Monday, November 2, 2015

Land acquired under an agreement not to be held as compulsory acquisition under Sec. 194LA

The question of compulsory acquisition will arise only where the compensation cannot be determined by agreement. In other words when the compensation is based on an agreement between State Government and owner of the land, no more can we say that it is a compulsory acquisition.
The disputed issue is as under:
Whether acquisition of land under an agreement by Karnataka Industrial Area Development Board (a state Government Undertaking) with landowners under the Karnataka Industrial Areas Development Act, 1966 (‘KIA Act’) would be deemed as compulsory acquisition within the meaning of Sec.194LA?”
Held:
1)    Section 194LA applies only when there is a compulsory acquisition under law. Under compulsory acquisition, the seller has no option but to sell the land. He cannot even negotiate the price as same is fixed by statute itself.
2)    In the instant case, the land owners and a State Government Undertaking (i.e., assessee) entered into an agreement whereby they mutually agreed for the amount of compensation which was fixed in accordance with Section 29(2) of the KIA Act.
3)    The question of compulsory acquisition will arise only where the compensation cannot be determined by agreement. In other words when the compensation is based on an agreement between State Government and owner of the land, no more can we say that it is a compulsory acquisition.
4)    In the instant case, compensation was based on an agreement between State Government and owner of the land, and, therefore, it could not be said to be a case of compulsory acquisition. Thus, once the acquisition is not considered as compulsory, Sec.194LA of the IT Act will not be applicable.
5)    The matter was remanded back to AO for verification whether in all the cases payment was made under agreement only. Once it was found that the acquisition resulted through an agreement, it would not be considered as compulsory acquisition- Karnataka Industrial Area Development Board v. ITO [2015] 62 taxmann.com 393 (Bangalore - Trib.)


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