Infopark Kerala v. Asst. Commissioner Of Income Tax

JUDGMENT

1. The question that falls for decision is the scope of S. 194LA of the Income Tax Act, 1961, which reads as follows:

“194LA. Payment of compensation on acquisition of certain immovable property

Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, 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 ten percent of such sum as income-tax thereon.”

2. Petitioner seeks to quash Ext. P4. Ext. P4 is issued to the CEO of the petitioner advising the petitioner to take immediate steps to ensure compliance with the statutory provisions for deduction of tax at source and remittance of the same to the Government account. Petitioner is a Society established under the Travancore Cochin Societies Registration Act, 1955. It is managed by a Board nominated by the Government of Kerala and it is set up with the objective of development of Information Technology Parks. Briefly put the case of the petitioner is as follows:

As and when the land is identified, which is suitable for the project, Government issues notification under S. 4 of the Land Acquisition Act, 1894 notifying the lands. A notification is also issued under S. 6(1) of the Survey and Boundaries Act, 1961. The price of the land is determined by the District Level Purchase Committee, which consists of District Collector as Chairman. There is an assessment of the replacement value of the land and the recommendation of the District Level Purchase Committee is forwarded to the Empowered Committee for approval. The Empowered Committee consists of the Chief Secretary of the State as the Chairman. The other members are the Principal Secretary, Secretary (Finance), Secretary (PWD), Secretary (Law), Secretary (FTP) and any other member nominated by the Chief Secretary. It considers the proposal and would make necessary modifications. The title deeds are to be verified by the Land Acquisition Officer and there is a scrutiny of the title deeds by Advocates and on the basis of the opinion expressed by the counsel and the Land Acquisition Officer, recommendations are issued. It is the further case of the petitioner that the transaction entered into by the petitioner for acquisition of land falls into two categories. The first category consists of those transactions where the land owners arrive at an agreement and they execute the sale deed in favour of the petitioner. The second category consists of cases where negotiated agreement is not arrived at and acquisition is done under the Land Acquisition Act. According to the petitioner, in the first category of transaction there is a sale of property, which is covered by the provisions of Transfer of Property Act and it does not consist of acquisition of property by the Government for the project. In a case where there is acquisition of property by the Government, the procedure involves issuance of a notification under S. 4, which constitutes a preliminary notification, declaration under S. 6 and direction under S. 7. Thereafter, the property has to be marked unless it is marked under S. 4. Under S. 9, the Collector issues notice to the parties to enable the making of claims, and inquiry has to be held and finally an award is to be passed under S. 11 of the Act. S. 48 of the Land Acquisition Act permits withdrawal of the Government from the acquisition except in a case covered by S. 36 of the Act, that is where possession has not been taken. Ext. P1 is produced as the guidelines issued by the Government. Ext. P2 is produced as copy of the notification under S. 4 of the Land Acquisition Act and S. 6 of the Survey and Boundaries Act. Ext. P3 is copy of the sale deed executed by the land owner. It is while so Ext. P4 is issued. Therein, S. 194 LA of the Income Tax Act is referred to and it is inter alia stated as follows:

“From the enquiries conducted by this office, I am given to understand that acquisition of land for Infopark (Smart City Project) is being done on the strength of the notification issued by the Government.

The mode of execution may have been through sale deeds after reaching a negotiated agreement on the amount to be paid as compensation, but the proceedings are carried out as a consequence of notification issued under the Land Acquisition Act, 1894, to acquire the specified land area.

Once a particular area has been notified by Government for acquisition for a specified purpose, there is no option for the owners but to sell. The only difference in this case is that it has been brought under Fast Track Procedure to expedite the process of land acquisition, and consideration/compensation is decided through the medium of District Level Purchase Committee and Grievance Redressal Committees. This being the case, even if sale deeds are executed, it is, in effect, compulsory acquisition of land within the meaning of S. 194LA, and tax should therefore be deducted on all such payments.

In respect of payments already made without deducting tax at source, proceedings under Ss. 201(1)/201(1A) are separately being initiated.”

3. Consequently advice is given to act in accordance with the statutory provisions.

4. A counter affidavit is filed by the first respondent inter alia stating as follows:

The sale deed is being executed in pursuance of Government notification for land acquisition and Kerala Gazette Notification dated 15.10.2004 It is not an ordinary sale deed as it is understood in normal property transaction where land is sold by free will and agreed consideration. Here, the land owner has no choice. Either he agrees to the negotiated price, enters into a sale deed and hands over the land or urgency clause as per S. 17 of the Land Acquisition Act is further invoked and the land is taken possession of by the authorities concerned. In any case, it is stated that the end result is that he has to hand over the land to the project. The element of compulsion is always present. It is clear that this is nothing but compulsory acquisition and uptq the execution of the sale deed, there is a factor of compulsion, because proceedings under the Land Acquisition Act are on going. Upon the completion of acquisition of property no proceedings are necessary under the Actand the proceedings are to be withdrawn. Withdrawal under S. 48 is stated to be a formality as the land has already been acquired and passed into the hands of the project implementing authority. It is stated that after conducting enquiries, issuing notice under S. 201(1), hearing the petitioner and calling for details and materials on record, a letter was sent directing the petitioner to prevent future defaults in tax deduction at source on such payments yet to be made. It is stated that the letter was rather a written direction to prevent future default as already committed. Action under S. 201(1) has to be taken on the assessee in default, that is the petitioner in this case and it is not to be construed as a threat but as a statutory proceeding as provided in Ss. 201(1) and 201(1A) of the Income Tax Act. Had there been no notification and invoking of land acquisition proceedings, the sale deed would not have been executed. The execution of sale deed expedites the process of land acquisition but since its very genesis is in the notification for acquisition, it cannot be termed a completely voluntary act on the part of the seller. The provisions of S. 194 LA apply to all cases of compulsory acquisition of immovable property regardless of the instrument used to transfer the property. There would be no hardship to the petitioner to deduct tax at source. The fact that the project is of prime importance does not absolve the concerned authorities from dispensing their duly to deduct tax at source from payments covered by S. 194LA. Respondents have also produced an annexure to the counter affidavit.

5. Reply affidavit is also filed, wherein it is inter alia stated as follows:

Sale deeds satisfied the requirements of a contract distinct from a compulsory acquisition. The price is agreed on the basis of negotiation. There is negotiation and the price is finally arrived at and the sale deed is executed on the basis of the agreed price. These situations are completely lacking in a compulsory acquisition. Reference is placed on the guidelines. The mere issuance of notification does not necessarily result in the subsequent steps being taken particularly in so far as there are a number of further steps to be taken to complete the process of compulsory acquisition even after the issuance of the notification. The sale deed cannot be equated to a compulsory acquisition. Even without a notification, there could have been a negotiated agreement of price and an execution of a sale deed.

6. A rejoinder affidavit is filed to the reply affidavit by the first respondent essentially reiterating the stand in the counter affidavit.

7. I heard learned Senior Counsel Sri. V. Ramachandran, appearing on behalf of the petitioner and Sri. P.K Raveendranatha Menon, learned Senior Counsel appearing for the Income Tax Department.

8. Learned counsel for the petitioner reiterates the contentions raised in the Writ Petition. He would submit that the land in question was acquired under the fast track procedure, in respect of which guidelines have been issued and which have been produced along with Ext. P1. He would submit that it contemplates negotiation. In this case, it is pointed out that there was negotiation. The matter was taken up before the Empowered Committee and ultimately many of the land owners agreed for selling their properties and accordingly they entered into sale deeds with the petitioner and the petitioner became the owner of the said properties. On the strength of the said title deeds it is submitted that it is inconceivable as to how the petitioner can be saddled with the liability under S. 194LA of the Act to deduct 10% of the sale consideration. He reiterated his contentions, which I have already referred to. He also points out that there are practical difficulties in calling upon the petitioner to comply with the provisions of S. 194LA of the Act. It is stated that most of the land owners would have no income as to render them liable to pay tax. He also relies on the following decisions:

State of Madhya Pradesh v. Vishnu Prasad Sharma (AIR 1966 SC 1593), Sreenivasa Shenoy v. State of Kerala (AIR 1968 Ker. 325), Jai Narain v. The Land Acquisition Collector, Delhi (AIR 1976 Del. 166), Jasraj v. State of Rajasthan (AIR 1977 Raj. 150), The Special Tahsildar v. Sri. Pethavanallur Mayuranathasami Temple (AIR 1978 Mad. 406), Special Land Acquisition Officer v. M.S Godrej and Boyce ((1988) 1 SCC 50 : AIR 1987 SC 2421) and Abdul Majeed Sahib v. District Collector, Kollam (1993 (2) KLT 317 : AIR 1994 Ker. 171).

9. Per contra, learned counsel appearing on behalf of the respondents 1 and 2 reiterated his contentions and pointed out that once a notification is issued under the Land Acquisition Act, there is no choice for the land owner, whose lands are covered by the notification. His lands are frozen. If he does not negotiate and sell the land by way of transfer, certainly his lands would come to be acquired under the Land Acquisition Act. To call a transaction sale, there must be a real choice available to the owner of the land in the first place as to whether he wishes to sell the land to anyone. He submits that in a case as the present, where a notification is issued under the Land Acquisition Act, the land owners may have entered Into sale deeds in the shadow and the threat of the land acquisition proceedings being taken to their logical conclusion. Even if the land owner may have had the freedom in the matter of the price of the land and may have negotiated, he is unlike a land owner, who has the freedom either to sell the land or not to sell the land. This fundamental factor may not be lost sight of, it is submitted. In this context, he relied on the decision of the Calcutta High Court in the decision reported in Calcutta Electric Supply Corporation Ltd. v. Commissioner of Income Tax (Vol. XIX ITR 406). He also submits that S. 194 LA is a provision geared to collection of amounts towards tax payable and also he submits that the petitioner has only to collect the tax and remit it to the Government.

10. In this case, I am concerned with those transactions where the land owners have executed sale deeds on the basis of negotiations in favour of the petitioner. In this case, it is an admitted fact that Government have issued proceedings under S. 48 withdrawing from the acquisition in respect of properties where the land owners have executed sale deeds in favour of the petitioner. The effect of withdrawal of the Government from the notification has been noticed in various decisions. The effect of withdrawal under S. 48 is the effacement of the notification issued under S. 4(1) of the Land Acquisition Act. (See AIR 1977 Raj. 150).

11. As in every other case, the primary duty of the court is to glean the intention of the law maker. In decoding any legislative device the first duty cast on the court is to understand the intention of the legislature by looking at the plain meaning of the words used in the provision. Departure from the plain meaning of the provision wquld be justified if there is some ambiguity which arises in the interpretation of the provision. No doubt, if the literal meaning produces a palpable absurdity or manifest injustice, the court would strive to place an interpretation which has the effect of avoiding of the said effect.

12. S. 194 LA falls in Chap. 17, which relates to collection and recovery of tax. S. 190 reads as follows:

“190. Deduction at source and advance payment.

(1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction (or collection) at source or by advance payment (or by payment under sub-s. (1A) of S. 192), as the case may be, in accordance with the provisions of this Chapter.

(2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-s. (1) of S. 4.”

13. Coming to the terms of S. 194LA, the heading of the section tself refers to payment of compensation on acquisition of certainimmovable property.

14. The crucial words in S. 194 LA are “any person responsible”, “any sum being in the nature of compensation or the enhanced compensation, or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force.” No doubt, the words ‘any person’ supports the case of the Department that S. 194 LA would apply even to the petitioner at first blush. But I find myself unable to accept the interpretation canvassed by the department on considering the other parts of the section. The sum payable must be in the nature of compensation or enhanced compensation or the consideration or enhanced consideration on account of compulsory acquisition. The words ‘compensation’ and ‘enhanced compensation’ are concepts which are apparently taken from the provisions of the Land Acquisition Act. S. 9 of the Land Acquisition Act provides that the Collector shall give notice in regard to claims to compensation for all interests in such land may be made to him. Sub-s. (2) also referred to the word ‘compensation’. S. 11 also referred to the word ‘compensation’. S. 11 enjoins that the Collector must hold an inquiry and pass an award. The award must provide for the compensation which, in his opinion shall be allowed for the land. Sub-s. (3) speaks about determination of the compensation. S. 15 speaks about matters to be considered and neglected in determining the amount of compensation, which is provided under Ss. 23 and 24. S. 16 provides for the power to take possession after the award is passed. Taking of possession has the effect of vesting absolutely the title in the Government free from all encumbrances. No doubt S. 17 speaks about the special powers in cases of urgency. Possession can be taken in such cases on expiry of fifteen days from the date of publication of the notice mentioned in S. 9 and it is provided that the land will thereupon vests absolutely with the Government free from all encumbrances. Sub-s. (2) of S. 17 also provides for taking of possession in certain contingencies contemplated therein and it is declared that upon taking of possession of such land, it shall thereupon vest absolutely with the Government free from all encumbrances. The Collector has to offer in such cases compensation to persons interested for the standing crops and trees, if any, on the land and for any other damage. Also the Collector has to tender payment of 80% of the compensation for such land as estimated by him. S. 18 of the Act speaks about the right of a person interested, who has not accepted the award, to file written application before the Collector requiring the matter to be referred to court for its determination inter alia of the amount of compensation. S. 19 speaks about duty of the Collector to state for the information of the court inter alia the ground on which the compensation was determined if the objection was on the amount of compensation. S. 25 provides that the amount of compensation awarded shall not be less than the amount awarded by the Collector under S. 11. S. 28 provides that the Collector can be directed to pay interest on excess compensation. S. 29 speaks about apportionment of compensation when there are other persons interested. S. 30 refers to the dispute relating to the apportionment of the compensation or any part thereof, or as to the persons to whom the same or any part thereof is payable leading to the reference of the same by the Collector to the court. S. 31 sub-ss. (1)(3) and (4) reads as follows:

“31. Payment of compensation or deposit of same in Court.

(1) On making an award under S. 11, the Collector shall tender payment of the compensation awarded by him to the persons interested entitled thereto according to the award, and shall pay it to them unless prevented by some one or more of the contingencies mentioned in the next sub-section,

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(3) Notwithstanding anything in this section, the Collector may, with the sanction of the appropriate Government, instead of awarding a money compensation in respect of any land, make any arrangement with a person having a limited interest in such land, either by the grant of other lands in exchange, the remission of land revenue on other lands held under the same title, or in such other way as may be equitable having regard to the interest of the parties concerned.

(4) Nothing in the last foregoing sub-section shall be construed to interfere with or limit the power of the Collector to enter into any arrangement with any person interested in the land and competent to contract in respect thereof.”

15. S. 34 speaks about payment of interest on compensation which is not paid or deposited on or before taking of possession. S. 54 provides for appeals to the High Court from the award or from any part of the award of the court. It is also important to refer S. 28A.S 28A provides for the right to claim excess compensation with persons who had not sought for reference under S. 18. The word ‘compensation’ occurs in S. 9. The notification under S. 4 of the Act must be followed by the issuance of declaration under S. 6 of the Act. Thereafter, the Collector is obliged to issue notice under S. 9, consider the claims and pass an award fixing compensation. There can be no doubt that S. 194LA of the Income Tax Act will apply to the compensation awarded by the Collector under the Land Acquisition Act by way of passing the award. If the claimant is not satisfied with the award of the Collector and seeks a valid reference and the Collector makes a reference to the court, it is open to the court to award higher compensation or enhanced compensation. If the claimant is still dissatisfied, he may file an appeal to the High Court and also take the matter still to the highest court and claim enhanced compensation. Thus the concepts ‘compensation’ or ‘enhanced compensation’ are concepts which are drawn by the legislature bearing in mind the meaning it has come to acquire under the Land Acquisition Act. In other words, the word ‘compensation’ must mean compensation which is given under an award passed by the appropriate Collector and the words ‘enhanced compensation’ means the enhanced compensation becoming payable under the award of the civil court or the High Court or of the Apex Court or under S. 28(A).

16. A question may arise whether the petitioner is liable to comply with Ext. P8 in view of the use of the words ‘consideration’ and ‘enhanced consideration’. In this context, learned counsel for the petitioner would submit that the said words are used in view of the various statutes, which provide for acquisition of assets, that is laws other than the Land Acquisition Act. For instance he relied on the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and the Burmah Oil Company (Acquisition of Shares of Oil India Limited and the Undertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited Act, 1981. In the latter Act, S. 10 provides for payment of a sum of more than Rs. 21 Crores apparently in consideration of the transfer to and vesting in the Central Government of the shares of the Oil Company and also the right, title and interest of each specified Company in terms of its undertaking in India; Likewise, S. 6 of the Banking Companies Act also provide for payment of amount in respect of the transfer as was specified in such schedule.

17. I notice that both these Acts are much prior to the insertion of S. 194LA of the Income Tax Act. I notice that both the words ‘compensation’ and ‘consideration’ as also ‘enhanced compensation’ and ‘enhanced consideration’ must be payable on account of compulsory acquisition under any law. The words ‘consideration’ and ‘enhanced consideration’ are to be read along with the words compulsory acquisition under a law. The examples of legislation canvassed by the petitioner though anterior in time, in my view provide the answer to the question as to the import of the words. In other words ‘consideration’ and ‘enhanced consideration’ mean amounts payable under any law providing for compulsory acquisition.

18. The contention of the Standing Counsel would appear to be that there is no sale even though sale deeds may have been executed by certain land owners. It is his contention that there can be a sale only when the seller decides to sell the property as a free agent and when he has a choice either to sell or not to sell. Sri. P.K Raveendranatha Menon would submit that it may be true that there were negotiations. But those negotiations, it is submitted, related only to the question of price. There was an element of compulsion in regard tothe question of sale and the freedom at best which the land owners enjoyed was limited to the amount and the mode of payment of the consideration. In such circumstances, he points out that it amounts to compulsory acquisition under a law in force.

19. In Calcutta Electric Supply Corporation Ltd. v. Commissioner of Income Tax, West Bengal (19 ITR 406) relied on by the respondents, the question which arose was whether the transaction by which the Government had acquired the plant would be regarded as a sale within the meaning of S. 10(2)(vii) of the Indian Income-tax Act In that case during the war Government requisitioned an electricity generating plant of the assessees under R. 83(1) of the Defence of India Rules. The assessees were not willing to sell the plant and they requested the Government to review the matter. But the Government refused to rescind the order. The amounts which the assessees eventually received as the price or compensation exceeded the written down value of the plant by Rs. 3,27,840/-. It is in this context that the Bench of the Calcutta High Court took the view that there was no sale. It is important to notice S. 10(2)(vii) of the Indian Income Tax Act. S. 10(2)(vii) reads as follows:

“(2) Such profits or gains shall be computed after making the following allowances, namely:—

(vii) in respect of any…………machinery or plant which has been sold or discarded ………the amount by which the written down value of machinery or plant exceeds the amount for which the………machinery or plant is actually sold or its scrap value:”

20. It was in the context of the said statutory provision the court proceeded to hold as follows:

‘The word “sale” is not defined in the Indian Income-tax Act and, therefore, it must be given its ordinary grammatical meaning. According to the Oxford Dictionary “sale” means “an act of selling or making over to another for a price.” It has also been defined as an exchange of a thing for a price. Making over anything for a price or exchanging it for a price suggests that the act is voluntary. The ordinary conception of “sale” is that something is handed over for a price as the result of negotiation and agreement. There is an agreement between the parties whereby one person known as the seller hands over a thing or property to the other person known as the buyer for a consideration usually in terms of money which has been agreed between the parties. That is the ordinary English conception of a “sale”.

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It seems to me quite clear that the acquisition of this plant by the Government could never be said to be a “sale” as that word is ordinarily used in the English language. There was nothing voluntary about the transaction. Against the wishes of the assessees Government requisitioned this property. The assessees asked Government to stay their hand and cancel the order depriving them of their property. But Government refused to do so and stated that they would determine the amount payable and they were paying Rs. 5,00,000/- on account. In short, the order of requisition deprived the assessees of property which they had no desire whatsoever to lose. In fact, it deprived them of property which quite clearly they wanted to retain.”

21. In this context it is apposite to remember that the issuance of a notification under S. 4(1) of the Land Acquisition Act does not divest a land owner of his title in his land unless progress is made under the Act to the stage where under the award passed possession is taken under S. 16 whereupon the land will vest upon the Government free from encumbrances. No doubt if possession is taken earlier under S. 17 of the Land Acquisition Act, 1894 also there is vesting of title. It could not be said that there is an actual acquisition till then under the law relating to compulsory acquisition. In this context it is apposite to refer to the following observations of the Apex Court in the decision reported in Special Land Acquisition Officer, Bombay v. Godrej and Boyce ((1988) 1 SCC 50 : AIR 1987 SC 2421):

“Under the scheme of the Act, neither the notification under S. 4 nor the declaration under S. 6 nor the notice under S. 9 is sufficient to divest the original owner of, or other person interested in, the land of his rights therein. S. 16 makes it clear beyond doubt that the title to the land vests in the Government only when possession is taken by the Government. Till that point of time, the land continues to be with the original owner and he is also free (except where there is specific legislation to the contrary) to deal with the land justas he likes, although it may be that on account of the pendency of proceedings for acquisition intending purchasers may be chary of coming near the land. So long as possession is not taken over, the mere fact of a notification under S. 4 or declaration under S. 6 having been made does not divest the owner of his rights in respect of the land or relieve him of the duty to take care of the land and protect it against encroachment.”

22. In the case before me, where, the land owners, may be in the context of the notification under S. 4(1) have executed sale deeds in favour of the petitioner, it cannot be held that it is still not a sale of property, the incidents which would be governed by the provisions of the Transfer of Property Act and title passed upon the registration of the sale deeds. The decision reported in Fazilka Electric Supply Co. Ltd. v. Commissioner of Income Tax, Delhi ((1959) 36 ITR 411) is also relied on by the counsel for the respondents. The question which arose was whether there was a sale within the meaning of S. 10(2)(vii) of the Income Tax Act, 1922. The assessee in the said case carried on business of generation and supply of electricity. Under the terms of its licence, a clause empowered the Government to exercise its option to purchase the undertaking. The price paid by the Government was in excess of the written down value of the assets. Therein the court proceeded to hold that a transaction which amounts to compulsory acquisition does not come within the purview of S. 10(2)(vii) of the Income Tax Act. I have already extracted S. 10(2)(vii) of the Income Tax Act. The court proceeded to hold that if a transaction amounts to compulsory acquisition, then the transaction does not come under S. 10(2)(vii) of the Income Tax Act. They proceeded to hold as follows:

“The question arises whether the present transaction does or does not amount to compulsory acquisition. The contention raised on behalf of the assessee company is that it is acquisition because S. 7 itself describes the transaction as compulsory purchase. The learned counsel argued that “compulsory purchase” is only another and equivalent expression for “compulsory acquisition”. This is not correct. The term “compulsory purchase” is not defined in the Electricity Act. We must therefore consider its meaning as commonly understood in this country. Lord Morton of Henryton in Hudson's case gave his dissenting judgment and based it on the argument that compulsory acquisition of property had been described in the legislative practice of Great Britain as compulsory sale. The Supreme Court in Dunkerley's case noticed this argument and held that this ratio does not apply to our country (vide para 32 of the judgment) and approved of the majority view in Hudson's case to the effect that bargain is an essential element in a transaction of sale. Even in England Lord Simonds in Hundson's case when considering the expression “compulsory sale” observed as follows:

“There are aspects of a so-called compulsory sale which clearly distinguish it from a sale stricto sensu and I am not satisfied that without some context to aid it the word ‘sale’ in an Act of Parliament should be held to include a transaction which is more accurately, and, I think, now more commonly, described as a compulsory acquisition………

23. It has not those elections which in some degree assimilate a compulsory sale to a sale simpliciter and make the name, if a misnomer, at least a convenient misnomer. It was easy to describe as a purchase or sale with the qualifying adjective ‘compulsory’, a transaction in which the parties were placed in a position to negotiate and, apart from the power of compulsion in the background, were not unlike an ordinary vendor and purchaser’.

It is clear from these observations that a compulsory sale is brought about by negotiations. I am, therefore, of the opinion that neither ‘compulsory sale’ nor ‘compulsory purchase’ equates with ‘compulsory acquisition’. That being so there was no compulsory acquisition in the present case.

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Both in England and in India one of the essential factors of a transaction of sale is that there must be an agreement express or implied to sell, i.e, there must be a mutual assent between the parties.”

24. The court proceeded to ultimately hold that the transaction amounted to sale under S. 10(2)(vii) of the Income Tax Act. In the course of the judgment, the court proceeded to repel the stand of the Company that the element of mutuality is lacking in the case holding that the rules show that a draft licence has to be sent by an applicant for licence containing definite and specific terms on which the licence is sought, which amounts to an offer, which the Government accepts or rejects and the licence itself amount Jo a contract between the parties.

25. In Matajog Dobey v. H. C. Bhari (AIR 1956 SC 44) one of the questions which arose was whether there was implied power to remove the obstruction caused to the discharge of his duties by the officer under the Taxation on Income (Investigation Commission)’Act. The court proceeded to hold as follows:

“Where power is conferred or a duty imposed by statute or otherwise, and there is nothing said expressly inhibiting the exercise of the power or the performance of the duty by any limitations or restrictions, it is reasonable to hold that it carries with it the power of doing all such acts or employing such means as are reasonably necessary for such execution.”

26. Learned counsel for the respondents 1 and 2 apparently seeks to invoke the principle laid down in the said decision to contend that when the notification under S. 4 is issued so that the land may be acquired, it should be understood as also containing the implicit power to acquire the property by way of purchase of the property by way of execution of sale deeds and therefore the sale deeds executed in this case by the land owners must be treated as fulfilling the statutory manthra of they being compulsory acquisition under the law relating to acquisition. Learned counsel also took me through the terms of the sale deed. It is pointed out that the sale deed executed has the following statements:

“(1) AND WHEREAS the aforesaid properties were ordered to be acquired for the development of Info Park Kerala as per Govt. Order (MS) No. 46/2005 dated 10.5.2005 ITD and as per Govt. Order No. 24/2005 dated 6.10.2005 the said acquisition was included by the Government under Fast Track Proceedings.

(2) On the basis of my agreeing to the above order fully, subject to orders, the Land Acquisition Special Tahsildar, Kochi Refineries, Vyttila, Tripunithura has taken possession of the said properties including the Schedule property, as per above order, on 13.9.2007 and made over to Info Park, Kerala for the development of Info Park, Kerala.”

27. Thus it is contended that reference is made to the sale being in consequence of the acquisition proceedings under the Land Acquisition Act and the possession being handed over to the Tahsildar. However, it is also apposite to refer to the other portions of the sale deed, the free translation of which is produced as Ext. R1(b). After referring to the Government Order, which I have already extracted, it is stated as follows:

“In pursuance of this, due to the disputes raised by the owners of the properties including the scheduled properties, a District Level Purchase Committee headed by the District Collector was formed and the said committee after holding discussions with the land owners about the value of land, submitted its recommendations to the Government. However, since the land owners did not agree to the land value so approved by the. Government and thereupon a Grievance Redressal Cell headed by the District Collector met on 19.9.2006 and submitted revised recommendations to the Government. Accordingly, the Grievance Redressal Cell headed by the District Collector fixed a value of Rs. 84,268/- (Eighty four thousand two hundred sixty eight) in respect of 2.40 ares of land described in the Schedule which has got tarred road access, which was approved by the Government by G.O(MS) 26/06 vi.sa.va dated 22.12.2006 and this was fully agreed to by us. In order to rehabilitate the 42 residents from the acquired land the Government issued orders on 20.4.2007 to assign 5 cents each free of cost. But not being satisfied with this, when the evacuees including us resorted to agitational methods and legal action, the District Collector submitted a new rehabilitation package to the State Level Empowered Committee (SLEC) to acquire land under Fast Track Scheme and the SLEC after discussions, submitted the same for the consideration of the Cabinet and the Government after examining the Scheme, canceling the earlier order to assign 5 cents to the 42 residents, issued order as per M.S 12/07 vis.a.va dated 29.6.2007 wherein it was ordered to assign 6 cents of land each free of cost to 59 residents including the 41 residents including us and the 18 nuclear families residing with them and to allow grant of Rs. 1 Lakh each to such extra families residing with 41 residents for construction of house and to those 31 families who surrender more than 15 cents to give 5 cents of lands extra at Government rates and to allow 50% more than the value fixed for the buildings in 2005 to the building owners towards the value of the building and to allow to dismantle the building and to take the usable things therefrom without any cost and to allow a lumpsum for dismantling the building and promised that the basis amenities for rehabilitation like road, electricity, water will be arranged.

Though the amount fixed as aforesaid was more than the market value of the properties including the schedule properties that was prevailing at the time of issue of notification u/S. 4(1) of the Land Acquisition Act, it was in view of the peculiar circumstances of Info Park, Kerala that an amount which was more than a sum consisting of the market value, its solatium and other compensation amounts that are payable when properties are acquired under the Land Acquisition Act and other better benefits demanded by us became liable to be paid to us who are the land owners, in the circumstances aforesaid, by the Government and Info Park, Kerala.”

28. The recitals in Ext. R1(b) would trace the title of the vendor and it further goes on to show that the vendor has given consent letter willingly as per mutual agreement in consideration of total amount consisting of the cost towards the price of the land and also in terms of the package which formed the total consideration, which included the value of the trees and improvements and also six cents of land separately allowed to the vendor free of cost as per G.O(MS) 12/07 besides the enhanced value of the building, demolition charges and further amounts being paid to the land owner. It is further stated that the vendor absolutely agree to transfer the property by way of sale and they agreed that the petitioner may possess the properties, pay tax in their name and apply for mutation. The usual covenants found in a sale are also to be found in the document. After having considered the terms of the sale as also the attendant circumstances, and the circumstances which began with the issuance of notification under S. 4(1), I am of the firm view that the sale deeds would constitute sale under the Transfer of Property Act and cannot be treated as a compulsory acquisition under the law for acquisition of immovable property. As already noticed, there was no divesting of the title of the land owners under S. 16 of the Land Acquisition Act, namely, passing of an award, and possession being taken thereunder or by possession being taken earlier under the urgency clause, namely S. 17. The mere issuance of notification under S. 4(1) does not have the effect of divesting of title of the land owner. Only if there were such divesting of the title of the land owner, and amounts were paid either as compensation or as enhanced compensation, could it be said that there is compulsory acquisition under the law for the time being in force. It may be true that when the notification under S. 4 was issued, the choice of action of the land owners became limited. Faced with the notification under S. 4 of the Land Acquisition Act, there are three courses of action, which can be contemplated. Land owner may prefer Writ Petition challenging the notification itself. Instead if he is so advised, he may decide to transfer his right to the Government. If neither of the two happens and the Government does not decide to withdraw from the notification, the proceedings may be continued under the Land Acquisition Act where it reaches the stage where an award is passed determining the compensation and unless possession is taken under the urgency clause earlier possession is taken and Government becomes the owner of the property. I would think that unlike the facts in the case law cited by the learned counsel for the respondents, this is not a case where the property was requisitioned or otherwise acquired. The title passed to the petitioner only on the strength of the sale deeds executed by the land owners concerned. A perusal of the sale deeds also would appear to dearly support the contention of the petitioner that there was a voluntary transaction entered into by a willing owner to transfer after a number of negotiations, which consumed considerable time. Even if the choice were limited, the question posed before me being whether there was a compulsory acquisition under the law in force, the answer can only be that there was no compulsory acquisition even though it may be true that, but, for the execution of the sale deeds, it may have led to compulsory acquisition under the Land Acquisition Act. But short of that stage being reached, it is not open to the respondent department to contend merely because the notification is issued under the Land Acquisition Act and even assuming that a declaration is also issued, which according to the petitioner, was not issued, S. 194LA is attracted. The fact that Government itself invoked S. 48 withdrawing from the acquisition is another circumstance which I feel should weigh the matter in favour of the petitioner. It is clear therefrom that possession was not taken under the Act, that is either under S. 17 or S. 16. In the decision reported in Jasraj v. State (AIR 1977 Raj. 150) the court held as follows:

“The effect of an order under S. 48 of the Act Is to completely take away S. 4 notification. Once that order i.e under S. 48 of the Act has been passed, result is that the Government has withdrawn from the acquisition of land which formed the subject matter of S. 4 notification. Thereafter, if it wants for any reason to start acquisition proceedings, the only manner permissible in law is by issuing a fresh notification under S. 4 of the Act. tt cannot by resort to the power under S. 23 of the General Clauses Act revive and bring back S. 4 notification which was wiped away and ceased to exist when order under S. 48(1) of the Act was passed. The position under the law is that an order under S. 48 of the Act has the result of withdrawing the notification issued under S. 4. This means that there is a clear slate and if subsequently the Government wants to acquire the land it must start from the stage of issuing a fresh notification under S. 4 of the Act.”

29. Once a notification under S. 4 is effaced by way of withdrawal, the only way it can restart the acquisition proceedings, if so advised, is to issue a fresh notification. This means, in the facts of this case, that even though Government started out by issuing a notification under S. 4 of the Land Acquisition Act, it became unnecessary to proceed with the acquisition as the land owners had executed sale deeds in favour of the petitioner. It is not in dispute that the Government adopted Ext. P1 guidelines relating to the fast track procedure and in keeping with the fast track procedure in one stream of cases, where land owners were agreeable with the negotiations, the sale deeds were executed. The other stream where negotiations did not yield the desired result, left the Government with no choice but to proceed under the law relating to acquisition. Regarding the first stream of cases, it is clear that though there was a shadow of acquisition under the Land Acquisition Act, the parties felt it advisable to ward off the actual acquisition under the Act and instead proceeded to execute sale deeds. There is no case of any fraud, misrepresentation or other vitiating elements afflicting the sale deeds. It cannot be said that the sale deeds have been executed under the Land Acquisition Act. There is no provision in the Land Acquisition Act which empowers or enables the execution of the sale deed as done in this case. There is no merit in the contention of the respondents that the sale deeds were executed in exercise of the incidental power. It may be true that the Land Acquisition Act does not prohibit a sale in favour of the Government or authority. In fact even after the notification is issued and till there is vesting of the title with the Government under S. 16 or under S. 17, there is no prohibition against a sale by a land owner. But the absence of a prohibition does not mean that the sale deed is executed in the exercise of incidental powers. There is no warrant or need to trace the right of the landowner to any such incidental power in the matter of an inter vivos transaction as a sale even after a notification under the Act or a declaration is not prohibited.

30. In such circumstances, I am of the view that invoking S. 194LA of the Income Tax Act in respect of cases where sale deeds were executed in favour of the petitioner was totally without jurisdiction. Ext. P4 palpably has no legs to stand on. Accordingly, the Writ Petition is only to be allowed and I do so. I quash Ext. P4.