JUDGMENT : [WA Nos.1250/2014, 1295/2014, 1296/2014, 1538/2014, 1539/2014, 1728/2014, 1729/2014, 1818/2014, 1819/2014 & 170/2015] Bechu Kurian Thomas, J. The issue that arises for consideration in this batch of writ appeals relate to the question whether tax is liable to be deducted at source for amounts paid as compensation arrived at under negotiated settlements during acquisition of property. The learned Single Judge held that tax cannot be deducted at source under Section 194LA of the Income Tax Act, 1963 (for short, 'the Act') in respect of compensation paid to the land owners which was arrived at based on negotiated settlements. 2. The above question springs from proceedings for acquisition of land initiated under Section 11 of the Land Acquisition Act, 1894 (for short, 'the LA Act') for implementing the Kochi Metro Rail Project. After proceedings were initiated for the acquisition of property under the L.A. Act, negotiations were held and settlements were arrived at with the respective land owners by the District Level Purchase Committee. In effect consent awards were passed by the District Collector under Section 11(2) of the LA Act, pursuant to the agreement between the parties on the price payable for the land acquired as compensation. The writ petition was filed contending that the lands having been purchased by the Government, on the basis of negotiated settlements, there is no compulsory acquisition and hence Section 194LA of the Act was not applicable. Reliance was placed on the decisions reported in Info Park Kerala v. Asst. Commissioner of Income Tax [ 2008 (4) KLT 782 ] as well as in Thomas v. District Collector [ 2013 (3) KLT 941 ]. 3. The learned Single Judge upheld the claim of the writ petitioners and allowed the writ petitions by restraining the revenue officials from deducting any tax at source under Section 194LA of the Act, in respect of the compensation paid to the writ petitioners. 4. The learned counsel for the appellant at the threshold submitted that the issue involved in these appeals was considered by the Supreme Court in the decision reported in Balakrishnan v. Union of India and Others [ (2017) 3 SCC 634 ] and held in favour of the appellants. 5. 4. The learned counsel for the appellant at the threshold submitted that the issue involved in these appeals was considered by the Supreme Court in the decision reported in Balakrishnan v. Union of India and Others [ (2017) 3 SCC 634 ] and held in favour of the appellants. 5. Before we consider the aforesaid submission of the learned counsel for the appellant, we wish to mention that the impugned judgment was rendered on 03.06.2014 and even though the appeal was admitted in 2014, there was no stay of operation of the judgment and accordingly the compensation amounts would have already been disbursed to the writ petitioners, in tune with the impugned judgment. 6. Be that as it may, Section 194LA was inserted in the statute book by Finance Act 2004 With effect from 01-10-2004. The section reads as below: S.194LA. Payment of compensation on acquisition of certain immovable property:- Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten percent of such sum as income-tax thereon. Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed two lakh and fifty thousand rupees: Provided further that no deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013). Explanation-For the purposes of this section,- (i) “agricultural land” means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (ii) “immovable property” means any land (other than agricultural land) or any building or part of a building. 7. Explanation-For the purposes of this section,- (i) “agricultural land” means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (ii) “immovable property” means any land (other than agricultural land) or any building or part of a building. 7. A reading of the above section clearly shows that when compensation or consideration, as the case may be, for compulsory acquisition of any immovable property other than agricultural land becomes payable, the person responsible for paying such compensation or consideration shall be bound to deduct ten percent of such sum as income tax at the time of payment. The proviso to the section, as it then stood, further stipulated that the deduction need not be made, if the aggregate amount of such payment to the person during a financial year, does not exceed two hundred thousand rupees. It is obvious that the emphasis in the section is on the words ‘compulsory acquisition’. If the nature of acquisition is compulsory, then, irrespective of whether the amounts are paid as compensation or as consideration, the deduction becomes mandatory, provided the other conditions are applicable. 8. Acquisition of property becomes compulsory in nature whenever and wherever property is obtained by the government, pursuant to proceedings initiated for land acquisition under the relevant land acquisition laws. Negotiated settlements arrived at with government or governmental bodies for transfer of property, after proceedings for acquisition have been initiated remain in the realm of compulsory acquisition. The decision to part with the property, which is the subject matter of a negotiated settlement, does not originate from any exercise of a free mind of the owner of the property. It stems from the compulsion imposed by proceedings for acquisition. The transfer of property remains in the nature of compulsory acquisition. 9. The learned Single Judge relied upon a decision of the Division Bench of this Court in WA 2243 of 2008. We are afraid that the said decision no longer holds the field in view of the decision of the Supreme Court in Balakrishnan v. Union of India and others (2017) 3 SCC 634 . 9. The learned Single Judge relied upon a decision of the Division Bench of this Court in WA 2243 of 2008. We are afraid that the said decision no longer holds the field in view of the decision of the Supreme Court in Balakrishnan v. Union of India and others (2017) 3 SCC 634 . In the said decision it was held that a land owner would have been compelled to divest himself of his land because of the compulsory acquisition and to avoid possible litigations, he would have entered into negotiation and settlement. The court also observed that, merely because the compensation amount payable for the land is agreed upon between the parties, the same will not change the character of the acquisition from that of compulsory acquisition to a voluntary sale. The decision which was relied upon by the learned Single Judge i.e. Info Park v. Asst. Commissioner of Income Tax [ 2008 (4) KLT 782 ] was overruled by the Supreme Court in the aforesaid case. 10. For a better comprehension the observations of the Supreme Court in Balakrishnan's case (supra) are extracted as below : 7. It is in the aforesaid factual backdrop, this Court is to determine as to whether it can be treated that the land of the appellant was compulsorily acquired. From the facts mentioned above, it becomes apparent that the acquisition process was initiated by invoking the provisions of the LA Act by the State Government. For this purpose, not only Notification under Section 4 was issued, it was followed by declaration under Section 6 and even award under Section 9 of the LA Act. With the award, the acquisition under the LA Act was completed. Only thing that remains thereafter was to pay the compensation as fixed under the award and take possession of the land in question from the appellant. No doubt, in case, the compensation as fixed by the Land Acquisition Collector was not acceptable to the appellant, the LA Act provides for making a reference under Section 18 of the Act to the District Judge for determining the compensation and to decide as to whether the compensation fixed by the Land Acquisition Collector was proper or not. However, the matter thereafter is only for quantum of compensation which has nothing to do with the acquisition. However, the matter thereafter is only for quantum of compensation which has nothing to do with the acquisition. It is clear from the above that insofar as acquisition is concerned, the appellant had succumbed to the action taken by the Government in this behalf. His only objection was to the market value of the land that was fixed as above. To reiterate his grievance, the appellant could have either taken the aforesaid adjudicatory route of seeking reference under Section 18 of the LA Act leaving it to the Court to determine the market value. Instead the appellant negotiated with Techno Park and arrived at amicable settlement by agreeing to receive the compensation in the sum of Rs.38,42,489. For this purpose, after entering into the agreement the appellant agreed to execute the sale deed as well which was a necessary consequence and a step which the appellant had to take. 8. In our view, insofar as acquisition of the land is concerned, the same was compulsorily acquired as the entire procedure under the LA Act was followed. The settlement took place only qua the amount of the compensation which was to be received by the appellant for the land which had been acquired. It goes without saying that had steps not been taken by the Government under Sections 4 and 6 followed by award under Section 9 of the LA Act, the appellant would not have agreed to divest the land belonging to him to Techno Park. He was compelled to do so because of the compulsory acquisition and to avoid litigation entered into negotiations and settled the final compensation. Merely because the compensation amount is agreed upon would not change the character of acquisition from that of compulsory acquisition to the voluntary sale. It may be mentioned that this is now the procedure which is laid down even under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 as per which the Collector can pass rehabilitation and resettlement award with the consent of the parties/landowners. Nonetheless, the character of acquisition remains compulsory. 11. Thus it is ineludible that once the proceedings for acquisition are initiated under law, whatever be the nature of payment, whether as compensation for acquisition or as consideration for a negotiated settlement, the character of the acquisition remains compulsory in nature and hence Section 194LA of the Act will apply. Nonetheless, the character of acquisition remains compulsory. 11. Thus it is ineludible that once the proceedings for acquisition are initiated under law, whatever be the nature of payment, whether as compensation for acquisition or as consideration for a negotiated settlement, the character of the acquisition remains compulsory in nature and hence Section 194LA of the Act will apply. The judgement in Balakrishnans’ case clearly covers situations of this nature. In the above circumstances, the judgment of the learned Single Judge is liable to be set aside. We do so, in all these appeals. 12. As observed by us earlier, after the impugned judgment there was no stay of operation of the judgment and the compensation or consideration as the case may be would have been paid without deducting the TDS. We clarify that in cases where TDS was deducted before payment of consideration, the same is liable to be made over to the Income Tax Department. In cases where the consideration was paid without deduction of tax as per the judgment, it is needless to state that the judgment had worked itself out. With the above observations these appeals are disposed of.