IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN WEDNESDAY, THE 3RD MARCH 2010 / 12TH PHALGUNA 1931 WP(C).No. 3317 of 2010(L) ------------------------- AGAINST THE ORDER DATED 30/10/2009 IN EP 362/2002 IN LAR 322/82 IN EA.1004/2009 of PRINCIPAL SUB COURT,ERNAKULAM .................... PETITIONER(S): JUDGMENT DEBTOR: --------------------------------------------------------- STATE OF KERALA, REPRESENTED BY DEPUTY COLLECTOR (LA), COLLECTORATE, ERNAKULAM. BY GOVERNMENT PLEADER MR. SHYSON P.MANGUZHA RESPONDENT(S): DECREE HOLDER: ------------------------------------------------------- THE PALACE ADMINISTRATION BOARD, THRIPUNITHURA. BY ADV. MR.JOSEPH FRANKLIN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss WPC.NO.3317/2010 L APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE PETITION FILED BY THE STATE. P2: COPY OF THE ORDER DTD. 30/10/2009 IN E.A.NO.1004/2009. P3: COPY OF ORDER IN EP.NO.362/2002 ON 30/10/2009. RESPONDENT'S EXHIBITS: R1(A): COPY OF THE JUDGMENT IN I.T.R.NO.172 TO 176 OF 1982, HON.HIGH COURT OF KERALA DTD. 25/07/91. /TRUE COPY/ P.A.TO JUDGE Kss S.S.SATHEESACHANDRAN, J ------------------------------------- W.P.(C) No.3317 OF 2010 -------------------------------- Dated this the 3rd day of March 2010 JUDGMENT Writ petition is filed by the State against Ext.P2 order passed by the learned Sub Judge, Ernakulam declining the request made for deducting the income tax payable on the compensation amount deposited to satisfy the decree passed in L.A.R 322 of 1982 on the file of Sub Court, Ernakulam. State has deposited a sum of Rs.20,40,923/- as the balance amount due under the decree as compensation payable to the claimants/decree holders. An application was moved by the State that, from the compensation amount so deposited, a sum of Rs.2,09,746/- has to be deducted towards income tax as due from the decree holders. The claimants filed objections to that petition. The court below declined the request made by the Government by Ext.P2 order holding that there is no provision to deduct tax amount from the attached amount (compensation deposited). Propriety and correctness of that order is challenged in the writ petition invoking the supervisory jurisdiction vested with this court under Article 227 of the Constitution of India. 2. I heard the counsel on both sides. The learned Government Pleader inviting my attention to 194 LA of the Income Tax Act 1961 submits that the amount due as income tax W.P.(C) No.3317 OF 2010 Page numbers from the compensation payable on compulsory acquisition is liable to be deducted and failure to comply with that mandate is liable to visited with penal consequences. On the other hand the learned counsel for the respondents/claimants submitted that the members of the Cochin royal family palace are exempted from paying income tax on the income derived from the properties of the palace fund and that question has been concluded in a proceeding before the income tax Tribunal by the finding entered in a reference order passed by this court. My attention was also invited to a copy of the judgment in the reference order rendered by this court which is exhibited as R1(a) in the counter filed by the respondents. 3. Section 194 LA of the Income Tax Act clearly spells out that in respect of compensation paid on account of compulsory acquisition of any immovable property other than agricultural land, tax due has to be deducted before disbursing such compensation. Section 271(C) of the Income Tax Act states that any person who fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVIIB is liable to be penalised a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid. Section 194LA of the Income Tax Act referred to above comes within chapter XVIIB W.P.(C) No.3317 OF 2010 Page numbers of the Income Tax Act. “State of Kerala v Mariyamma” (2005 (2) KLT 587) has explained the principles applicable in the deduction of income tax from compensation awarded in Land Acquisition cases referring to the relevant provisions of the Income Tax Act. The learned Sub Judge was clearly in error in holding that there is no provision in the Income Tax Act for deducting tax on the compensation to be payable in respect of compulsory acquisition over land. Reliance placed by the learned counsel for the claimant on Ext.R1(a) reference order prima facie is found not applicable in the case of compensation payable over compulsory acquisition of land. Finding in the reference order indicate that the question that arose for consideration was income from the properties of the palace fund and how far the members of the Cochin royal family are liable for tax on such income. The learned counsel for the claimants fairly conceded that whatever amount due as tax can be deducted from the amount deposited as mandated under the Income Tax Act and the rest of the compensation already deposited be disbursed to the claimants without delay. The counsel also submitted that the cheque application filed has now been posted to 29/05/2010 in view of the pendency of the writ petition before this court. There will be a direction to the court below to prepone the cheque application W.P.(C) No.3317 OF 2010 Page numbers moved before that court and pass appropriate orders for release of the amount, subject to satisfaction of the conditions applicable under law for such release, after deducting the amount claimed by the Government as sum due to the income tax on the compensation amount deposited before the court. The learned Government Pleader also submits that further steps as required by law will be taken for remittance of the amount due as income tax on the compensation amount deposited before the court. 4. Ext.P2 order passed by the learned Sub Judge is set aside and the court below is directed to take note of the directions/observations above, and pass appropriate orders in accordance with law for release of the amount after deducting the sum due as income tax on the compensation amount. Subject to the above, the writ petition is disposed. Parties are directed to report before the court below on 29/03/2010. Send a copy of the judgment to the court concerned forthwith. Sd/- S.S.SATHEESACHANDRAN JUDGE //TRUE COPY// P.A TO JUDGE vdv