JUDGMENT : Vakiti Ramakrishna Reddy, J. This Land Acquisition Appeal, filed under Section 54 of the LAND ACQUISITION ACT , 1894 (hereinafter referred to as “the Act”), is directed against the judgment and award dated 22.03.2005 passed in O.P. No. 74 of 1996 on the file of the Senior Civil Judge, Peddapalli (hereinafter referred to as the “Reference Court”). 2. By the impugned judgment, the Reference Court enhanced the compensation awarded by the Land Acquisition Officer (for short, “LAO”) in respect of the acquired lands, thereby giving rise to the present appeal at the instance of the Land Acquisition Officer & Revenue Divisional Officer, Peddapalli. I. BRIEF FACTS: 3. The lands situated in Survey Nos. 586, 587, and 588, admeasuring: Ac. 13-11 guntas, Ac. 14-21 guntas, and Ac. 4-31 guntas, respectively aggregating to a total extent of Ac. 32-23 guntas, situated at Jangaon Village, Ramagundam Mandal, Karimnagar District, were acquired for the public purpose of providing house sites. II. NOTIFICATION AND AWARD: 4. A notification under Section 4(1) of the LAND ACQUISITION ACT , 1894 was issued on 15.03.1996, proposing acquisition of the subject lands for the public purpose of providing house sites to the weaker sections of the society. 5. Subsequently, the Land Acquisition Officer passed an award dated 29.03.1996, fixing the market value of the acquired lands at Rs. 18,500/- per acre. Not being satisfied with the said compensation, the claimants sought a reference under Section 18 of the Act, which came to be numbered as O.P. No. 74 of 1996 before the Reference Court. III. ISSUES FRAMED BY THE REFERENCE COURT: 6. The Reference Court, upon the pleadings, framed the following issues for determination: (i). Whether the Award passed by the Land Acquisition Officer is not reasonable and adequate? (ii). Whether the claimants are entitled to get enhanced compensation, and if so, at what rate? (iii). To what relief? IV. EVIDENCE ON RECORD: 7. To substantiate their claim for higher compensation, the claimants examined PWs 1 to 3 and got marked Exhibits A-1 to A-24, which comprised exemplar sale deeds and certified copies of earlier awards pertaining to adjacent lands. 8. On behalf of the respondent-State, RW.1 was examined and Exhibit B-1 was marked. V. FINDINGS OF THE REFERENCE COURT: 9. The Reference Court, upon appreciation of oral and documentary evidence, found that the claimants had duly proved the genuineness of the sale deeds, namely Exs. 8. On behalf of the respondent-State, RW.1 was examined and Exhibit B-1 was marked. V. FINDINGS OF THE REFERENCE COURT: 9. The Reference Court, upon appreciation of oral and documentary evidence, found that the claimants had duly proved the genuineness of the sale deeds, namely Exs. A-12 and A-13, through the testimony of PWs 2 and 3, whose depositions were held to be credible and trustworthy. 10. It was observed that the lands covered under the aforesaid sale deeds are situated adjacent to the acquired lands and are comparable in nature, potentiality, and utility. On this premise, the Reference Court placed reliance on the decision of the Hon’ble Supreme Court in Special Land Acquisition Officer v. T. Adinarayan Setty , [ AIR 1979 SC 472 ] , wherein it was held that sale transactions must be proved either by production of sale deeds or by examining parties or persons having knowledge of such transactions. 11. The Reference Court further noted that the acquired lands, being fertile and having potential value, are located within Ramagundam Municipality and Jangaon town, and are highly suitable for conversion into house sites. 12. In support of its conclusion, the Reference Court also relied on the principle enunciated in Special Deputy Collector v. Kurra Sambasiva Rao , [AIR 1997 SC 2025] , which laid down that, in fixing compensation, the Court must consider the relative situation, nature of use, income, potentiality, and distinctive features of the land. 13. Additionally, reliance was placed on Dilawarsab Babusab Mullasab v. Special Land Acquisition Officer , [ AIR 1974 SC 2333 ] , where the Hon’ble Supreme Court held that the best evidence for determination of market value is comparable sales proximate to the date of the notification issued under Section 4(1) of the Act. 14. In the light of the aforesaid precedents and evidence, the Reference Court was satisfied that Ex.A-12 (dated 10.04.1995) and Ex. A-13 (dated 19.04.1995), though reflecting a market value of Rs. 150/- per square yard, equivalent to Rs. 7,20,000/- per acre, provided a reliable basis for assessing compensation. 15. Considering the surrounding circumstances, the Reference Court, however, fixed the compensation at Rs. 80,000/- (Rupees Eighty Thousand only) per acre. A-13 (dated 19.04.1995), though reflecting a market value of Rs. 150/- per square yard, equivalent to Rs. 7,20,000/- per acre, provided a reliable basis for assessing compensation. 15. Considering the surrounding circumstances, the Reference Court, however, fixed the compensation at Rs. 80,000/- (Rupees Eighty Thousand only) per acre. It further held that the claimants were entitled to 30% solatium on the enhanced compensation, together with interest at 9% per annum from the date of taking possession for one year, and thereafter at 15% per annum until payment or deposit into Court. 16. Consequently, the Reference was partly allowed with proportionate costs. 17. Thus, upon appreciation of the said evidence, the Reference Court enhanced the market value of the acquired lands from Rs. 18,500/- per acre to Rs. 80,000/- per acre. 18. Being aggrieved by the order dated 22.03.2005 passed by the Reference Court, the Land Acquisition Officer has preferred the present Appeal. VII. SUBMISSIONS OF THE PARTIES: A) Contentions of the Appellant (State/LAO): 19. The learned Government Pleader, appearing on behalf of the appellant, contended that the Reference Court erred in relying upon Exs.A-12 and A-13, which pertain to lands that are not situated in the same village as the acquired lands, and therefore could not form a proper basis for determination of compensation. 20. The learned counsel for the appellant submitted that the Reference Court gravely erred in enhancing the market value of the acquired lands from Rs. 18,500/- per acre to Rs. 80,000/- per acre without proper basis. The reasons assigned by the Reference Court, it is urged, are unsound and untenable. 21. It is contended that the Reference Court failed to appreciate that the Land Acquisition Officer had passed the award after collecting and analyzing sale statistics from the Sub-Registrar’s Office within the vicinity of the acquired lands, and therefore, the award of the LAO deserved to be confirmed. 22. The appellant further argued that the Reference Court committed an error in relying upon Exs. A-12 and A-13, which pertain to lands not situated in the same village, and are of small extents, thus not comparable with the vast extent of acquired lands. 23. 22. The appellant further argued that the Reference Court committed an error in relying upon Exs. A-12 and A-13, which pertain to lands not situated in the same village, and are of small extents, thus not comparable with the vast extent of acquired lands. 23. It is also urged that, even assuming the lands fall under the same survey number, the vicinity, fertility, and nature of the lands differ, and therefore, the Reference Court ought not to have placed reliance on the said sale deeds without making appropriate deductions. 24. On the basis of the aforesaid submissions, the Learned Government Pleader has prayed that, there being merit in the appeal, the same may be allowed. B) Contentions of the Respondents (Claimants): 25. Per contra, the learned counsel for the respondents contended that the reliance placed by the Reference Court on Exs. A-12 and A-13 was justified. Though the lands covered under the said documents are from different villages, they are comparable in terms of proximity, fertility, and potentiality to the acquired lands. 26. It is urged that the Reference Court, after due consideration of the surrounding circumstances, rightly enhanced the compensation, and therefore, no interference is called for in the present appeal. 27. In such circumstances referred to above, the learned Counsel for Respondents prayed that, there being no merit in the present appeal, the same deserves to be dismissed. VIII. POINTS FOR DETERMINATION: 28. Having heard the learned counsel appearing for the respective parties and having carefully examined the material placed on record, the following points arise for determination in this Appeal: (i). Whether the Reference Court was justified in enhancing the market value of the acquired lands? (ii). Whether the enhancement granted is in accordance with law and evidence on record? (iii). To what relief are the claimants entitled? IX. COMPARATIVE STATEMENT OF COMPENSATION: 29. For proper appreciation, the comparative chart of compensation, as awarded by the Land Acquisition Officer and as enhanced by the Reference Court, is tabulated as under: Compensation Awarded by LAO (Rs. per acre) Compensation Enhanced by Reference Court (Rs. per acre) Difference (Enhanced Award) (Rs. per acre) Rs. 18,500/- Rs. 80,000/- Rs. 61,500/- 30. IX. COMPARATIVE STATEMENT OF COMPENSATION: 29. For proper appreciation, the comparative chart of compensation, as awarded by the Land Acquisition Officer and as enhanced by the Reference Court, is tabulated as under: Compensation Awarded by LAO (Rs. per acre) Compensation Enhanced by Reference Court (Rs. per acre) Difference (Enhanced Award) (Rs. per acre) Rs. 18,500/- Rs. 80,000/- Rs. 61,500/- 30. From the above tabulation, and upon a careful reappraisal of the evidence, it is manifest that the Land Acquisition Officer had adopted a conservative approach in fixing the market value, whereas the Reference Court, on the other hand, took into account: i. the location and potentiality of the lands; ii. the sale exemplars of the proximate period; and iii. the comparability of lands situated in the vicinity of the acquired lands. 31. The critical question, therefore, is whether the reliance placed by the Reference Court on Exs. A-12 and A-13, and its ultimate fixation of market value at Rs. 80,000/- per acre, can be said to be justified in law. X. ANALYSIS AND FINDINGS: 32. The learned Government Pleader, appearing on behalf of the appellant, strenuously contended that the Reference Court erred in relying upon Exs. A-12 and A-13 for fixing the market value of the acquired lands. It was submitted that the said sale deeds do not pertain to the same village or survey numbers as those of the acquired lands, but to distinct survey numbers, and hence cannot form the basis of comparison. 33. On the other hand, learned counsel for the claimants urged that the acquired lands are situated within the Ramagundam notified area, abutting developed residential colonies, and therefore have a high potential value for conversion into house sites. According to him, Exs. A-12 and A-13, though not from the exact same survey numbers, reflected the true market potential of lands situated immediately adjacent to the acquired lands, and thus should be taken as reliable representative sales. 34. It will be worthwhile to refer to Section 23 of the Act. Section 23 reads as under: 23. According to him, Exs. A-12 and A-13, though not from the exact same survey numbers, reflected the true market potential of lands situated immediately adjacent to the acquired lands, and thus should be taken as reliable representative sales. 34. It will be worthwhile to refer to Section 23 of the Act. Section 23 reads as under: 23. Matters to be considered in determining compensation (1) In determining the amount of compensation to be awarded for land acquired under this Act, the Court shall take into consideration first, the market value of the land at the date of the publication of the [notification under section 4, subsection (1)] [Substituted by Act 38 of 1923, Section 7, for "declaration relating thereto under section 6".]; secondly, the damage sustained by the person interested, by reason of the taking of any standing crops or trees which may be on the land at the time of the Collectors taking possession thereof; thirdly, the damage (if any) sustained by the person interested, at the time of the Collectors taking possession of the land, by reason of severing such land from his other land; fourthly, the damage (if any) sustained by the person interested, at the time of the Collectors taking possession of the land, by reason of the acquisition injuriously affecting his other property, movable or immovable, in any other manner, or his earnings; fifthly, if, in consequence of the acquisition of the land by the Collector, the person interested is compelled to change his residence or place of business, the reasonable expenses (if any) incidental to such change; and sixthly, the damage (if any) bona fide resulting from diminution of the profits of the land between the time of the publication of the declaration under section 6 and the time of the Collectors taking possession of the land. ((1-A) In addition to the market value of the land, as above provided, the Court shall in every case award an amount calculated at the rate of twelve per centum per annum on such market value for the period commencing on and from the date of the publication of the notification under section 4, sub-section (1), in respect of such land to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier. Explanation. Explanation. In computing the period referred to in this sub-section, any period or periods during which the proceedings for the acquisition of the land were held up on account of any stay or injunction by the order of any Court shall be excluded.] Inserted by Act 68 of 1984, Section 15 (w.e.f. 24.9.1984).] (2) In addition to the market value of the land as above provided, the Court shall in every case award a sum of (thirty per centum] /Substituted by Act 68 of 1984, Section 15, for " fifteen per centum" (w.e.f. 24.9.1984).] on such market value, in consideration of compulsory nature of the acquisition. 35. The Honourable Supreme Court in Kapil Mehra v. Union of India, (2015) 2 SCC 262 laid down the method of determination of the market value and further observed as under: 10. Market Value: First question that emerges is what would be the reasonable market value which the acquired lands are capable of fetching. While fixing the market value of the acquired land, the Land Acquisition Officer is required to keep in mind the following factors: (i) existing geographical situation of the land; (ii) existing use of the land; (iti) already available advantages, like proximity to National or State Highway or road and/or developed area and (iv) market value of other land situated in the same locality/ village/ area or adjacent or very near to the acquired land. 11. The standard method of determination of the market value of any acquired land is by the valuer evaluating the land on the date of valuation publication of notification Under Section 4(1) of the Act, acting as a hypothetical purchaser willing to purchase the land in open market at the prevailing price on that day, from a seller willing to sell such land at a reasonable price. Thus, the market value is determined with reference to the open market sale of comparable land in the neighbourhood, by a willing seller to a willing buyer, on or before the date of preliminary notification, as that would give a fair indication of the market value. 36. On a careful consideration, this Court finds no substance in the contention of the appellant. The Reference Court, while fixing the compensation, rightly relied upon Exs. A-12 and A-13, which are registered sale deeds of lands situated in Survey Nos. 598 and 599. 36. On a careful consideration, this Court finds no substance in the contention of the appellant. The Reference Court, while fixing the compensation, rightly relied upon Exs. A-12 and A-13, which are registered sale deeds of lands situated in Survey Nos. 598 and 599. The said lands are adjacent to and abutting the acquired lands in Survey Nos. 586, 587 and 588. The purchasers under those sale deeds, examined as P.Ws. 2 and 3, categorically deposed that the lands purchased by them were in the same locality, within the Ramagundam Notified Area, and were comparable in nature and potentiality with the acquired lands. Their testimony stood the test of cross-examination and could not be dislodged. Thus, the Reference Court was justified in treating those transactions as genuine and representative sales for determining the compensation of the acquired lands. 37. The Learned Government Pleader for the appellant, however, contended that the Reference Court committed an error in enhancing the market value of the acquired lands instead of confirming the award passed by the LAO. It was submitted that the LAO had determined the compensation after collecting and verifying sale statistics from the Office of the Sub-Registrar relating to lands situated in the vicinity. On the other hand, the Learned Counsel for the claimants contended that the sale statistics relied upon by the LAO were misconceived, as they pertained to lands situated 7 to 8 kilometers away in remote survey numbers, which were purely agricultural in character and bore no similarity in location, potentiality, or surroundings with the acquired lands. 38. On perusal of the material on record, it is evident that the sales relied upon by the LAO pertained to Survey Nos. 732 and 813, nearly 7 to 8 kilometers away from the acquired lands. Those lands were agricultural in nature, lacking in development, and therefore cannot be treated as comparable transactions for assessing the market value of the acquired lands. 39. On the contrary, the acquired lands are located within the Ramagundam Notified Area, abutting established residential colonies of SCCL, FCI, and NTPC. Evidence on record further establishes that civic amenities such as roads, electricity, and water supply were already available even prior to the notification under Section 4(1). Therefore, the Reference Court was justified in discarding the sale statistics relied upon by the LAO as irrelevant. 40. Evidence on record further establishes that civic amenities such as roads, electricity, and water supply were already available even prior to the notification under Section 4(1). Therefore, the Reference Court was justified in discarding the sale statistics relied upon by the LAO as irrelevant. 40. Another contention urged by the appellant is that the Reference Court erred in not making deductions, since Exs. A-12 and A-13 pertained to small extents of land. However, the Learned Counsel for the claimants rightly submitted that the acquired lands were not undeveloped agricultural lands but were already situated in the heart of the Ramagundam notified residential area. The record further reveals that the lands had long ceased to be used for cultivation, and even plots within the acquired survey numbers were sold as house sites as early as 1982. Hence, the principle of deduction applicable for converting agricultural lands into residential layouts does not apply to the present case. 41. It is pertinent to note that the argument of the appellant that deductions should have been made while relying on Exs. A-12 and A-13, which pertain to smaller extents, cannot be sustained. The law is settled that when small residential plots are relied upon to determine the market value of large extents of acquired land, certain deductions towards development charges may be warranted. However, such deduction is not an inflexible rule; it depends on the facts of each case. 42. In Ravinder Kumar Goel v. State of Haryana , [2023 SCC OnLine SC 147] , the Honourable Supreme Court reiterated that transactions of smaller extents may indeed be relied upon to assess the value of large acquired tracts, subject to appropriate deductions where warranted. At the same time, it was emphasised that the determination of comparability must be made with reference to location, fertility, and potentiality. The Apex Court, while addressing this issue, observed as follows: ‘13. Therefore, since we have already indicated that the High Court was not justified in merely relying on the circular fixing the floor rates when other evidence was available on the record pursuant to the remand made, it is necessary for us to take note as to whether the Reference Court had committed an error in not relying on the sale exemplars produced by the respondents without analysing the comparability. The position of law is well settled that when large extent of lands is acquired and if the sale exemplar, also for the large extent is available on record it would be safer to rely on the same if they are comparable transactions. However, as already noted above, this Court in Atma Singh (supra) has also held that the sale instances of smaller extents cannot be ignored. Further, this Court has reiterated in many cases that the sale exemplars for smaller extent can be relied upon subject to appropriate deduction being provided towards development charges.’ 43. In the present case, though Exs. A-12 and A-13 reflected a value of Rs.150/- per square yard (amounting to about Rs.7,26,000/- per acre), the Reference Court, exercising restraint, fixed Rs.80,000/- per acre as fair and reasonable compensation. This cautious approach, though significantly higher than the LAO’s award of Rs.18,500/- per acre, remains conservative considering the developmental potential of the lands. Thus, the question of imposing deductions does not arise. 44. The Honourable Supreme Court in Land Acquisition Officer v. Jasti Rohini , [ (1995) 1 SCC 717 ] held that while assessing potentiality, the Court must examine the land’s proximity to residential, commercial, or industrial establishments, its amenities such as water and electricity, and the likelihood of future development. The relevant paragraphs are extracted hereunder: 11. …. The question whether the land has potential value as a building site or not is primarily one of fact depending upon diverse factors as to its conditions, the use to which it is put or is reasonably capable of being put and its suitability for building purpose. Its proximity to residential, commercial or industrial area, existence of educational, cultural, industrial or commercial institutions, existence of amenities like water, electricity, drainage and the possibility of future extension in that area, the existence of or prospects of development schemes, the existence or absence of building activities towards the acquired land or in the neighbourhood thereof are the relevant facts to be taken into consideration in evaluating the market value on the basis of potential use of the land. It is true that an element of guess, in an estimate, would have a play in determining the market value. It is true that an element of guess, in an estimate, would have a play in determining the market value. But the present value alone falls to be determined and feats of imagination should not run riot or travel beyond its manifest limits nor be an arbitrary or whim of the court in determining the compensation or the fixation of the market value. The existing conditions, the demand for the land in the neighbourhood and other related and relevant facts should be taken into consideration in determining the compensation on the basis of potential value of the land. In Gulzara Singh case [ (1993) 4 SCC 245 ], it was found that the sale deed Ex. A-9 was a genuine sale deed between a willing vendor and a willing vendee and it furnished the basis for determination of the market value. It was also found that the land was situated in the developing area and accordingly this Court took those factors into consideration, and had fixed the market value on the basis of potential value on existing conditions. 12. Equally the decision in Inder Singh v. Union of India [ (1993) 3 SCC 240 ] renders little assistance. In that case also, it was found that abadi land fetched Rs 33,600 per acre and they had potential value for development, such as for building houses etc. as in the immediate neighbourhood the lands were developed for industrial purpose. Taking those factors, this Court had determined the market value of abadi lands at Rs 42,000 and of other barani lands at Rs 38,000. In view of the nature of lands in that case, this Court had determined the market value at the rates mentioned therein after recording the finding that the land possessed of potential value. 45. In Sabhia Mohammed Yusuf Abdul Hamid Mulla v. Land Acquisition Officer , [ (2012) 7 SCC 595 ] , the Honourable Supreme Court observed that deduction towards development is justified only in cases of undeveloped or underdeveloped lands, generally to the extent of 1/3rd. However, where no development is required for implementation of the public purpose, such deduction is unwarranted. The relevant paragraph is extracted hereunder: “19 . However, where no development is required for implementation of the public purpose, such deduction is unwarranted. The relevant paragraph is extracted hereunder: “19 . In fixing the market value of the acquired land, which is undeveloped or underdeveloped, the courts have generally approved deduction of 1/3rd of the market value towards development cost except when no development is required to be made for implementation of the public purpose for which land is acquired.” 46. Likewise, in Bhagwathula Samanna v. Special Tahsildar and Land Acquisition Officer , [ (1991) 4 SCC 506 ] , it was held that deduction is context-specific and depends on the development already in existence. The relevant paragraph is extracted hereunder: “10. This Court has in a recent decision in Special Tahsildar Land Acquisition, Vishakapatnam v. Smt A. Mangala Gowri (1991) 4 SCC 218 following Tribeni Devi case [ (1972) 1 SCC 480 : AIR 1972 SC 1417 : (1972) 3 SCR 208 ] pointed out as under: “It is to be noted that in building regulations, setting apart the lands for development of roads, drainage and other amenities like electricity etc. are condition precedent to approve layout for building colonies. Therefore, based upon the situation of the land and the need for development the deduction shall be made. Where acquired land is in the midst of already developed land with amenities of roads, drainage, electricity etc. then deduction of 1/3 would not be justified. In the rural areas housing schemes relating to weaker sections deduction of 1/4 may be justified.” 47. Applying these principles, this Court is of the view that the Reference Court rightly adopted Exs.A-12 and A-13 as proximate and reliable exemplars without imposing any deduction, inasmuch as the acquired lands were already situated within a developed residential and industrial township. 48. The contention that the acquired lands differ in fertility or portions of the survey numbers cannot stand, as the evidence shows that the lands are homogeneous in nature and potential, forming part of the Ramagundam Notified Area and abutting established colonies. 49. It must also be noted that the fertility of soil is no longer a relevant criterion once the lands have ceased to be used for cultivation and have acquired the character of potential house sites. This fact was already recognized by the Government in G.O.Ms. No. 33, Municipal Administration, dated 19.01.1982, declaring the area as a notified township. 49. It must also be noted that the fertility of soil is no longer a relevant criterion once the lands have ceased to be used for cultivation and have acquired the character of potential house sites. This fact was already recognized by the Government in G.O.Ms. No. 33, Municipal Administration, dated 19.01.1982, declaring the area as a notified township. The Reference Court, therefore, rightly disregarded distant agricultural sale instances and relied upon genuine proximate sales under Exs. A-12 and A-13. IX. CONCLUSION 50. In view of the above discussion, this Court holds that the Reference Court was justified in discarding the agricultural sales relied upon by the LAO and in adopting Exs. A-12 and A-13 as the proper basis for determining the market value. The enhancement of compensation from Rs.18,500/- per acre to Rs.80,000/- per acre, together with statutory benefits such as solatium at 30% and interest at 9% and 15% as awarded, is fair and reasonable in the facts and circumstances. 51. Hence, this Court is of the considered view that the findings of the Reference Court are based on proper appreciation of oral and documentary evidence, and are in consonance with the settled legal principles governing determination of compensation under the LAND ACQUISITION ACT . The Reference Court has maintained a fair balance between the exemplar sale deeds relied upon by the claimants and the material relied upon by the Land Acquisition Officer, and has fixed the market value in a just and reasonable manner. The enhancement granted by the Reference Court is neither excessive nor unsupported by record. Therefore, the impugned judgement warrants no interference by this Court. XI. RESULT: 52. In the light of the foregoing discussion, this Court finds no merit in the Appeal. The judgment and award dated 22.03.2005 in O.P. No. 74 of 1996 passed by the learned Senior Civil Judge, Peddapalli, does not warrant any interference. The claimants shall be entitled to all statutory benefits under the Act, including solatium, additional value and interest. Accordingly, the Appeal stands dismissed. In the circumstances, there shall be no order as to costs. As a sequel, pending miscellaneous applications, if any, in this Appeal shall also stand closed.