief, suggesting petitioners could claim tax exemption from the competent authority. Dissatisfied, the petitioners appealed to the High Court, leading to this pivotal judgment.
Justice Rao's decision mandates the remanding of the case back to the Executing Court for fresh consideration, emphasizing the exemption provisions under the RFCTLARR Act. The court directed a swift resolution of the matter, ensuring the petitioners receive their due compensation without unjust tax deductions.
The judgment reaffirms the legal stance that compensation for land acquired under the RFCTLARR Act is shielded from income tax, providing relief to landholders across the state.
Bottom Line :
Compensation awarded for compulsory acquisition of land under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act), except as mentioned under Section 46, is exempted from the levy of income tax as per Section 96 of the RFCTLARR Act and the proviso to Section 194LA of the Income Tax Act.
Statutory provision(s): Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Section 96; Income Tax Act - Section 194LA
