High Court of KeralaSingle Judge2013-12-19Writ petition allowed in part. No costs.

Abdul Rasheed and Mumtaz v. District Collector, Special Tahsildar LA (NH), Land Acquisition Officer, Office of the Special Tahsildar LA (NH) PMG, Thiruvananthapuram and Commissioner of Income Tax (TDS), Kowdiar, Thiruvananthapuram

Case / Petition Number:WP(C).No. 31747 of 2013 (P)

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P.R.RAMACHANDRA MENON
Judgment Date: 2013-12-19
Court Decision / Holding: The writ petition is allowed in part. The respondents are directed to disburse the sale consideration after deducting income tax at 1% under Section 194IA of the Income Tax Act, 1961. No costs.
Final Disposition: Writ petition allowed in part. No costs.

Parties to the Case

Appellants / Petitioners

Abdul Rasheed
Mumtaz

Respondents

District Collector, Collectors Office, Thiruvananthapuram 695004
Special Tahsildar LA (NH), Land Acquisition Officer, PMG, Thiruvananthapuram 695001
Commissioner of Income Tax (TDS), Kowdiar, Thiruvananthapuram 695004

Legal Representation & Advocates

Counsels for Petitioners

• Sri. R.T. Pradeep
• Sri. P. Bijimon

Counsels for Respondents

• Sri. Manoj P. Kunjachan
• Sri. Jose Joseph, S.C., for Income Tax

Case Synopsis & Summary

This writ petition challenges the liability to deduct income tax from the sale consideration for a negotiated transfer of immovable property acquired by the State for road widening. An extent of 0.41 acres in Nemom Village, including a building in LAC No.170, was transferred to the Government for widening the Karamana–Kalikkavila road. The petitioners contend that, since the sale was negotiated and not a compulsory land acquisition, deduction under Section 194IA is unwarranted, citing Infopark Kerala v. Assistant Commissioner of Income Tax, 2008 (4) KLT 782, which held tax deduction applicable only on compulsory acquisitions under 194LA. The respondents concede that 194LA does not apply to negotiated sales, but insist that 194IA applies when the total sale consideration exceeds Rs.50 lakhs and the property is not agricultural land. The court examines the provisions: 194IA (1)–(3), the Explanation to 194IA defining agricultural land, and the definition of “immovable property” in 2(14). It clarifies that the property is not agricultural land in light of Explanation (a) to 194IA and that the sale consideration exceeds Rs.50 lakhs, making 194IA applicable. Infopark’s dictum is held distinguishable, as it deals with 194LA. The court ultimately holds that tax must be deducted at 1% under 194IA and directs payment of the balance after deduction, allowing the petition in part.

Provisions of Law Cited

Section 194IA of the Income Tax Act, 1961Section 194LA of the Income Tax Act, 1961Section 203A of the Income Tax Act, 1961Explanation to Section 194IARule 11(2) of the Income Tax RulesSection 2(14)(iii)(a) and (b) of the Income Tax Act, 1961

Submissions & Arguments

Contentions of Appellants / Petitioners

Applicants argued that deduction under Section 194IA is not warranted since the sale was negotiated and not via land acquisition; relied on Infopark Kerala v. Additional Commissioner of Income Tax that deduction under 194LA is reserved for compulsory acquisitions. They contend the property is not agricultural land; hence 1% deduction under 194IA should not apply if not triggered by acquisition. The challenge is to avoid any deduction from the sale consideration.

Contentions of Respondents

Respondents argued that while 194LA does not apply to negotiated sales, 194IA does, since the total sale consideration exceeds Rs.50 lakhs and the property is not agricultural land (per Explanation to 194IA). They stressed the property was not agricultural land and that deduction at 1% under 194IA is triggered when payment/credit occurs for transfer of immovable property to a resident transferor, even in the absence of land acquisition.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Infopark Kerala v. Assistant Commissioner of Income Tax	2008 (4) KLT 782	Distinguished	The judgment distinguished Infopark Kerala’s case, noting it dealt with deduction under Section 194LA in the absence of compulsory acquisition; the present case concerns 194IA, and thus Infopark’s reasoning is not controlling.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** **THURSDAY, THE 19TH DAY OF DECEMBER 2013/28TH AGRAHAYANA, 1935** **WP(C).No. 31747 of 2013 (P) ----------------------------** **PETITIONERS :** **1. ABDUL RASHEEDAGED 52 YEARS, S/O. MOHAMMED KUNJU, NELLUKADAYIL VEETTIL, KADAYIL VILAKATHU,NEMOM DESOM, NEMOM VILLAGE.** **2. MUMTAZ, AGED 47 YEARS,W/O. ABDUL RASHEED, NELLUKADAYIL VEETTIL, KADAYIL VILAKATHU, NEMOM DESOM, NEMOM VILLAGE.** **BY ADVS.SRI.R.T.PRADEEP SRI.P.BIJIMON** **RESPONDENTS :** **1. DISTRICT COLLECTOR, COLLECTORATE, CIVIL STATION, KODAPPANAKKUNNU, THIRUVANANTHAPURAM 695004.** **2. SPECIAL TAHSILDAR LA (NH), LAND ACQUISITION OFFICER, OFFICE OF THE SPECIAL TAHSILDAR LA (NH) PMG, THIRUVANANTHAPURAM 695001.** **3. COMMISSIONER OF INCOME TAX (TDS), OFFICE OF THE COMMISSIONER OF INCOME TAX, KOWDIAR, THIRUVANANTHAPURAM - 695004.** **R1 & R2 BY SR GOVERNMENT PLEADER SRI.MANOJ P.KUNJACHAN R3 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19-12-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **BP** ## **WP(C).No. 31747 of 2013 (P)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS :** - **P1: COPY OF NOTICE DT 26/3/2013 TO 1ST PETITIONER.** - **P2: COPY OF NOTICE DT 24/4/2013 TO 1ST PETITIONER UNDER RULE 11 (2).** - **P3: COPY OF NOTICE DT 26/3/2013 TO 1ST PETITIONER** - **P4: COPY OF NOTICE DT 26/3/2013 TO 2ND PETITIONER.** - **P5: COPY OF NOTICE DT 24/4/2013 TO PETITIONES 1 & 2 UNDER RULE 11(2).** - **P6: COPY OF JUDGMENT DT 23/8/2013 WPC NO. 20572/2013.** - **P7: COPY OF JUDGMENT DT 4/11/2013 IN WPC NO. 26926/13.** **RESPONDENT'S EXHIBITS : NIL.** **//TRUE COPY//** **P.A. TO JUDGE** **BP** ## **P.R.RAMACHANDRA MENON, J.** - - - - - - - - - - - - - - - - - - - - - ## **W.P.(c) No.31747 OF 2013** - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 19[th] day of December, 2013 ## **JUDGMENT** Is income tax liable to be deducted from the sale consideration payable to the petitioners on negotiated sale of an immovable property, forms the issue to be considered. 2. An extent of 0.41 Ares comprised in Re.Sy.No.902/7 of Nemom Village with the building involved in LAC No.170 belonging to the petitioners who are husband and wife was transferred to the Government for widening of KaramanaKalikkavila road. The petitioners are apprehensive of deduction of income tax and has filed the writ petition for a direction to disburse the whole of the sale consideration without any deduction what so ever. Reliance is placed on **Infopark Kerala v. Asst. Commissioner of Income Tax** [2008 (4) KLT 782] to contend that such deduction is warranted only when there is a compulsory acquisition. 3. The respondents do concede that income tax is not liable to be deducted under Section 194LA of the Income Tax Act, 1961 W.P.(C)No.31747/2013 2 ('the Act' for short) when the price is fixed by negotiation and not through land acquisition. But the respondents maintain that tax is liable to be deducted under Section 194 IA of the Act effective from 1.6.2013 though not under Section 194 LA of the Act. The respondents point out that the property agreed to be transferred is not an agricultural land and that the sale consideration exceeds ` 50 lakhs attracting the rigour of Section 194 IA of the Act. 4. Heard Sri.Jose Joseph, Standing Counsel for the Income Tax Department as well. 5. Section 194 IA of the Act is as follows:- **“194IA. Payment on transfer of certain immovable property other than agricultural land -** (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon. (2) No deduction under sub-section (1) shall be made W.P.(C)No.31747/2013 3 where the consideration for the transfer of an immovable property is less than fifty lakh rupees. (3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section. Explanation:-For the purpose of this section, - (a) “agricultural land” means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (b) “immovable property” means any land (other than agricultural land) or any building or part of a building.” 6. Section 194 IA of the Act has been introduced with effect from 1.6.2013 by the Finance Act, 2013 in order to have a mechanism for reporting of transactions in the real estate sector and to collect tax at the earliest point of time. It provides that every transferee at the time of making payment of or crediting any sum as consideration for transfer of immovable property to a resident transferor shall deduct tax. Such deduction at the rate of 1% of the sum as consideration will be applicable only if the property is not an agricultural land and the total sale consideration is ` 50 lakhs or more. The property in the instant W.P.(C)No.31747/2013 4 case is not an agricultural land going by Explanation (a) to Section 194 IA of the Act aforequoted. 7. Explanation (a) to Section 194 IA of the Act clarifies that 'agricultural land' means agricultural land in India, not being a land situated in any area referred to in items (a) and (b) of subclause (iii) of clause (14) of Section 2. Section 2(14) (iii) (a) & (b) can be profitably extracted hereunder:- “2(14) “capital asset” means property of any kind by an assessee, whether or not connected with his business or profession, but does not include - (i) x x x x x x x (ii) x x x x x x x (iii) agricultural land in India, not being land situate - (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand (according to the last preceding census of which are relevant figures have been published before the first day of the previous year) ; or (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; “ W.P.(C)No.31747/2013 5 It is unnecessary to probe in to the nature of the property in order to decipher as to whether the same is an agricultural land or not in the context. Such land situated within the jurisdiction of a Municipality or a Municipal Corporation is not to be treated as an 'agricultural land' in terms of Explanation (a) to Section 194 IA of the Act. 8. What survives for consideration is as to whether the total sale consideration agreed upon for the transfer of the property exceeds ` 50 lakhs in order to attract the rigour of Section 194 IA of the Act. The petitioners are fully justified in their contention that tax is not liable to be deducted at the rate of 10% of the sum as consideration under Section 194 IA of the Act, since there is no land acquisition. But tax is certainly liable to be deducted from the sale consideration payable to the petitioner at 1% of the sum under Section 194 IA of the Act since the total sale consideration exceeds ` 50 lakhs. The obligation to deduct tax under Section 194 IA of the Act arises when consideration is payable to a resident transferor on the transfer of immovable property otherwise than by land acquisition. It is upto the petitioners to submit return before the jurisdictional assessing W.P.(C)No.31747/2013 6 officer and take the proceedings to a logical end in the determination of tax liability. The dictum in Inforpark Kerala's case as affirmed in W.A.No.2243/2008 is clearly distinguishable in as much as the same dealt with the deduction of tax under Section 194 LA of the Act in the absence of a compulsory acquisition. 9. The District Collector and the Special Tahsildar (Land Acquisition) are therefore directed to disburse the sale consideration to the petitioners after deducting income tax @ 1% of the sum under Section 194 IA of the Act. The Writ Petition is allowed in part. No costs. ## **P.R.RAMACHANDRA MENON JUDGE** sv.