Smt. Yashoda vs. The Deputy Commissioner

The petitioners claim that the land belonging to them measuring to an extent of 2330 square meters in Sy.No.21/34 of Basavanahalli Village and Post, Kushal Nagar Taluk, Coorg District, was acquired by the Union of India for the purposes of respondent No.3 for widening Mysuru - Madikeri Highway. An award was passed determining the compensation payable at a sum of Rs.50,72,872. 92. The respondent No.2 deducted a sum of Rs.7,49,946.20 being 18% GST out of the compensation payable to the petitioners. The petitioners claim that they are not liable to pay GST as acquisition of land cannot be construed as sale of goods or providing of service. The HC-KAR

The learned counsel for the petitioners reiterated the above contentions and submitted that the provisions of the Central Goods and Service Tax Act, 2017 (henceforth referred to as 'GST Act') is not applicable to an acquisition of land. He also contends that provisions of the Income Tax Act, 1961, also are not applicable whenever agricultural land is acquired and compensation is paid. He submits that this Court in W.P.No.35685/2025 and connected cases has already taken a view that no TDS can be deducted from the compensation payable. He also contends that there is no sale of any goods or provision of any service for provisions of the GST Act to be attracted. He therefore, submits that the deduction of GST from the compensation payable to the petitioners is not only arbitrary but a colourable exercise of power.

Learned counsel for respondent Nos.2 to 4 contends that the GST Act mandates levy of GST on works contract/structure valuation and the same was applied uniformly to all landlosers. It is contended that the petitioners HC-KAR

I have considered the submissions of the learned counsel for the petitioners as well as the learned counsel for respondent Nos.2 to 4. 6. The fact that the property of the petitioners are acquired for widening of the road by the Union of India is not in dispute. It is also not in dispute that a sum of Rs.50,72,872.92 was determined as compensation payable in respect of the land and building/s acquired. It is also not in dispute that the respondent No.2 has deducted a sum of Rs.7,49,946.20 towards 18% GST. An immovable property is defined under Section 3 of the Transfer of Property Act, 1881, to include everything attached to it or imbedded for the beneficial enjoyment of the immovable property. This therefore means HC-KAR

Though the learned counsel for respondent Nos.2 to 4 have contended that GST Act mandates levy of GST on works contract/structure valuation and the same was applied uniformly to all landlosers, they failed to explain under what provision of the GST Act, the acquisition of a land or structure would amount to supply of goods or provision of service. As a HC-KAR

This Court, while considering whether income tax could be deducted at source on the interest on compensation paid to a landloser, held that tax cannot be deducted at source even on the interest awarded under Section 28 of the Land Acquisition Act, 1894, as that forms part of the compensation and such interest is intended to factor inflation during the period between the determination of compensation and its payment. HC-KAR

Therefore, this Court has no hesitation to hold that the respondents have acted in excess of their power in deducting GST from compensation payable to the petitioners.

In that view of the matter, the award notice bearing No. LAQ/NHAI/NH-275/AWD/Supplementary-AWD/ Basavanahalli/2023-24 dated 24.08.2024 as per Annexure – E, issued by the respondent No.2 in so far as deducting GST from the compensation payable to the petitioners is quashed. The respondent No.2 is directed to refund the GST of Rs.7,49,946.20 deducted from the compensation payable to the petitioners along with interest at the rate of 15% per annum from the date of the award till the date of payment. Interest payable on the deducted GST shall be recovered from the respondent No.2 personally. The respondent No.2 shall pay cost of Rs.50,000/- (Rupees Fifty Thousand only) to the petitioners within a month, towards the expenses incurred in filing this unwanted petition.

This petition stands disposed off on the above terms. HC-KAR

Learned High Court Government Pleader for respondent No.1 and Sri.N.Kumar, learned counsel for the respondent Nos.2 to 4 are permitted to file memo of appearance within ten days. (R. NATARAJ) JUDGE