Severance takes place when only a part of a property, may be an agricultural land or a builtup urban property is acquired and the remaining part of the same property is left out of acquisition and left with the owner
Severance in land acquisition
Severance occurs when the land becomes separated due to compulsory acquisition of part of land
Compulsory Acquisition
It refers to the process by which a person’s rights and interests in property are divested and acquired by the state or some specified authority, without the need for the expropriates consent or co-operation in order to benefit society
This power is often necessary for social and economic development and the protection of the natural environment
Principal of compensation
1) the sum awarded should enable the claimant to be in the same financial position as he would have been if his interest had not been compulsorily required
2) the principle of equivalence – no worst and no bettet
Guidelines for Severance
1) there must be partial taking
2) the land taken and the remaining land held under same title or ownership or physical location and each giving enhanced value to the whole
3) there must be damage to the remaining portion of land
4) this damage should be caused by the loss of portion taken
5) damage caused by separating one part from the other
6) where the damages is extensive, acquiring body may acquire the remaining portion
Matters to be neglected in determining compensation
1) the degree of urgency of the acquisition
2) any disinclination of the person to part with land
3) any damage sustained by the person interested which, if caused by private person, would not be good cause of action
4) any depreciation in the value of land acquired likely to result from the use which it will be put when acquired
5) any increase in the value of the land acquired likely to result from the use which it will be put when acquired
6) any improvement to land acquired after the date of publication of declaration under section 11, unless for normal maintenances
Examples of Severance
1) new road cuts through an agricultural field or where either (a) part of front marginal open space or (b) front marginal open space along with a part of building is acquired for road/road widening
Compensation for Severance
The amount of compensation on the account of severance is estimated by considering the cost of engineering works required to be undertaken as a consequence of the acquisition, such as
1) fencing/compound wall with or without gates along the boundary or boundaries of the part left with owner
2) a building wall for the part of building left with the owner
Severance is thus a factual entity and the compensation is the factual expenditure required to be incurred for carrying out necessary engineering works, as a consequence of acquisition
No tax on compensation received for compulsory acquisition of land by government
Case law details for no tax on compensation received for compulsory acquisition of land by government
1) Case name – Viswanathan M Vs CCIT (Kerala High Court)
2) Appeal number WP (C) No 3227 of 2020
3) Date of judgement/order 18/02/2020
4) compensation received from levy of income tax code section 96 of the RFCTLARR Act shall also not to be taxable under the provisions of income-tax Act 1961
Impact of severance on property valuation
So far as compensation for severance is concerned, learned reference Court has categorically observed that thus the evidence on record points out that the claimants have suffered kiss due to less in area, compensation for severance shall be 60% of the market value of the land so acquired
Severance wrt capital gain tax
1) Commissioner of income tax Vs Smt M Subside Beevi Kerala High Court Judgement dated 06/02/1986
The compensation for severance for the reason that the acquisition has injuriously affected the property other than the property acquired cannot be treated as part of the consideration received or accrued as a result of the transfer of the capital asset
The tribunal was, therefore right in directing such expenses to be deducted in the matter of computation of capital gains
Severance is referrable to market value of the whole land on a before and after basis
No compensation for unauthorized errections
If any person has unauthorized erected, re-erected, added or altered any building, then any increase in the value of the land from such erection shall not be taken into account in estimating land value
No compensation for removal of encroachment
No compensation shall be payable for the removal of any encroachment
Burden on proof regarding market value of acquired land
The burden is on the claimants to establish that the amounts awarded to them by the Land Acquisition Officer are inadequate and that they are entitled to more
in absence of any evidence it cannot be said that the petitioners have suffered the severance charges, only pleading is not sufficient
