HC orders BMC to refund to builder ₹9.91 cr deducted as TDS

Bombay HC directs BMC to refund ₹9.92 crore to real estate company as TDS cannot be levied on land acquisition compensation under the Land Acquisition Act.

MUMBAI: Holding that tax deducted at source (TDS) cannot be levied for land acquisition compensation, the Bombay high court on Thursday directed the Brihanmumbai Municipal Corporation (BMC) to refund to Bombay Real Estate Development Company an amount of ₹9.92 crore.

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Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, “unequivocally provides that no income tax or duty shall be levied on any award or agreement made under the Act,” said the bench comprising justice MS Sonak and justice Kamal Khata.

The bench added that the only exception to this was the acquisition made under Section 46 of the Act, which did not apply to the BMC’s acquisition of 9,302 square metres of land at Poisar, Kandivali, belonging to the construction company, to build a cemetery. Section 46 removes certain entities like government-aided bodies from the benefit of tax exemption.

As the exemption under Section 96 of the Act would squarely apply in this case, the BMC should not have deducted the TDS from the compensation amount paid to the petitioner, the bench said.

The high court was hearing a petition filed by the Bombay Real Estate Development Company challenging the BMC’s decision to deduct TDS. The civic body took over the land in November 2022 under an agreement with the construction company, under which the price was fixed at ₹99.19 crore. However, in February 2023, the BMC transferred only ₹89.27 crore, claiming that the balance amount of around ₹9.92 crore was deducted as TDS.

The court has now directed the BMC to file a correction statement with the Income Tax authorities in 30 days, declaring that the amount of ₹9.92 crore was not liable to be deducted. The Income Tax authorities were, in turn, directed to process the correction statement so as to refund the amount to the company.