THE SCOPE AND APPLICABILITY OF SECTION 96 VIS-À-VIS SECTION 24(2) OF THE RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION, REHABILITATION AND RESETTLEMENT ACT, 2013

Senguttuvan K- Partner

Kshithija Prakashan-Associate

I. INTRODUCTION

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is a novel legislation introduced and enacted under the Concurrent List that replaced the very ancient and primordial legal framework governing acquisition of land proceedings enacted during the British Era, namely The Land Acquisition Act, 1894. The novel replaced legislation aims to focus on granting enhanced and fair compensation to all the beneficiaries whose land has been acquired by the appropriate government and further, to ensure transparency to the land acquisition proceedings and warranting rehabilitation and resettlement for those affected. One could ascertain the very objective of enacting this novel legislation is to bring into effect, a more cohesive legal framework governing the disputes of land acquisition proceedings, thereby necessitating a combined law, focusing on fair compensation and making adequate provisions for rehabilitation and resettlement for the land losers. A glimpse into Clause 18 of the Statement of Objects and Reasons of the 2013 Act provides that, “The benefits under the new law would be available in all the cases of land acquisition under the Land Acquisition Act, 1894 where award has not been made or possession of land has not been taken.”[1] As rightly explained by the Hon’ble Supreme Court of India in the case of Ramji Veerji Patel & Ors. vs. Revenue Divisional Officer & Ors.[2], in relation to Land Acquisition Act, 1894 (“Old Act”) having observed that, “The provisions contained in the Act of late, have been felt by all concerned; do not adequately protect the interest of the land owners/persons interested in the land. The Act does not provide for rehabilitation of persons displaced from their land although by such compulsory acquisition, their livelihood gets affected. For years, the acquired land remains unused and unutilized. To say the least, the Act has become outdated and needs to be replaced at the earliest by fair, reasonable and rational enactment in tune with the constitutional provisions, particularly, Article 300A of the Constitution.” This corroborates one of the reasons for the former Act to be replaced and substituted by the current legislation, The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

II. ESSENCE OF SECTION 24

(a) Effect of Non-Obstante clause

A non-obstante clause is generally appended to a section with a view to give the enacting part of the section, in case of conflict, an overriding effect over the provision in the same or other Act mentioned in the non-obstante clause. It is equivalent to saying that in spite of the provisions or Act mentioned in the non-obstante clause, the provision following it will have its full operation or the provisions embraced in the non-obstante clause will not be an impediment for the operation of the enactment or the provision in which the non-obstante clause occurs.[3]

Where a provision in an Act contains a non-obstante clause, which is of wide amplitude, it not only overrides the provision of the Act but also overrides the provision of any other for the time being in force. Such a non-obstante clause must be given its full effect.[4] The non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment.[5] 

(b) Effect of Transitional Provision

Transitional provisions in a statute are those provisions which are inserted, in order to effect a smooth ‘transaction’ from the pre-statute position to the position resurrecting from the statute in question. They may become necessary in view of the fact that the statute in question makes new or radically altered provisions which vitally affect the existing set-up. Merely to say that an enactment comes into force on a specified date is not enough. The draftsman has to set out the details as to how and when the transition from the old to the new is to be effected. This aspect has been lucidly put by lord Bridge: “The purpose of transitional provision is to facilitate the change from one statutory regime to another.”[6] 

(c) Effect of Conjunctive and Disjunctive Words

The word ‘or’ is normally disjunctive and ‘and’ is normally conjunctive [7] but at times they are read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context.[8] As pointed out by LORD HALSBURY the reading of ‘or’ as ‘and’ is not to be resorted to, “unless some other part of the same statute or the clear intention of it requires that to be done.”[9] Where a provision is clear and unambiguous, the word ‘or’ cannot be read as ‘and’ by applying the principle of reading down.[10]

Speaking generally, a distinction may be made between positive and negative conditions prescribed by a statute for acquiring a right or benefit. Positive conditions separated by ‘or’ are read in the alternative [11] but negative conditions connected by ‘or’ are construed as cumulative and ‘or’ is read as ‘nor’ or ‘and.’[12] In Section 11 of the Suits Valuation Act, 1887, clauses (a) and (b) of sub-section (1) although separated by the word ‘or’ have been read conjunctively as that is the obvious intention disclosed by sub-section (2).[13] 

III. THE OVERVIEW

Section 24(1) begins with a “non-obstante clause” focusing on the situations where land acquisition proceedings has been initiated under the Land Acquisition Act, 1894. It entails two clauses, signifying two different scenarios. Under Section 24(1)(a), it contemplates a scenario wherein no award under Section 11 of the erstwhile legislation of Land Acquisition Act, 1894 was made but however, the proceedings of land acquisition has been initiated under the said Act, then the applicability of the provisions of the current Act of 2013 in terms of determining the compensation alone would be made. Precisely, this provision contemplates only a limited applicability of the 2013 Act and thus, does not require the entire exercise of the land acquisition proceedings to be initiated de novo under the Act of 2013.

Section 24(1)(b) on the other hand, is the larger umbrella clause under Section 24, which protects the vested rights of the parties under the Land Acquisition Act, 1894, if the stage of passing of award has been crossed.[14] This provision stipulates a scenario wherein an award has been made under Section 11 of the 1894 Act, then the provisions of that said Act shall continue to apply to the entire land acquisition proceedings and nevertheless, the provisions of the Act of 2013 would be inapplicable.

Section 24(2) is more of a ‘lapsing clause/ provision’ under Section 24, which highlights the rigorous application of the Act of 2013 in its entirety, by mandating the land acquisition proceedings to be initiated de novo. Section 24(2) also begins with a non-obstante clause and contemplates a scenario where land acquisition proceedings initiated under the Land Acquisition Act of 1894 shall be deemed to have lapsed and a de novo exercise of the land acquisition proceedings shall be made applicable as per the provisions of the 2013 Act. According to this provision, twin conditions must be satisfied for the land acquisition proceedings to be initiated de novo under the Act of 2013, including the involvement of having an award being made under the land acquisition proceedings already initiated under the Land Acquisition Act of 1894. It is significant to contemplate the embargo laid on Section 24(2), highlighting a period of five years or more before the commencement of the Act, having an award been made already under Section 11 of the Land Acquisition Act, 1894. This embargo signifies the consequent action of land acquisition proceedings having been initiated through an award under Section 11 of the 1894 Act, subject to twin conditions:

  • Physical possession of the land has not been taken; or
  • Compensation has not been paid.

On the fulfillment of these twin conditions, the said land acquisition proceedings already initiated under the Act of 1894 through an award as per Section 11 of the said Act, shall be deemed to have lapsed and de novo land acquisition proceedings shall be initiated in accordance with the provisions of 2013 Act. To be accurate, Section 24(2) is related to Section 24(1)(b) as an exception, wherein land acquisition proceedings would lapse in certain contingencies even when an award under Section 11 of the 1894 Act had been made. Section 24(2) is unrelated to Section 24(1)(a) as it does not stipulate an award to be made under Section 11 of the said 1894 Act at all.

The Proviso appended to Section 24 is a continuation of Sub-section (2) of Section 24, i.e., the proviso is a part of Section 24(2). The proviso is a wholesome provision and in fact, it fits in the context of Section 24(2). As per the said proviso, where an award has been made and compensation in respect of a majority of land holdings has not been deposited in the account of the beneficiaries, then all such beneficiaries as specified in the notification for acquisition under Section 4 of the said Land Acquisition Act, shall be entitled to compensation in accordance with the provisions of 2013 Act. One may deem the said Proviso to be a continuation of Section 24(2), wherein an award under the erstwhile Land Acquisition Act, 1894 had been made with the subsistence of such land acquisition proceedings, nevertheless, all the beneficiaries as specified in the notification shall be entitled to compensation in accordance with the provisions of the current Act of 2013. The Proviso essentially limits the application of the 2013 Act to only conferring the entitlement of compensation to all the beneficiaries as specified in the notification for acquisition under Section 4 of the 1894 Act.

IV. ESSENCE OF SECTION 96

Section 96 of the current Act of 2013 stipulates Exemption from Income-tax, stamp duty and fees. This section is more of a beneficial provision, wherein no income tax or stamp duty shall be levied on any award or agreement made under the Act of 2013 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same. This section entails an exception concerning Section 46, to which the applicability of this provision is not favoured. Section 46 deals with the purchase of land by a person other than a specified person through private negotiations. Therefore, the benefit of Section 96 is not available when a land is purchased through private negotiations as mentioned under Section 46. Thus, in cases other than those covered by Section 46 of the 2013 Act, the levy of income-tax is barred by Section 96 and as a consequence, the deduction or collection under Section 194LA of the Income-Tax Act, 1961 is impermissible.[15]

V. APPLICABILITY OF SECTION 96 IN THE BACKDROP OF SECTION 24(2) PROVISO

As stated earlier, Section 96 of the current Act of 2013 is a favorable provision to all the beneficiaries who lost their land in the land acquisition proceedings. Section 96 attempts to confer a favorable situation to the beneficiaries by exempting them from paying their income-tax and other stamp duty and fees, subject to the award or agreement made under the provisions of the 2013 Act. Though this provision has centered itself to the benefits that it confers, the provision seems to have created an ambiguity among the tax payers regarding taxability of compensation received on compulsory acquisition of non-agricultural land.[16] It was argued that the said provision was wider in scope than the concerned provisions under the Income-Tax Act, as it do not make any distinction between agricultural land and non-agricultural land. This was subsequently resolved by a Circular No. 36/2016 issued by the Central Board of Direct Taxes on 25th October, 2016, clarifying that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide Section 96 of the 2013 Act, shall also not be taxable under the provisions of the Income-Tax Act, 1961, even if there is no specific provision of exemption for such compensation in the Income-Tax Act, 1961.[17] Thus, this circular brought clarity to the issue that all compensation are exempted under Section 96 of 2013 Act from being levied of Income-tax and stamp duty and consequently, such compensation shall also be exempted under the Income-Tax Act, 1961, irrespective of the fact that if land is classified as agricultural or non-agricultural land.[18]

This issue was recently discussed by the Kerala High Court in a Writ Petition filed by Mr. Viswanathan M, in the case of Viswanathan M vs. CCIT[19], where the issue under consideration was “whether the exemption will be allowed against compensation paid for acquired land?” In this case, a considerate cents of land belonging to the Petitioner was acquired by the government under a sale agreement for the purpose of expansion of road. As per the sale agreement duly executed between the parties, 80% of the compensation was paid to the Petitioner and the remaining balance was pending to be paid. However, consequent to this, the Assessing Officer duly issued a notice under Section 143(1) of the Income-Tax Act, 1961, to the Petitioner requiring him to pay the income-tax on the compensation received. The Petitioner urged that he is exempted from paying the income-tax on the compensation received by relying on the provision of Section 96 of 2013 Act. The Petitioner also placed his reliance on the Circular No. 36/2020 issued by the CBDT, clarifying the position that land, whether agricultural or non-agricultural, when acquired through compulsory acquisition or under an agreement, the compensation paid with this respect would not be taxable as under the 2013 Act as well as the Income-Tax Act, 1961. The Kerala High Court having ruled the decision in favour of the Petitioner has held that “the language of Section 96 of the RFCTLARR, Act, 2013, do not leave any doubt in the mind that if the land is either acquired or the result of an agreement, it could not fall within the mischief of Income-Tax Act, in other words, exemption is liable to be granted.” [20] Since, Section 96 of the 2013 Act explicitly mentions no levying of income-tax or stamp duty on any award or agreement made under the said 2013 Act, therefore, irrespective of the acquisition of land by the appropriate government, either under an agreement or by compulsory acquisition, it has been clarified by the CBDT’s circular on granting exemption from payment of income-tax on the compensation as per Section 96 and as well as, under the provisions of the Income-Tax Act, 1961.

As understood under Section 11 of the Land Acquisition Act, 1894, the term ‘award’ stipulates three criterions, the Collector is mandated to render: (a) true area of the land; (b) compensation which in his opinion should be allowed for the land; and (c) apportionment of the said compensation among all the persons known or believed to be interested in the land. Section 11 of the 1894 Act resembles Section 23 of the 2013 Act. Since, the Proviso to Section 24(2) contemplates a scenario wherein an award has been made and compensation in respect of a majority of land holdings has not been deposited in the account of the beneficiaries, then such beneficiaries shall be entitled to compensation in accordance with the provisions of 2013 Act, then one can contemplate the rigorous application of Section 96 against the Proviso to Section 24(2). Though it may be argued that under the Proviso, an award had been made as per the provisions of the Land Acquisition Act, 1894, nevertheless, the compensation in respect of a majority of land holdings has not been deposited in the account of the beneficiaries, then application of the provisions of 2013 Act for the purpose of determining and conferring the benefit of paying compensation shall be made.

Considering the Proviso to be a continuation/extension of Section 24(2), where land acquisition proceedings had been initiated under the 1894 Act and an award under Section 11 of the said Act has been made five years or more prior to the commencement of the 2013 Act, but physical possession of the land has not been taken or the compensation has not been paid, then such proceedings shall be deemed to have lapsed and exercise of de novo land acquisition proceedings has to be initiated at its entirety under the 2013 Act, the Proviso still holds good for the application of Section 96 to be favoured, as the award has already been made under the 1894 Act, but compensation has not been deposited in the account of beneficiaries, then the very reason for invoking the provisions of 2013 Act for payment of compensation, shall be employed for the application of Section 96, i.e., exempting those beneficiaries from paying income-tax. Precisely, for a person whose land has been acquired as per the land acquisition proceedings of 1894 Act and its physical possession has also been taken but compensation has not been paid, then in such a scenario, he is entitled to receive the compensation as per the provisions of 2013 Act, and thus, consequently, can also invoke Section 96 for its application.  

[1] https://www.mondaq.com/india/real-estate/576510/retrospective-applicability-of-larr-act-2013

[2] MANU/SC/1288/2011

[3] See ‘Principles of Statutory Interpretation’ by Justice G.P. Singh, Ninth Edn., Chapter V, Synopsis IV at pp. 318 and 319, referred in State of Bihar v. Bihar M.S.E.S.K.K. Mahasangh, AIR 2005 SC 1605

[4] Swapan Kumar Achariya v. Subhas Chandra Bhattacharjee, AIR 1998 Cal 271 at p. 272

[5] See G.P. Singh’s ‘Principles of Statutory Interpretation’, Ninth Edn., pp. 318-320, referred in Iridium India Telecom Ltd v. Motorola Inc., AIR 2005 SC 514

[6] Britnell v. Secretary of State for Social Security, (1991) 1 WLR 1980

[7] Hyderabad Asbestos Cement Product v. Union of India, JT 1999 (9) SC 505

[8] Ishwar Singh Bindra v. State of U.P., AIR 1968 SC 1450, p.1454

[9] Mersey Docks and Harbour Board v. Henderson Bros., (1888) 13 AC 595, p.603

[10] Union of India & Ors. v. Rabinder Singh, (2012) 12 SCC 787, p. 795

[11] Star Co. Ltd v. Commr. Of Income Tax, AIR 1970 SC 1559

[12] Patel Chunibhai Dajibha v. Narayanrao, AIR 1965 SC 1457, p. 1465

[13] Kiran Singh v. Chaman Paswan, AIR 1954 SC 340, p. 345

[14] https://main.sci.gov.in/supremecourt/2016/8700/8700_2016_3_1501_21394_Judgement_06-Mar-2020.pdf, Para 10, Pg 8

[15] https://taxguru.in/income-tax/no-income-tax-award-made-rfctlaar-act-2013.html

[16] https://www.taxscan.in/compensation-received-compulsory-land-acquisition-not-subject-income-tax- cbdt/3703/

[17] https://www.incometaxindia.gov.in/communications/circular/circular362016.pdf

[18] https://database.taxsutra.com/articles/a79907a984ef2572fd2d5a1a5afbc8/expert_article

[19] WP (C) No. 3227/2020

[20] https://taxguru.in/wp-content/uploads/2020/05/Viswanathan-M.-Vs-Chief-Commissioner-Kerala-High-Court.pdf

 

 

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