Karnataka High Court Mandates Release of Withheld TDS on Land Acquisition Compensation
The compulsory acquisition of land often leads to protracted legal battles over fair compensation. A recurring issue in such disputes is the deduction of Income Tax at source on the enhanced compensation and the interest accrued thereon. In a significant judicial pronouncement, the Karnataka High Court, in the case of Kamalakar Vs Karnataka Neeravari Nigam Ltd., addressed the legality of withholding compensation amounts under the guise of Tax Deducted at Source (TDS).
The Court categorically ruled that authorities cannot deduct income tax from the compensation payable to land losers, directing the immediate release of the withheld funds to the assessee.
Factual Matrix of the Dispute
The assessee, Kamalakar, approached the Karnataka High Court by filing Writ Petition No. 203476 of 2026 (LA-RES). The primary relief sought was a writ of mandamus directing the respondents—Karnataka Neeravari Nigam Ltd. and other state authorities—to disburse specific amounts that had been withheld from the land acquisition compensation payable to him.
According to the facts presented, the land belonging to the assessee was acquired, and while compensation was awarded, a portion of it was retained by the acquiring body. The respondents failed to produce any substantive material to justify this retention, merely suggesting during the proceedings that the withheld sums might represent deductions made towards Income Tax or TDS.