Income tax cannot be deducted on compensation paid for land acquisition: Bombay HC

Author: Nishu June 11, 2022

Income tax cannot be deducted on compensation paid for land acquisition: Bombay HC


National High-Speed ​​Rail Corporation Limited had acquired a land in Bhiwandi, Thane for the bullet train project

National High-Speed ​​Rail Corporation Limited had acquired a land in Bhiwandi, Thane for the bullet train project

Bombay High Court held that no income tax should be deducted on compensation paid by National High-Speed ​​Rail Corporation Limited (NHSRCL) for land acquisition in Mumbai-Ahmedabad high-speed rail project and steps should be taken to refund the amount. ,

A division bench of Justice SV Gangapurwala and Justice MG Sevlikar passed the order on Thursday and was hearing Seema Patil’s plea. She owns a few plots located at Bhiwandi in Thane district and National High-Speed ​​Rail Corporation Limited (NHSRCL) acquired the land from her under an agreement and deducted income tax at source from the compensation paid on October. 23, 2019.

On or around May 8, 2020, a supplementary deed was filed between Ms. Patil and NHSRCL under which some additional amount was paid to her and TDS amount was deducted. On or around December 4, 2020, Ms. Patil requested the company to reverse the TDS on the ground that no tax is deductible. After 20 days, NHSRCL came back to her and said that if the land has been acquired from Ms. Patil and it has been duly deposited with the Income Tax Department, then exemption from Income Tax does not apply.

Ms. Patil’s counsel argued that the Right to Fair Compensation and Transparency in the Land Acquisition, Rehabilitation and Rehabilitation Act specifically exempts the award and/or the amount of compensation paid under the settlement from payment of income tax. He said that NHSRCL should not have deducted tax at source as it is applicable only where the amount is taxable in the hands of the recipient.

Counsel appearing for NHSRCL argued that the amount received by Ms. Patil under a settlement is taxable. Since the acquisition is by an agreement between the parties and it cannot be called a compulsory acquisition under the Act. Hence, income tax at source is deductible.

On June 9, the court observed, “As the exemption under the Act shall be in full force, no income-tax can be levied in the present case for the amount of compensation, inter alia, of the amount of tax deducted at source by NHSRCL.” (TDS) cannot be deducted.) From the amount of compensation paid to the petitioner. The company has already deducted TDS, which it should not have deducted.

The court thus directed to take steps to refund the amount as per the provisions of the Income Tax Act and Rules.

11 June, 2022, 10:11 am

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