TDS Exemption for Compensation Under Land Acquisition Act 2013: A Court Ruling
The Bombay High Court has ruled that TDS is exempt for compensation paid under the Land Acquisition Act 2013, in a recent matter of Bombay Real Estate Development Company versus Municipal Corporation of Greater Mumbai and Others.
TdsLand Acquisition Act 2013Bombay High CourtTax ExemptionCompensationReal Estate MumbaiAug 07, 2024
The court was hearing a matter involving the Municipal Corporation of Greater Mumbai (MCGM) acquiring a property belonging to the petitioners under the Land Acquisition Act. The MCGM took possession of the property and issued a possession receipt. A registered Transfer Deed was entered into between the petitioners and the MCGM, and the said property was transferred to the MCGM.
The MCGM had reserved the said property under the Development Control and Promotion Regulations 2034 (DCR) for a public purpose, i.e., for setting up a cemetery in terms of the Maharashtra Regional and Town Planning Act 1966. The MCGM proposed to acquire the property by issuing a public notice dated 14 September 2021 in two newspapers, offering a total compensation of Rs. 99,19,50,752/-. However, the MCGM deducted Rs. 9,91,95,076/- (i.e. 10%) from the compensation amount as Tax Deducted at Source (TDS), which the petitioners contested.
The petitioners argued that the TDS from the compensation amount was contrary to Section 96 of the Land Acquisition Act, which explicitly states that no income tax or duty shall be levied on any award or agreement made under the Land Acquisition Act, except under Section 46 of the Land Acquisition Act.
The court ruled in favor of the petitioners, acknowledging that the TDS from the compensation was indeed ultra vires in view of Section 96 of the Land Acquisition Act. The court emphasized that the provisions of Section 96 clearly prohibit the levying of any tax on compensation awarded to landowners under the Land Acquisition Act, except as specified in Section 46 of the Land Acquisition Act.
The court directed the MCGM to file a correction statement with the Income Tax Department within 30 days from the date of the judgment, and further directed the Income Tax Department to process the correction statement under the law and issue necessary intimation to the petitioners and the MCGM.
This judgment clarifies the applicability of the Land Acquisition Act and affirms that the provision under Section 96 of the Land Acquisition Act shall prevail over other provisions of Income Tax or similar acts levying duty or tax on the transfer.
Frequently Asked Questions
What is the main issue in this court case?
The main issue is whether the TDS deducted by the MCGM from the compensation amount is lawful under the provisions of the Land Acquisition Act.
What is the provision of Section 96 of the Land Acquisition Act?
Section 96 explicitly states that no income tax or duty shall be levied on any award or agreement made under the Land Acquisition Act, except under Section 46 of the Land Acquisition Act.
What was the court's ruling in this case?
The court ruled that the TDS from the compensation was indeed ultra vires in view of Section 96 of the Land Acquisition Act.
What is the implication of this judgment?
This judgment clarifies the applicability of the Land Acquisition Act and affirms that the provision under Section 96 of the Land Acquisition Act shall prevail over other provisions of Income Tax or similar acts levying duty or tax on the transfer.
Who can benefit from this judgment?
Landowners who have received compensation under the Land Acquisition Act can benefit from this judgment, as it exempts them from paying TDS on the compensation amount.
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