IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR. JUSTICE AMIT RAWAL TUESDAY, 18TH DAY OF FEBRUARY 2020 / 29TH MAGHA, 1941 WP(C).No.3227 OF 2020(C) PETITIONER: VISWANATHAN M., AGED 59 YEARS, S/O. LATE K.S. MANI, ELUPARAMBIL, AZAD ROAD, SOUTH END, THAMMAAM, PULLEPPADY ROAD, KATHRIKADAVU, KALOOR-682017. BY ADVS. SRI.T.R.S.KUMAR SMT.DEENA JOSEPH SHRI.ABHILASH AUGUSTINE M. RESPONDENTS: 1 CHIEF COMMISSIONER, INCOME TAX DEPARTMENT, C.R. BUILDING, I.S. PRESS ROAD, KOCHI-682018. 2 COMMISSIONER OF INCOME TAX, C.R. BUILDING, I.S. PRESS ROAD, KOCHI-682018. 3 INCOME TAX OFFICER, CORPORATE WARD 2(2), I.S. PRESS ROAD, KOCHI-682018. 4 SPECIAL TAHSILDAR (L.A.), CORPORATION OF KOCHI, VYTTILA-682019. 5 CORPORATION OF KOCHI, REPRESENTED BY ITS SECRETARY, CORPORATION OFFICE, KOCHI-682011. BY ADVS. R4 BY DR. THUSHARA JAMES, GOVERNMENT PLEADER R5 BY SRI.P.FAZIL, STANDING COUNSEL,COCHIN CORPORATION R1 TO R3 BY SRI.CHRISTOPHER ABRAHAM, STANDING COUNSEL THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18.02.2020, COURT ON SAME DAY DELIVERED FOLLOWING: WP(C).No.3227 OF 2020(C) 2 JUDGMENT Petitioner, in instant case, has assailed Exts.P7 and P8, assessment order and notice of demand issued by Income Tax Department, respectively. 2. Succinctly, facts which are necessary for adjudication of controversy involved are that petitioner is absolute owner, title holder of land to extent of 7.33 cents with three shop rooms and residential building in Sy. No.170/2 and 170/4 in Elamkulam Village, Kanayannoor Taluk, Ernakulam District, which is situated on southern side of Thammanam Pullepady Road. market value of land on announcement of Smart City Project, Metro Rail Project and Mono Rail Project, increased many fold. Out of aforementioned land, about 1.32 Ares (3.26 cents) of land with building of 1500 Sq. Ft. had been taken for expansion of Thammanam Pullepady Road. Land Acquisition Officer fixed value as Rs.10,48,269/- and improvements at Rs.3,864/-. notification under WP(C).No.3227 OF 2020(C) 3 Old Land Acquisition Act was published on 24.04.2013. Thereafter, declaration under Sections 6(1) and 17(1) of erstwhile Land Acquisition Act, 1894, showing emergency provisions which tantamount to compulsory acquisition were published. 3. learned counsel for petitioner submits that Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which came into force with effect from 01.01.2014 and award in aforementioned case has not so far been passed. fact of matter is, under agreement Ext.P1 dated 13.08.2016, entered into between petitioner and other land owners and Corporation of Kochi, land was acquired. In other words, effect of acquisition under Land Acquisition Act, 1894 effaced. In terms of aforementioned agreement sum of Rs.43,08,268/- (80% of total amount due, after deducting 1% Income Tax amount of Rs.43,518/-) was released to petitioner and 20% is still pending, for which W.P.(C) WP(C).No.3227 OF 2020(C) 4 No.208/2020 was filed, which is pending consideration. 4. grievance in instant writ petition is confined to impugned assessment order and demand notice whereby Assessing Officer, after undertaking assessment order brought case of petitioner under scrutiny and issued notice under Section 143 (1) of Income Tax Act, 1961. In result thereof, petitioner received show cause notice. Petitioner was represented through authorised representative and brought to fact that aforementioned compensation can be exempted under Section 96 of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 as it would not fall within mischief of Section 54F of Income Tax Act, 1961. In support of aforementioned contention, reliance has been laid to Circular No.36/2016 dated 25.08.2016 whereby Central Board of Direct Taxes issued clarification that if land is non- agricultural, it would not be taxable as per provisions of Income-tax Act, 1961. assessment order and WP(C).No.3227 OF 2020(C) 5 demand notice are wholly without jurisdiction, malicious and not sustainable in eyes of law. 5. Per contra, Sri.Christopher Abraham, learned Standing Counsel for Income-tax did not deny issuance of Circular No.36/2016 dated 25.08.2016 (Ext.P10) but supports impugned order on premise that occupancy certificate placed on record reveals that construction was not done within period of three years, in order to claim exemption from Capital gain and urges this Court for dismissal of this writ petition. 6. Having heard learned counsel appearing for both parties and apprising paper books, I am of view that there is force and merit in submissions. Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 came into force with effect from 01.01.2014. It is matter of record that parties to lis; viz., petitioner and acquisition authority, for purpose of coming out way development had in unison agreed to WP(C).No.3227 OF 2020(C) 6 acquire and give land on basis of certain conditions in fixing market value. Petitioner, in lieu, thereof received 80% of amount, i.e., Rs.43,51,786/-. I would not be commenting on claim of petitioner with regard to balance amount, as matter is subjudice in this Court. language of Section 96 of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, do not leave any doubt in mind that if land is either acquired or result of agreement, it could not fall within mischief of Income Tax Act, in other words, exemption is liable to be granted. It is in this background of matter and owing to certain confusions, Central Board of Direct Tax vide Circular No.36/2016 dated 25.08.2016 came out with clarification. For sake of brevity, only relevant portion of circular is re-produced herein:- 3. As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in matter of providing exemption from income-tax under RFCTLARR Act, exemption provided under WP(C).No.3227 OF 2020(C) 7 Section 96 of RFCTLARR Act is wider in scope than tax-exemption provided under existing provisions of Income-tax Act, 1961. This has created uncertainty in matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. matter has been examined by Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of RFCTLARR Act shall also not be taxable under provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in Income-tax Act, 1961. aforementioned clarification is totally opposite to what has been assessed by Assessing Officer. For reasons aforementioned, assessment and demand notice cannot sustain and are hereby quashed. writ petition is accordingly disposed. Sd/- AMIT RAWAL, JUDGE Skk//18022020 WP(C).No.3227 OF 2020(C) 8 APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 TRUE COPY OF AGREEMENT DATED 30/08/2016. EXHIBIT P2 TRUE COPY OF GOVERNMENT ORDER (RT) NO.3085/14/RD DATED 05/07/2014. EXHIBIT P3 TRUE COPY OF GOVERNMENT (RT) N.1806/14/RD DATED 06/05/2014. EXHIBIT P4 TRUE COPY OF GOVERNMENT ORDER (RT) NO.2085/14/RD DATED 22/05/2014. EXHIBIT P5 TRUE COPY OF WRIT PETITION NO.208/2020 WITHOUT EXHIBITS. EXHIBIT P6 TRUE COPY OF INTERIM ORDER IN SLP NO.11399-11407/2018 DATED 05/09/2019 PASSED BY HON'BLE SUPREME COURT. EXHIBIT P7 TRUE COPY OF ASSESSMENT ORDER DATED 19/12/2019. EXHIBIT P8 TRUE COPY OF NOTICE OF DEMAND DATED 19/12/2019. EXHIBIT P9 TRUE COPY OF NOTICE DATED 28/01/2020 ISSUED BY INCOME TAX DEPARTMENT. EXHIBIT P10 TRUE COPY OF CIRCULAR DATED 25/10/2016. EXHIBIT P11 TRUE COPY OF CIRCULAR DATED 01/03/2018. RESPONDENTS' EXHIBITS: NIL Viswanathan M. v. Chief Commissioner, Kochi/The Commissioner of Income-tax, Kochi/The Income-tax Officer, Corporate Ward 2(2), Kochi/The Special Tahsildar (L.A.), Vyttila/ Corporation of Kochi