Karnataka High Court: No TDS Deduction Permissible on Land Acquisition Compensation — Withheld Amounts Must Be Released
Case Overview
Case Name: Siddanna S/O Basalingappa Vs Karnataka Neeravari Nigam Ltd (Karnataka High Court)
**Writ Petition No.😗* 203085 of 2026 (LA-Res)
Date of Order: 10/08/2025
Court: Karnataka High Court
The Karnataka High Court, in a significant ruling concerning land acquisition compensation, granted relief to a group of land losers whose compensation amounts had been partially withheld by Karnataka Neeravari Nigam Ltd. and other respondents. The Court held that deduction of income tax or TDS from compensation payable to land losers under land acquisition proceedings is neither legally permissible nor sustainable, and directed that all withheld amounts be released within three months.
Background and Facts of the Case
The petitioners in this matter were land losers who had pursued appeals challenging the original compensation awarded for acquisition of their lands. Their appeals were allowed, and enhanced compensation was directed to be paid to them. However, when the respondents — primarily Karnataka Neeravari Nigam Ltd. — proceeded to disburse the compensation amounts, they withheld varying sums from the payments due to each petitioner.
The amounts awarded, paid, and withheld in respect of each petitioner, as recorded in the order, are set out below:
| Sl. No. | MSA No. | Name | Amount Awarded (Rs.) | Amount Paid (Rs.) | Amount Withheld (Rs.) |
|---|---|---|---|---|---|
| 1 | 200061/2017 | Siddanna | 1,05,30,743 | 98,54,131 | 6,76,412 |
| 2 | 200051/2015 | Taherabee, Shakeer | 1,45,64,751 | 1,35,91,402 | 9,73,349 |
| 3 | 200050/2015 | Abdul Khadar | 1,07,14,112 | 99,85,049 | 7,29,063 |
| 4 | 200190/2017 | Maharudrappa | 27,98,735 | 89,28,883 | 5,98,602 |
| 5 | 200019/2018 | Shailaja | 49,27,367 | 46,13,036 | 3,14,331 |
| 6 | 200049/2015 | Sunanda and Ors. | 1,70,13,834 | 1,59,30,526 | 10,83,308 |
| 7 | 200214/2017 | Subhaschandra | 32,56,565 | 30,56,565 | 1,87,420 |
| 8 | 200229/2017 | Revanasiddappa | 54,32,449 | 50,79,081 | 3,53,368 |
| 9 | 200181/2017 | Maheboob Sab | 28,02,882 | 26,40,581 | 1,62,301 |
| 10 | 200182/2017 | Maheboob Sab | 52,56,157 | 48,37,640 | 4,18,517 |
| 11 | 200187/2017 | Maheboob Sab | 9,86,718 | 9,29,624 | 57,094 |
The above withheld amounts, communicated through correspondence dated 30.01.2026, formed the subject matter of the writ petitions.
The Dispute Before the Court
The petitioners challenged the withholding of amounts on the ground that no such deduction could lawfully be made towards income tax or TDS on land acquisition compensation. The respondents, on the other hand, could not place any documentary material before the Court explaining the precise basis for withholding these sums, though their counsel suggested that the deductions might have been made towards income tax or TDS liability.
The Court proceeded to examine the legal position by placing reliance on two coordinate decisions of the Karnataka High Court.
Precedents Relied Upon
Karnataka Neeravari Nigam vs. The State and Ors. — W.P. No. 226178/2020 dated 02.04.2026
This earlier matter involved long-pending land acquisition disputes relating to various irrigation projects of Karnataka Neeravari Nigam Limited. Given the protracted nature of the litigation and the failure to disburse compensation within a reasonable timeframe, the Court directed that the disputes be referred to mediation under the guidance of Hon'ble Sri Justice A.V. Chandrashekhar (Retired) as Mediator.
Following several rounds of mediation, the parties arrived at a mutually acceptable settlement, which was reduced to writing and recorded as a Mediation Agreement. The agreement addressed critical aspects including the market value of land (quantified at Rs. 1,64,223/- per acre for dry land), interest components, timelines for payment, and the closure of pending proceedings. The settlement was also treated as a lawful settlement within the meaning of Section 89 of the Code of Civil Procedure, 1908 read with Order XXIII Rule 3 CPC.