INCOME TAX ACT, 1961

Section 45

Capital gains - Chargeability - Compulsory acquisition of land - Capital gains whether to be accrued on date of award of compensation or date of notification for acquisition

Land of assessee was taken up by way of Notification dated 15-5-1968 and award of compensation was made on 29-9-1970. However, at time of issuance of initial notification for acquisition, subject land was already in possession of beneficiary college under a lease. Assessee contended that transfer, leading to capital gains, took place on very date of preliminary notification (15-5-1968) because possession of land in question was already with beneficiary College. Held: Revenue alleged that transfer was complete, only on date of award and capital gain would be computed from said date. In matter of compulsory acquisition of land under Act of 1894 for public purpose, property was to vest absolutely in Government (thereby divesting owner of all his rights therein) only after taking of possession in either of methods, i.e., after making of award, as provided in section 16; or earlier than making of award, as provided in section 17. However, where possession was taken over before arriving at relevant stage for such taking over, capital gains shall be deemed to have accrued upon arrival at relevant stage and not before. In instant case, assessee continued to carry its status as owner of land and neither on date of notification nor until date of award, Government took over possession of land in question and if at all possession of College was to result in vesting of land in Government, such vesting happened only on date of award and not before. Therefore, transfer of land for purposes of section 45, was complete only on date of award and not on date of notification for acquisition under section 4 of Act of 1894. AO rightly assessed tax liability of assessee on long-term capital gains arising on account of acquisition, on basis of amount of compensation allowed in award.

REFERRED : Nand Ram (D) Through LRs. & Ors. v. Jagdish Prasad (D) Through LRs. 2020 (5) SCALE 723, Sevoke Properties Ltd. v. West Bengal State Electricity Distribution Company Ltd. [Civil Appeal No. 3873 of 2019 (Arising out of SLP(C) No.32456 of 2018), dt. 11-4-2019], Berger Paints India Ltd. v. CIT (2004) 266 ITR 99 (SC) : 2004 TaxPub(DT) 1388 (SC), CIT v. Narendra Doshi (2002) 254 ITR 606 (SC) : 2002 TaxPub(DT) 496 (SC), R.V. Bhupal Prasad v. State of Andhra Pradesh & Ors. (1995) 5 SCC 698, Sankari Manickyamma, Rama Bai & Ors. v. CIT (1990) 181 ITR 400 (SC) : 1990 TaxPub(DT) 685 (SC), Special Land Acquisition v. Godrej & Boyce (1988) 1 SCC 50, Joginder Singh & Ors. v. State of Punjab & Anr. AIR 1985 SC 382, Badrilal v. Municipal Corporation of Indore [Civil Appeal No. 1243 of 1967, dt. 6-12-1972], Bhawanji Lakhamshi v. Himatlal Jamnadas Dani (1972) 1 SCC 388, Lt. Governor of Himachal Pradesh & Anr. v. Avinash Sharma (1971) 1 SCR 413, Ramanathan Chettiar, RM. AR. AR. RM. AR. AR. v. CIT (1967) 63 ITR 458 (SC) : 1967 TaxPub(DT) 245 (SC), Dr. Sham Lal Narula v. CIT (1964) 53 ITR 151 (SC) : 1964 TaxPub(DT) 319 (SC), Fruit and Vegetable Merchants Union v. Delhi Improvement Trust AIR 1957 SC 344, Mec India (P) Ltd. v. Lt. Col. Inder Maira & Ors. (1999) Delhi Law Times 679, CIT v. Pandari Laxmaiah (1997) 223 ITR 671 (AP) : 1997 TaxPub(DT) 180 (AP-HC), Bombay Burmah Trading Corporation Ltd. v. CIT (1988) 169 ITR 148 (Bom) : 1988 TaxPub(DT) 265 (Bom-HC), S. Appala Narasamma v. CIT (1987) 168 ITR 17 (AP) : 1987 TaxPub(DT) 956 (AP-HC), Peter John v. CIT (1986) 157 ITR 711 (Ker) : 1986 TaxPub(DT) 678 (Ker-HC), Buddaiah v. CIT (1985) 155 ITR 277 (Karn) : 1985 TaxPub(DT) 1179 (Karn-HC), CIT v. Shivsagar Estate (2002) 257 ITR 59 (SC) : 2002 TaxPub(DT) 101 (SC), UOI & Ors. v. Kaumudini Narayan Dalal & Anr. (2001) 249 ITR 219 (SC) : 2001 TaxPub(DT) 902 (SC) and CIT v. T. NK Govindarajulu Chetty (1987) 165 ITR 231 (SC) : 1987 TaxPub(DT) 1260 (SC).

FAVOUR : Against the assessee.

A.Y. : 1971-72

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