My client's commercial property was compulsorily acquired for a metro project and tax was deducted at source on the compensation. Section 10(37) does not help because the land is not agricultural. Is there anything else?
Yes — section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which provides that no income tax or stamp duty shall be levied on any award or agreement made under that Act except one under its section 46. The Karnataka High Court held that where the acquisition was initiated after 1 January 2014 the compensation had to be paid under the 2013 Act, and that on a conjoint reading of section 96 of that Act, CBDT Circular No. 36/2016 dated 25 October 2016, the second proviso to section 194LA of the Income-tax Act and section 10(37), such compensation is exempt both from income-tax and from tax deduction at source. The writ petitions were allowed, the awards and endorsements quashed, and a refund of the TDS with interest directed.
Decided by the High Court (S.R. Krishna Kumar J (High Court of Karnataka, Bengaluru)) on 2022-04-21, reported as W.P. No. 43206/2018 and W.P. No. 53718/2017; no law-report citation printed on the document. It bears on section 10(37), section 194LA, section 2(14)(iii), section 96 RFCTLARR Act, 2013, section 46 RFCTLARR Act, 2013 of the Income Tax Act 1961, in Capital Gains, Capital Gains Exemptions, TDS Defaults and Refunds, Interest & Condonation matters.
The reach of this is that section 96 is WIDER than section 10(37) in three ways that matter. It draws no distinction between agricultural and non-agricultural land — the properties here were a business complex and a luxury boutique hotel — so it reaches compensation that could never qualify under section 10(37). It is not confined to individuals and Hindu undivided families. And it carries no two-year agricultural use condition. The Central Board of Direct Taxes has itself accepted this: Circular No. 36/2016, reproduced in full in the judgment, records that section 96 "is wider in scope than the tax exemption provided under the existing provisions of Income-tax Act, 1961" and clarifies that compensation exempted by section 96 "shall also not be taxable under the provisions of Income Tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961". The TDS consequence is statutory as well as circular-based: the second proviso to section 194LA, inserted with effect from 1 April 2017, forbids deduction where the payment is in respect of an award or agreement exempted from income-tax under section 96. The Court also rejected the Revenue's textual argument that section 96 speaks of an award "made under this Act" and not "made as per this Act", holding that in a beneficial statute it makes no difference so long as the compensation itself is payable under the 2013 Act. Note the limit: the case turns on the finding that the acquisition, though under the Karnataka Industrial Areas Development Act, 1966, had to yield compensation under the 2013 Act because the preliminary notification post-dated 1 January 2014.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioners owned properties at Sadaramangala village and at Hoodi village in Bengaluru, developed into a business complex and a luxury boutique hotel. The properties were acquired for the Bangalore Metro Rail Project Phase-II under the Karnataka Industrial Areas Development Act, 1966, by preliminary notifications issued on 22 September 2015, 16 December 2017, 27 April 2015 and 3 July 2017 — all after 1 January 2014, when the RFCTLARR Act, 2013 came into force — followed by final notifications and, in one petition, general awards dated 25 October 2018; in the other no award had been passed but an official memorandum dated 6 July 2017 directed payment of compensation under the Land Acquisition Act, 1894. The petitioners complained about the quantum of compensation, about deduction of tax at source on the compensation, and about the refusal of exemption from income-tax. The respondents contended that the writ petitions were not maintainable because a reference for enhancement was available and had been sought, that compensation was rightly awarded under the 1894 Act, that TDS was correctly deducted, and that the compensation was not exempt from income-tax. The KIADB had by a unanimous resolution at its 343rd Board meeting resolved that compensation for lands acquired under the KIAD Act pursuant to notifications issued on and after 1 January 2014 would be determined as per Schedule I of the 2013 Act, a stance it had taken before the Court in earlier litigation and which had been recorded and acted upon there.
Both writ petitions were allowed. The Court held, first, that they were maintainable notwithstanding the availability of a reference for enhancement, because a claim to compensation under the 2013 Act and a claim for enhancement are distinct, mutually exclusive and independent. Secondly, that the petitioners were entitled to compensation under the RFCTLARR Act, 2013 and not under the Land Acquisition Act, 1894, the subject lands having been notified for acquisition under section 28(1) of the KIAD Act after 1 January 2014. Thirdly, that on a conjoint reading of section 96 of the 2013 Act, CBDT Circular No. 36/2016 dated 25 October 2016, section 194LA and section 10(37) of the Income-tax Act, compensation payable in respect of awards passed after 1 January 2014 is exempt from payment of income tax and from tax deduction at source, so that the impugned endorsements, communications and orders of the revenue were illegal, arbitrary and without jurisdiction or authority of law. The impugned awards and endorsements were quashed, fresh or modified awards under the 2013 Act were directed within three months, it was declared that the compensation is exempt from income tax and from TDS, and a refund of the amount deducted towards TDS with applicable interest from the date of deposit till the date of refund was directed.
On maintainability the Court reasoned that there is no nexus between the claim that compensation is payable under the 2013 Act and the claim for enhancement before the reference court, the two being distinct and independent. On the applicable Act it relied on the KIADB's own Board resolution of 27 August 2016, on the stance the Board had taken in its statements of objections in earlier writ proceedings, on the single Judge's order in S. Jalaja's case holding that land losers are entitled to compensation under the 2013 Act, on the Board's acceptance of that direction recorded in the appellate daily order of 24 June 2019, on the State Government's confirmation by letter of 8 August 2019, and on the Division Bench's dismissal of the appeals on 24 August 2021 — concluding that the respondents had decided, resolved, accepted and acquiesced in the position that land losers were entitled to compensation under the 2013 Act, and that the position had attained finality and was binding on them. On the tax question it set out section 96 of the 2013 Act, reproduced CBDT Circular No. 36/2016 in full and the amended section 194LA with its second proviso, and held that a conjoint reading of those provisions with section 10(37) makes it abundantly clear that compensation in respect of awards passed after 1 January 2014 is exempt from income tax and from TDS, adding that having regard to Article 265 of the Constitution the contrary actions of the revenue were without authority of law. The Revenue's argument that section 96 uses the words "award or agreement made under this Act" and not "made as per this Act" was rejected on four grounds: that the Court had already held compensation payable under the 2013 Act; that the 2013 Act is a beneficial piece of legislation so that the distinction makes no difference so long as compensation is payable under it; that all awards and compensation made by the respondents for KIADB acquisitions after 1 January 2014 had in fact been made under the 2013 Act with complete exemption from income-tax and TDS; and that the KIAD Act contained no provision of its own enabling an award, so that after 1 January 2014 awards could only be made under the 2013 Act.
96. Exemption from income-tax, stamp duty and fees.-No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same.
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Handle my notice → Ask a CA on WhatsAppYes — section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which provides that no income tax or stamp duty shall be levied on any award or agreement made under that Act except one under its section 46. The Karnataka High Court held that where the acquisition was initiated after 1 January 2014 the compensation had to be paid under the 2013 Act, and that on a conjoint reading of section 96 of that Act, CBDT Circular No. 36/2016 dated 25 October 2016, the second proviso to section 194LA of the Income-tax Act and section 10(37), such compensation is exempt both from income-tax and from tax deduction at source. The writ petitions were allowed, the awards and endorsements quashed, and a refund of the TDS with interest directed. This was decided by the High Court (S.R. Krishna Kumar J (High Court of Karnataka, Bengaluru)) and bears on section 10(37), section 194LA, section 2(14)(iii), section 96 RFCTLARR Act, 2013, section 46 RFCTLARR Act, 2013 of the Income Tax Act 1961. It is reported as W.P. No. 43206/2018 and W.P. No. 53718/2017; no law-report citation printed on the document. The reach of this is that section 96 is WIDER than section 10(37) in three ways that matter. It draws no distinction between agricultural and non-agricultural land — the properties here were a business complex and a luxury boutique hotel — so it reaches compensation that could never qualify under section 10(37). It is not confined to individuals and Hindu undivided families. And it carries no two-year agricultural use condition. The Central Board of Direct Taxes has itself accepted this: Circular No. 36/2016, reproduced in full in the judgment, records that section 96 "is wider in scope than the tax exemption provided under the existing provisions of Income-tax Act, 1961" and clarifies that compensation exempted by section 96 "shall also not be taxable under the provisions of Income Tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961". The TDS consequence is statutory as well as circular-based: the second proviso to section 194LA, inserted with effect from 1 April 2017, forbids deduction where the payment is in respect of an award or agreement exempted from income-tax under section 96. The Court also rejected the Revenue's textual argument that section 96 speaks of an award "made under this Act" and not "made as per this Act", holding that in a beneficial statute it makes no difference so long as the compensation itself is payable under the 2013 Act. Note the limit: the case turns on the finding that the acquisition, though under the Karnataka Industrial Areas Development Act, 1966, had to yield compensation under the 2013 Act because the preliminary notification post-dated 1 January 2014. If it applies to you, the first step is this: Establish the date of the preliminary notification. If the acquisition was initiated on or after 1 January 2014, argue that compensation is payable under the RFCTLARR Act, 2013 and that section 96 applies.
The petitioners owned properties at Sadaramangala village and at Hoodi village in Bengaluru, developed into a business complex and a luxury boutique hotel. The properties were acquired for the Bangalore Metro Rail Project Phase-II under the Karnataka Industrial Areas Development Act, 1966, by preliminary notifications issued on 22 September 2015, 16 December 2017, 27 April 2015 and 3 July 2017 — all after 1 January 2014, when the RFCTLARR Act, 2013 came into force — followed by final notifications and, in one petition, general awards dated 25 October 2018; in the other no award had been passed but an official memorandum dated 6 July 2017 directed payment of compensation under the Land Acquisition Act, 1894. The petitioners complained about the quantum of compensation, about deduction of tax at source on the compensation, and about the refusal of exemption from income-tax. The respondents contended that the writ petitions were not maintainable because a reference for enhancement was available and had been sought, that compensation was rightly awarded under the 1894 Act, that TDS was correctly deducted, and that the compensation was not exempt from income-tax. The KIADB had by a unanimous resolution at its 343rd Board meeting resolved that compensation for lands acquired under the KIAD Act pursuant to notifications issued on and after 1 January 2014 would be determined as per Schedule I of the 2013 Act, a stance it had taken before the Court in earlier litigation and which had been recorded and acted upon there. The matter was decided on 2022-04-21 by the High Court (S.R. Krishna Kumar J (High Court of Karnataka, Bengaluru)). On those facts the High Court held as follows. Both writ petitions were allowed. The Court held, first, that they were maintainable notwithstanding the availability of a reference for enhancement, because a claim to compensation under the 2013 Act and a claim for enhancement are distinct, mutually exclusive and independent. Secondly, that the petitioners were entitled to compensation under the RFCTLARR Act, 2013 and not under the Land Acquisition Act, 1894, the subject lands having been notified for acquisition under section 28(1) of the KIAD Act after 1 January 2014. Thirdly, that on a conjoint reading of section 96 of the 2013 Act, CBDT Circular No. 36/2016 dated 25 October 2016, section 194LA and section 10(37) of the Income-tax Act, compensation payable in respect of awards passed after 1 January 2014 is exempt from payment of income tax and from tax deduction at source, so that the impugned endorsements, communications and orders of the revenue were illegal, arbitrary and without jurisdiction or authority of law. The impugned awards and endorsements were quashed, fresh or modified awards under the 2013 Act were directed within three months, it was declared that the compensation is exempt from income tax and from TDS, and a refund of the amount deducted towards TDS with applicable interest from the date of deposit till the date of refund was directed.
On maintainability the Court reasoned that there is no nexus between the claim that compensation is payable under the 2013 Act and the claim for enhancement before the reference court, the two being distinct and independent. On the applicable Act it relied on the KIADB's own Board resolution of 27 August 2016, on the stance the Board had taken in its statements of objections in earlier writ proceedings, on the single Judge's order in S. Jalaja's case holding that land losers are entitled to compensation under the 2013 Act, on the Board's acceptance of that direction recorded in the appellate daily order of 24 June 2019, on the State Government's confirmation by letter of 8 August 2019, and on the Division Bench's dismissal of the appeals on 24 August 2021 — concluding that the respondents had decided, resolved, accepted and acquiesced in the position that land losers were entitled to compensation under the 2013 Act, and that the position had attained finality and was binding on them. On the tax question it set out section 96 of the 2013 Act, reproduced CBDT Circular No. 36/2016 in full and the amended section 194LA with its second proviso, and held that a conjoint reading of those provisions with section 10(37) makes it abundantly clear that compensation in respect of awards passed after 1 January 2014 is exempt from income tax and from TDS, adding that having regard to Article 265 of the Constitution the contrary actions of the revenue were without authority of law. The Revenue's argument that section 96 uses the words "award or agreement made under this Act" and not "made as per this Act" was rejected on four grounds: that the Court had already held compensation payable under the 2013 Act; that the 2013 Act is a beneficial piece of legislation so that the distinction makes no difference so long as compensation is payable under it; that all awards and compensation made by the respondents for KIADB acquisitions after 1 January 2014 had in fact been made under the 2013 Act with complete exemption from income-tax and TDS; and that the KIAD Act contained no provision of its own enabling an award, so that after 1 January 2014 awards could only be made under the 2013 Act. In the words reproduced by the source cited on this page: "96. Exemption from income-tax, stamp duty and fees.-No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same." The decision followed or applied Union of India v. Pushpavathi & Others (2018) 3 SCC 28 — applied on maintainability; Viswanathan M v. The Chief Commissioner 2020 (2) KLJ 309 (Kerala High Court) — relied on; C. Nanda Kumar v. Union of India 2017 SCC OnLine Hyd 55 (Andhra Pradesh High Court, Division Bench) — relied on; CBDT Circular No. 36/2016 dated 25 October 2016 — applied.
It was decided by the High Court on 2022-04-21 and is reported as W.P. No. 43206/2018 and W.P. No. 53718/2017; no law-report citation printed on the document. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 10(37), section 194LA, section 2(14)(iii), section 96 RFCTLARR Act, 2013, section 46 RFCTLARR Act, 2013, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Both writ petitions were allowed. The Court held, first, that they were maintainable notwithstanding the availability of a reference for enhancement, because a claim to compensation under the 2013 Act and a claim for enhancement are distinct, mutually exclusive and independent. Secondly, that the petitioners were entitled to compensation under the RFCTLARR Act, 2013 and not under the Land Acquisition Act, 1894, the subject lands having been notified for acquisition under section 28(1) of the KIAD Act after 1 January 2014. Thirdly, that on a conjoint reading of section 96 of the 2013 Act, CBDT Circular No. 36/2016 dated 25 October 2016, section 194LA and section 10(37) of the Income-tax Act, compensation payable in respect of awards passed after 1 January 2014 is exempt from payment of income tax and from tax deduction at source, so that the impugned endorsements, communications and orders of the revenue were illegal, arbitrary and without jurisdiction or authority of law. The impugned awards and endorsements were quashed, fresh or modified awards under the 2013 Act were directed within three months, it was declared that the compensation is exempt from income tax and from TDS, and a refund of the amount deducted towards TDS with applicable interest from the date of deposit till the date of refund was directed. It arises in Capital Gains, Capital Gains Exemptions, TDS Defaults and Refunds, Interest & Condonation matters, on section 10(37), section 194LA, section 2(14)(iii), section 96 RFCTLARR Act, 2013, section 46 RFCTLARR Act, 2013 of the Income Tax Act 1961, and was decided by S.R. Krishna Kumar J (High Court of Karnataka, Bengaluru). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put section 96 first and section 10(37) second. Section 96 has no agricultural-land condition, no individual or HUF restriction and no two-year use condition, and it reaches non-agricultural property. Cite CBDT Circular No. 36/2016 dated 25 October 2016, which binds the Department and expressly says that compensation exempt under section 96 is not taxable under the Income-tax Act even without a specific exemption in that Act. For the TDS point, rely on the second proviso to section 194LA, inserted with effect from 1 April 2017, and seek refund of any tax deducted, with interest from the date of deposit. Do not be deflected by an argument that an alternative remedy exists before the reference court; the Court held that a claim to be paid under the 2013 Act is distinct from and independent of a reference seeking enhancement. Meet the "under this Act" versus "as per this Act" argument head on; it was raised by the Revenue here and rejected.
Still good law. Seven citator hits, all Karnataka High Court, and the judgment (W.P. No. 43206/2018 c/w W.P. No. 53718/2017, decided 21 April 2022, reported also under the connected-petition name Sri Balaji Corporate Services v Union of India) has been followed in the Karnataka line of land-acquisition cases. In Nagamma v Special Land Acquisition Officer (16 December 2024) the Bench records reliance on it in its own voice, reproduces its operative order at length and quashes the award dated 06.10.2023, directing a fresh award within three months. Note precisely what that order says: the disposal at para 6 is 'in terms of the decision of this Court in the case of Sri.Arun Kumar & others vs. State of Karnataka & others', so the judgment Nagamma names as controlling, and the 'aforesaid judgment referred to supra' in the fresh-award direction, is Arun Kumar - which itself followed the 21 April 2022 judgment. Nagamma never uses the name L. Venkataramana Raju. The same course was taken in Arun Kumar v State of Karnataka (22 November 2022), P. Narayanappa (29 October 2022), Basetappa (18 January 2023), B. Madhu Sudhan Adiga (31 October 2023), Chudi Nagesh (17 December 2024) and Supriya S Shetty (20 November 2025); of these only Nagamma was opened on this check. Nothing overruling or doubting it was found. The point matters: section 96 of the RFCTLARR Act 2013 exempts the compensation from income-tax and from TDS in its own right, so the limits of section 10(37) - in particular the requirement that the land be agricultural - do not control the question. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read twice by different routes. A plain-document fetch returned paragraph 11.2 with the full text of section 10(37) and the whole of paragraph 13, the operative order, which is how the extent of the judgment was established — the last numbered paragraph is 13. A second fetch of the ?type=print text returned paragraphs 1 to 12 verbatim, including CBDT Circular No. 36/2016 at paragraph 11.1 and the amended section 194LA at paragraph 11.2. Note a numbering oddity that must not be mistaken for a fabricated locator: the number 11.2 is used TWICE in this judgment — once, in the plain-document rendering, for the paragraph setting out section 10(37), and once, in the ?type=print rendering, for the paragraph setting out section 194LA. I have therefore attributed statutory texts to this judgment by describing what each passage contains rather than relying on the sub-paragraph number alone. Paragraphs 5 and 6 are the parties' submissions and are not holdings. Much of paragraphs 10.6 to 10.12 consists of material quoted from OTHER proceedings — a KIADB Board resolution, statements of objections, and long extracts from a single Judge's order in S. Jalaja's case and a Division Bench order in W.A. No. 1105/2019, including their own paragraph numbers 27 to 30, 6 and 51. Those numbers belong to the quoted orders, not to this judgment, and citing them as paragraphs of this judgment would be a fabricated locator. The judgment records at paragraph 10.12 that the Division Bench order of 24 August 2021 has been challenged before the Supreme Court in SLP(C) No. 20912/2021 and connected matters, but on issues other than payment of compensation under the 2013 Act. This is not an income-tax appeal: the Court was construing the RFCTLARR Act, 2013, the KIAD Act, 1966 and the Land Acquisition Act, 1894 alongside the Income-tax Act, and the entry is confined to what it decides about the income-tax and TDS consequences. One lacuna in the report should be recorded rather than smoothed over. The operative order at paragraph 13(iv) as printed reads "...and respondents are directed to refund the amount deducted from the petitioners towards tax deduction at source(TDS) together with applicable from the date of deposit till the date of refund" — a word is missing after "applicable". The "held" field above supplies "interest", which is the obvious reading and is how the direction is universally understood, but the word does not appear in the text read and this entry should not be taken as reproducing it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both writ petitions were allowed. The Court held, first, that they were maintainable notwithstanding the availability of a reference for enhancement, because a claim to compensation under the 2013 Act and a claim for enhancement are distinct, mutually exclusive and independent. Secondly, that the petitioners were entitled to compensation under the RFCTLARR Act, 2013 and not under the Land Acquisition Act, 1894, the subject lands having been notified for acquisition under section 28(1) of the KIAD Act after 1 January 2014. Thirdly, that on a conjoint reading of section 96 of the 2013 Act, CBDT Circular No. 36/2016 dated 25 October 2016, section 194LA and section 10(37) of the Income-tax Act, compensation payable in respect of awards passed after 1 January 2014 is exempt from payment of income tax and from tax deduction at source, so that the impugned endorsements, communications and orders of the revenue were illegal, arbitrary and without jurisdiction or authority of law. The impugned awards and endorsements were quashed, fresh or modified awards under the 2013 Act were directed within three months, it was declared that the compensation is exempt from income tax and from TDS, and a refund of the amount deducted towards TDS with applicable interest from the date of deposit till the date of refund was directed.
TaxSphere, “L. Venkataramana Raju v. Union of India (Karnataka High Court) — where compensation is payable under the RFCTLARR Act, 2013, section 96 of that Act exempts it from income-tax and from TDS even though the land is not agricultural and section 10(37) cannot apply”, https://taxnotice.vittsphere.com/caselaw/case/l-venkataramana-raju-section-96-rfctlarr-exemption-is-wider-than-10-37-and-bars-tds-on-the-compensation/ (validity last checked 2026-09-09)
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My land was compulsorily acquired and the award was made after 1 January 2014 but the proceedings began under the 1894 Act. Is the compensation taxable?
My client's agricultural land inside the municipal limits has been compulsorily acquired. Section 2(14)(iii) does not help because the land is urban. What exactly must he prove under section 10(37)?
My land was notified and an award was made under the Land Acquisition Act, but I thought the award was too low, negotiated a higher figure and executed a sale deed. The Assessing Officer now says that was a voluntary sale and denies s.10(37). Is he right?
The land acquisition officer has deducted ten per cent from my compensation cheque. When is s.194LA actually attracted, what is the threshold now, and does the RFCTLARR exemption stop the deduction?
