The above batch of writ petitions are with respect to the acquisition of land, initiated by the Government, to implement Kochi Metro Rail Project, which implementation is the duty of the Company, Kochi Metro Rail Corporation, the 3rd respondent. Admittedly, the acquisition proceedings were initiated under the Land Acquisition Act, 1894, (for short, “L A Act”) but, however, at the stage of enquiry contemplated under Section 11 of the L A Act, many of the land owners, arrived at a negotiated settlement with the District Level Purchase Committee, constituted by the Government by G.O(MS) No.419/2011/RD dated 15.11.2011. The District Level Purchase Committee, having entered into negotiation; many of the land owners agreed to a price as arrived at on negotiation, thus enabling the Collector to pass award under sub-section (2) of Section 11 of the L A Act. The Collector having passed such award, the amounts due, as per the procedure established, is paid by the 3rd respondent to the land owner, through the Revenue Department. The dispute raised is with respect to the tax deduction at source mandated under 194 LA of the Income Tax Act, 1961. 2. The learned Counsel appearing for the petitioners relies on Ext.P3 judgment of this Court as also Exts.P4 and P5. Ext.P3 is by a Division Bench and other two by two learned Single Judges of this Court. It is contended on behalf of the petitioners that the principle upon which the law declared, insofar as tax deduction at source, under Section 194 LA, is squarely applicable in the present case also. Section 194 LA talks of compulsory land acquisition and mandates tax deduction at source for the compensation paid in lieu of such compulsory acquisition. The specific words, “compulsory acquisition”, employed in the section would take, any agreed sale, away from the rigor of deduction at source provided under Section 194 L A. It is urged that there is no mandate on the revenue officials to deduct tax at source, when paying compensation, under a negotiated settlement, as per the award passed by the Collector under Section 11(2); other than that imposed by Section 194 IA.
3. Sri.Jaiju Babu, the learned Senior Counsel, appearing for the 3rd respondent specifically places on record, that the Kochi Metro Rail Corporation never took a stand that the deduction has to be made under Section 194 LA. The learned Senior Counsel asserts that according to the 3rd respondent, the Division Bench judgment produced at Ext.P3 covers the issue. The acquisition proceeded with and later specifically settled on negotiation and concluded as per an award passed under sub-section (2) of Section 11 of the L A Act, is on the basis of the agreed price, on mutual consent and cannot at all be treated as a compulsory acquisition attracting Section 194 LA. The specific assertion is made since by an affidavit in W.P(C) 4209/2014, the petitioner therein, had averred that submission was made before Court on behalf of the 3rd respondent that Section 194 LA is applicable. No such submission was ever made, reiterates the Senior Counsel and takes umbrage at the averment made; which according to him, definitely is on a misapprehension.
4. Sri. Jose Joseph, learned Standing Counsel for Government of India (Taxes), however, draws a distinction insofar as the case covered under Ext.P3. Ext.P3, the learned Counsel points out, was a case in which though State had initiated acquisition proceedings, subsequently, the same were withdrawn. Such withdrawal of proceedings was on the negotiations with many of the land owners having achieved fruition. In the case of persons who agreed to a negotiated settlement, the proceedings initiated under Section 4(1) of the L A Act were withdrawn and sale deeds were executed by the respective land owners, in the name of the Info Park, Kerala, the requisitioning authority therein. That fact, surely took away, the sale, effected in favour of Info Park, from being termed a compulsory acquisition, is the argument. In the case of those who had not agreed to the negotiated settlement, the Collector had proceeded under the L A Act, and passed separate awards, the payment under which, were subject to the deduction under Section 194 LA.
5. The further distinction drawn is highlighted by the learned Standing Counsel, relying on Paragraph 9 of the judgment of the learned Single Judge which was upheld by a Division Bench in Ext.P3. It is pointed out that the execution of the sale deeds on the basis of negotiations, and the withdrawal of proceedings under Section 48 weighed with the Court in exempting deduction at source, in the earlier acquisition proceedings.
6. The negotiated settlement and sale effected independently of the compulsory acquisition, being not of a compulsory nature, this Court in Ext.P3 found that no tax deduction at source, under Section 194 L A, can be made. The essential difference in the present case is that the negotiated settlement did not lead to any withdrawal of land acquisition proceedings, but only led to an award being passed. In such circumstance, the award having been passed under Section 11(2) of the L A Act, despite the negotiated settlement, the acquisition would be compulsory in nature, is the contention. Drawing such distinction, the learned Standing Counsel would contend that Section 194 LA, on the facts disclosed in the present case, would squarely apply and tax has to be deducted at source under Section 194 LA and not under Section 194 IA.
7. A reading of Ext.P3 would indicate that the Division Bench on elaborate consideration of the issue of compulsory acquisition; which is the jurisdictional foundation for effecting tax deduction at source, under Section 194 LA, found that when negotiated settlement is arrived at and sale is effected on the agreed price, the transaction cannot be termed to be a compulsory acquisition. In cases of compulsory acquisition the land owners would be entitled to the market value, solatium, interest etc, as payable under the L A Act and would have the additional benefit of challenging the award made by the Collector before the Civil Court. A clear distinction was drawn between the negotiated settlement and an award made, on compulsory acquisition under the L A Act.
8. The award passed under the L A Act, was not the sole consideration in finding the negotiated settlements to be distinct from a compulsory acquisition. The necessary concomitant of a compulsory award, would be the compulsory nature of acquisition of land, without the land owners' consent. Even in the cases covered under Ext.P3, it was not the contention of the Government that the acquisition was totally given up, in cases which, the land owners refused to accept the negotiated compensation. On the contrary, acquisition proceedings stood withdrawn only with respect to lands, whose owners agreed to a negotiated settlement. In such cases, as soon as a negotiated price was agreed upon, the cloak of compulsory nature of acquisition, falls off. In all other cases the State compulsorily acquired the lands, notified under the L A Act. It can only be so since the acquisition is proceeded, in such cases, on the request of the requisitioning authority,and there cannot be any piece-meal acquisition, of the properties identified for acquisition. On an award being passed with respect to the compensation as provided under Section 11(1) of the LA Act, the compensation granted, at the option of the land owner is subjected to judicial scrutiny as per the remedies provided in the enactment itself.
9. The only distinction is the manner in which, compensation is paid and the conveyance concluded. In the Info Park's case, compensation was directly paid to the land owner and sale deed got executed in the name of the requisitioning authority. Herein an award was passed under subsection (2) of Section 11 and compensation paid through the revenue department of the State. But for the change, in form, no deviation from content, is discernible. In both instances consent on negotiation was obtained after initial threat of compulsory acquisition. When land owners came forward to negotiate and agree upon a price, then element of compulsion decimates; and it becomes a mutually agreed upon transaction. Further the agreed price is not subject to judicial scrutiny, which saves the Government from any future liability as also the liability for future interest, on enhanced compensation applicable retrospectively. Hence, mere initiation of proceedings under the L A Act and the award having been passed under the Act cannot be the sole reason for finding compulsion. The proceedings initiated under the LA Act can only be considered to be one initiated, so as to bring the prospective land owners, whose property is under threat of acquisition, to the negotiating table. Specific provision is made under subsection (2) of Section 11 to pass awards without any enquiry, determining compensation at the agreed rate. Subsection (2) of Section 11 is a non-obstante clause, providing for an award without any further enquiry, according to the terms of agreement on negotiation.
10. On the strength of the above reasoning, it cannot be said that merely because an award is passed, under Section11(2) or the fact of separate sale deeds having not been executed; the present transaction would fall under the net of compulsory acquisition. The negotiated settlement arrived at herein, did crystallize into a conveyance, evidenced by the award, conferring clear title on the 3rd respondent. This, definitely, cannot be termed to be a compulsory acquisition as stipulated under Section 194 LA. The mere change in procedure, does not deviate from the essential nature of the transaction; being concluded on mutual consent, as distinguished from statutory compulsion, the latter of which enables the land owners to challenge the determination of compensation.
11. Moreover, in the very same transaction wherein the 3rd respondent was involved, this Court had passed judgment evidenced at Exts.P4 and P5, relying the judgment of the Division Bench produced at Ext.P3, following the dictum laid down by the Division Bench. The discussion above persuades this Court, to the irrefutable conclusion, that the deduction of tax at source, as stipulated under Section 194 LA, has to concede to the law declared by this Court in Ext.P3, even in the case of the acquisition for the 3rd respondent.
Writ petitions hence are allowed restraining the revenue officials from making any tax deduction at source under Section 194 LA with respect to the compensation paid to the petitioners. But , however, leaving liberty to the Revenue Authorities to deduct such tax under Section 194 IA, wherever applicable.
Writ petitions are allowed, leaving the parties to suffer their respective costs.
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(K. VINOD CHANDRAN, JUDGE) jma //true copy// P.A to Judge