COMMISSIONER OF INCOME-TAX VS CACHAR NATIVE JOINT STOCK CO. LTD., 1998 PTD-GAUHATI-HIGH-COURT-INDIA 3232 (1996)

Income-tax---

----Capital gains---Acquisition or requisition of land---Owner to file claim after order served and compensation to be determined by Collector---No question of determination of capital gain till such determination of compensation---Indian Income Tax Act, 1961, S.45---Assam Land (Requisition and Acquisition) Act, 1964, S.9.

After an order of acquisition under section 9 of the Assam Land (Requisition and Acquisition) Act, 1964, is served or published, a claim has to be preferred by the owner of the land in question and the Collector is to determine the amount of compensation under section 11 of the 1964 Act; till then the amount of compensation cannot be said to be due. Only on the determination of the compensation in the manner prescribed under section 11 of the 1964 Act, the amount is to be paid from the date when the property stood vested in the manner prescribed under section 10. But before determination of the compensation amount, the question of determination of capital gain does not arise.

G.K. Joshi and U. Bhuyan for the Commissioner.

K.K. Dey for the Assessee.

JUDGMENT

D.N. BARUAH, J.---Pursuant to the orders passed by this Court in Civil Rule No.39(M) of 1979, the Income-tax Appellate Tribunal (for short, "the Tribunal"), has referred the following question under section 256(2) of the Income Tax Act, 1961 (for short, "the Act"), for opinion of this Court:

"Whether, on the facts and in the circumstances of the case and on a proper construction of section 2(47), section 45 and section 48 of the Income Tax Act, 1961, capital gains was not properly assessable for the assessment year 1971-72 in respect of the properties acquired by the Government?"

The facts are:

The assessee is a company incorporated under the Companies Act. Some of the assets belonging, to the assessee-company were acquired by the Government under the Requisition and Acquisition Act, 1964. The Income tax Officer found that the assessee made a claim of Rs.9.75,947 as compensation. Therefore, he worked out the capital gains arising out of the transfer of the assets at Rs.3,75,655 and profit under section 41(2) at Rs.25,000 and brought those amounts to tax. On appeal, the Appellate Assistant Commissioner found that the assessee had not received the compensation from the Government, since the quantum of such compensation had not been determined. He, therefore, held that there could be no question of ascertaining the profits under section 41(2) of the Act and long-term capital gains at the hands of the assessee at that juncture and that question would only arise when the said quantum was actually determined as being receivable by the assessee on the basis of the Government's adjudication Accordingly, he deleted the addition made to the total income of the assessee. The Revenue preferred an appeal before the Tribunal and the Tribunal found the decision of the Appellate Assistant Commissioner correct and accordingly dismissed the appeal. The Revenue, thereafter, made a request for referring the above question under section 256(1) of the Act which, however, was refused. Situated, thus, the Revenue approached this Court by filing a petition (Civil Rule No.39(M) of 1979) and this Court gave a direction. Hence, the present reference.

We have heard Mr. G.K. Joshi, learned standing counsel appearing on behalf of the Revenue, and Mr. K.K. Dey, learned counsel appearing on behalf of the assessee.

Mr. Joshi submits before us that in the facts and circumstances of the case the amount claimed ought to have been regarded as capital gains and assessment ought to have teen made. On the other hand, Mr.K.K. Dey, learned counsel appearing on behalf of the assessee-company, refutes the submission. According to him, the amount having not been determined, the question of determination of capital gains does not arise.

On the rival contentions of the parties it is to be seen whether the order passed by the Tribunal was just and proper. The land was acquired under the Assam Land (Requisition and Acquisition) Act, 1964 (for short, "1964 Act"). There was some urgency and accordingly the authority invoked the power under section 9 of the 1964 Act. Section 9 of the Act envisages that if in the opinion of the State Government or the Collector it is necessary or expedient to acquire speedily any land for works or other development measures in connection with flood control and anti-erosion measures including embankment and drainage, or for the construction of border fencing and allied works, including border roads and check posts etc., the State Government or the Collector may by order in writing acquire the land stating the area and the boundaries. The Collector shall, thereafter, cause the order passed under subsection (1) of section 9 to be served to such manner as may be prescribed on the owner of the land and also on the tenant or the occupant in cases where the owner is not in occupation of the land and also a notice to the same effect stating that claims to compensation for all interests in the land may be made to him within such time as may be prescribed. As per section 10 of the 1964 Act, when and order of acquisition is served or published under subsection (2) of section 9, the land shall vest absolutely in the Government. Therefore, from a reading of sections 9 and 10, it is abundantly clear that the transfer will have effect when the order passed under subsection (1) is served or published under subsection (2) of section 9 of the 1964 Act.

After the order passed is served or published, the claim is to be preferred by the owner and the Collector is to determine the amount of compensation under section 11 of the 1964 Act; till then the amount of compensation cannot be said to be due. Only on the determination of the compensation in the manner prescribed under section 11 of the 1964 Act, whatever amount is to be paid is to be paid from the date when the property stood vested in the manner prescribed under section 10. But before determination of the amount, the determination of capital gain does not arise. It will be determined only when the amount is determined.

In view of the above, we find that the Tribunal was justified in passing the order. Accordingly, we answer the question in the affirmative, in favour of the assessee and against the Revenue.

A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal, Guwahati.

M.B.A./1641/FC Reference answered.