Shashwati Chowdhury
Published on: June 11, 2022 at 17:15 IST
The Bombay High Court ruled that income tax cannot be deducted from an amount granted as compensation for property acquired for the Mumbai-Ahmedabad bullet train project by the National Hi-Speed Rail Corporation Ltd (NHSRCL).
On Thursday, a Division Bench of Justices S V Gangapurwala and M G Sewlikar passed an order on a petition brought by Seema Patil, who sought a refund of income tax deducted at source by the NHSRCL after it acquired her property in Bhiwandi, Thane district, for the project.
The Court observed in its order that the petitioner’s land was acquired for a public project, and that private negotiations and purchases of property were allowed to speed up the process of implementing a public project.
“If the parties do not agree to negotiate and direct purchase, then compulsory acquisition is used,” the Bench added.
“No income tax can be levied in the present matter for the amount of compensation. Hence, the NHSRCL could not have deducted the TDS from the compensation paid to the petitioner. Income received by the petitioner on account of property acquired by the NHSRCL by private negotiations and sale deed is exempted from tax,” the Bench held.
The NHSRCL was directed by the court to file a corrective statement within a month stating that the TDS it deducted while paying Patil’s compensation was not liable to be deducted.
Devendra Jain, Ms Patil’s advocate, stated that the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act exempts payment of income tax on compensation paid under an award/agreement.
The NHSRCL, on the other hand, maintained that the amount received by the Petitioner was taxable because the acquisition was by an agreement between the parties and not compulsory acquisition.
It also stated that a direct purchase method sale deed was entered into between Seema Patil and the NHSRCL, and that tax was deducted in accordance with the Income Tax Rules.
The deducted tax has already been deposited with the Income Tax Department, according to the NHSRCL, and Ms Patil has received the TDS (Tax Deducted at Source) Certificate.