BENGALURU: The Karnataka High Court on Wednesday said the Centre should soon address the issue of exempting farmers from paying income tax on the compensation given to them while acquiring their land for public purposes.
I-T exemption is given on payment of compensation under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 Act) when the land is acquired.
Local or state statutes such as the Karnataka Industrial Areas Development Act, 1966, Karnataka Highways Act, 1964, Bangalore Development Authority Act, 1987, etc., were enacted much before the 2013 Act.
Many farmers, whose land had been acquired under statutes other than the 2013 Act, were unhappy because of income tax on their compensation. Hence, the Union government should take immediate steps to address this aspect and solve the grievances of farmers who lost their land. Section 96 of the 2013 Act should be applicable to all land losers, a division bench of Justice Krishna S Dixit and Justice Vijaykumar A Patil said.
The bench passed the order while allowing an appeal filed by the Commissioner of Income Tax (TDS) against the order issued on April 12, 2023, by a single judge in favour of land losers Vijay M Valsang and others by exempting them from income tax on the compensation paid to them for the land acquired from them. This relief was given in terms of Section 96 of the 2013 Act.
The Centre contended that Section 96 of the 2013 Act providing for I-T exemption on the amount payable as compensation, is invocable only when acquisition of private land for public purposes has been accomplished under provisions of this Act and not under other statutes such as the Karnataka Highways Act, to be specific.
‘Land losers can take steps against state’
However, the counsel for land losers argued that all local statutes stand repealed by the enactment of the 2013 Act, and therefore, Section 96 of this new Act exempting compensation from income tax comes to the rescue of his clients, even when the acquisition of their land was done under local laws.
The court observed that there is no challenge to the provisions of Section 96 of the 2013 Act on the grounds that it is discriminatory. Therefore, it is liable to be voided as being violative of Article 14. That being the position, exemption from income tax cannot be claimed on the grounds that the state government has agreed to reimburse the same.
However, it is open to land losers to take up appropriate proceedings against the state for getting reimbursement of tax paid, in accordance with law, the court said.