Bombay High Court (Court), in the recent matter of Bombay Real Estate Development Company versus Municipal Corporation of Greater Mumbai and Others has held that under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 ("Land Acquisition Act ") income tax or stamp duty shall not be levied unless covered under the exception and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same.
Facts:
- The Municipal Corporation of Greater Mumbai (MCGM) acquired the property belonging to the petitioners under the provisions of the Land Acquisition Act. 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.
- Under the Development Control and Promotion Regulations 2034 (DCR), the said property was reserved for a public purpose i.e., for setting up a cemetery in terms of the Maharashtra Regional and Town Planning Act 1966.
- MCGM which had reserved the said property under the above DCRs, proposed to acquire it by issuing a public notice dated 14 September 2021 in two newspapers. The MCGM proposed to pay a total compensation of Rs. 99,19,50,752/- to the Petitioners. However, the MCGM deducted Rs. 9,91,95,076/- (i.e. 10%) from the compensation amount as Tax Deducted at Source (TDS). The Petitioners contested this deduction, arguing that it was arbitrary and ultra vires to the provisions of the Land Acquisition Act.
Issues:
Is the TDS by the MCGM from the compensation lawful under the provisions of the Land Acquisition Act?
Contention of the Parties
- The Petitioners argued that the TDS from the compensation amount is 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.
- MCGM contends that the deduction of TDS is a statutory requirement and is therefore justified under the Income Tax Act. It was further submitted that the deducted amount was duly remitted to the Income Tax department.
Judgment:
- The Court ruled in favour 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 MCGM to file a correction statement with the Income Tax Department within 30 days from the date of the judgment. The Court further directed the Income Tax Department to process the correction statement underthe law and issue necessary intimation to the Petitioners and the MCGM.
MHCO Comment:
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.
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