COMMISSIONER OF INCOME-TAX VS SHIV CHAND SATNAM PAUL
1999 P T D 3201
[229 I T R 745]
[Punjab and Haryana High Court (India)]
Before Ashok Bhan and 1qbal Singh, JJ,
COMMISSIONER OF INCOME-TAX
Versus
SHIV CHAND SATNAM PAUL
Income-tax Reference No.85 of 1983, decided on 23/04/1997.
Income-tax---
----Capital gains---Year in which assessable---Acquisition of land-- Notification published on 31-12-1970 for acquiring land---Award granting compensation made by Collector 17-9-1971 and possession of land taken by Government in September, 1971---Government not required to take tip; possession of land immediately on expiry of 15 days of publication of notice under S.9(1)---Capital gain assessable in assessment year 1972-73---Indian Income Tax Act, 1961, S.45---Indian Land Acquisition Act. 1894, Ss.4, 5-A, 9(l), 11, 16 & 17.
Under the Land Acquisition Act, 1894, vesting of land in the Government takes place (a) when possession is taken consequent upon the passing of the award under section 16; or (b) when possession is taken consequent upon the direction made under section 17(1) or where possession is taken as contemplated under section 17.
Whenever the urgency provisions of section 17 .of the Act are invoked, the procedure given under sections 5-A, 11 and 16 is dispensed with. On a declaration issued by the appropriate Government, the Collector without making an award, after 15 days of the publication of the notice under section 9, can take possession and thereafter, the land vests in the Government absolutely free from all encumbrances. The Government is not required to take possession immediately on the expiry of 15 days of the publication of notice under section 9(1) but may do so thereafter, at and time and the land would vest in the Government after taking possession. Section 17 does not provide that the Land Acquisition Collector should take possession of the land immediately after expiry of 15 days of the notice under section 9(1).
Land belonging to the assessee which was purchased by the assessee in the year 1957 for Rs.8,000 was acquired by the Government under sections 4 and 6 read with section 17 of the Land Acquisition Act, 1894, and the notification acquiring the land was published in the Gazette on December 31, 1970. The notification mentioned that as the urgent, provisions of the Act of 1894 had been invoked, the provisions of the Act would not apply in regard to the notification. The assessee as a consequence of the acquisition received from the Government a compensation of Rs.54,014 by the Collector's award, dated September 17, 1971. The Income tax Officer worked out the capital gain at Rs.26,650 and held that the gain was liable to be assessed in the assessment year 1972-73 since from the award of the Collector, dated September 17, 1971, the title to the land had vested in the Government. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee rejecting the contention of the assessee that the transfer of the land was effected in the year 1970 on the publication of the notification under sections 4 and 6 read with section 17 of the Act. The Tribunal took the view that capital gain arose on the transfer of the title to the land in the year 1970 relevant to the assessment year 1971-72 and not in the assessment year 1972-73 when the award was given and consideration received. The Tribunal, therefore, deleted the addition of Rs.26,650 made in the assessment year 1972-73. On a reference:
Held, that possession of the land was taken in September, 1971, which fell in the assessment year 1972-73 relevant to the financial year April 1, 1971, to March 31, 1972. Under section 45 of the Income Tax Act, 1961, tax on capital gains arises from a transfer of capital asset effected in the previous year.. Transfer of the capital asset,-in the present case took place in September, 1971, after the compensation -was paid and possession taken by the Government which fell in the assessment year 1972-73. Therefore, the transfer took place in the year 1972-73 and the land would be deemed to have vested in the Government in that year. Therefore, the Tribunal was wrong in holding that transfer of the land took place in the year 1971-72 in which year the notifications under sections 4, 6 and 17 of the Act of 1894. were issued:
R.P. Sawhney, Senior Advocate with Rajesh Bindal for the Commissioner. ,
B.S. Gupta, Senior Advocate with Sanjay Bansal for the Assessee.
JUDGMENT
ASHOK BHAN, J.---At the instance of the Commissioner of Income-tax, Jalandhar, the following question of law has been referred by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal"), to this Court for its opinion:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that capital gain arose in the assessment year 1971-72 and not in the assessment year 1972-73?"
The controversy in this case pertains to the assessment year 1972-73 relevant to the financial year April 1, 1971 to March 31, 1972. The respondent-assessee (hereinafter referred to as the assessee) is a joint Hindu undivided family which held 25 Kanals and 1 Marla of land in Muktsar. This land was purchased by the assessee in the year 1957 for a sum of Rs.8,000. The State of Punjab issued notifications under sections 4 and 6 read with .11 section 17 of the Land Acquisition Act, 1894 (hereinafter referred to as the kill Act of 1894), which was published in the Punjab Government Gazette, dated December 31, 1970, seeking to acquire the land, t public expense for a public purpose. It was mentioned in the notification that as the urgency provisions of the Act of 1894 had been invoked , the provisions of section 5-A of the Act of 1894 would not apply in regard to its acquisition. The Collector, Land Acquisition, P.W.D. Building and Road Branch, Jalandhar, was directed to proceed to take possession of the land.
The assessee as a consequence of this acquisition by the Government received a compensation of Rs.54,014 on the basis of the Collector's award, dated September 17, 1971. The Income-tax Officer worked out on the consideration and purchase price, the capital gain at Rs.26,650. According to him, this gain was liable to be assessed for the assessment year 1972-73. The possession was taken by the Government and compensation was paid by the Government in this year. It was inferred that from the date of the award, title had vested in the Government. Since the date September 17, 1971, fell in the year corresponding to the assessment year 1972-73, he was liable to be assessed for the capital gain in the year 1972-73. Though the assessee had returned the capital gain in his return, he disputed the addition of the capital gain in his assessment before the Appellate Assistant Commissioner. His plea is that transfer of the land was effected in the year 1970 on the publication of the notification under sections 4 and 6 read with section 17. The Appellate Assistant Commissioner turned down this plea and dismissed the appeal.
Aggrieved by the dismissal of the appeal, the assessee filed a further appeal before the Tribunal and contended that capital gains could only arise when the transfer of the title took place. According to him, the transfer of the title took plane within 15 days of the publication of the Gazette notification under section -17 of the Act of 1894. On consideration of the provisions contained in section 17 .of the Act of 1894, the Tribunal took the view that capital gains arose on the transfer of the title to the land in the year1970 relevant to the assessment year 1971-72 and not in the assessment year 1972-73 when the award was given and consideration received. Accordingly, the Tribunal deleted the addition of Rs.26,650 made in the, assessment year 1972-73.
Aggrieved against the finding recorded by the Tribunal, the Revenue filed a petition under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act), claiming three questions of law to be referred to this Court. After consideration of the matter, the Tribunal referred only one question to this Court for its opinion which has been reproduced in the earlier part of the judgment.
Counsel for the parties have been heard.
In our view, the Tribunal has clearly erred in its approach: The notification under section 4 is a preliminary notification seeking to acquire the land for a public purpose. Under section 5-A claimants can file objections against the proposed acquisition. After consideration of the objections raised by the claimants, the Government can issue declaration under section 6 acquiring the land for a public purpose. Thereafter, notices under section 9 are issued to the interested persons asking them to file their claims in lieu of the land acquired. The Land Acquisition Collector, thereafter, is liable to make an award under section 11 of the value of the land acquired. Under section 16 of the Act of 1894, the land comes to vest absolutely in the Government after the award under section 11 has been made and possession taken.
In cases where the urgency clause under section 17 is invoked, the procedure provided is different. Section 17(1) of the Act of 1894 reads as under:
" 17. Special powers in cases of urgency---(1) in cases of urgency, whenever the appropriate Government so directs, the Collector, though no such award has been made. may, on the expiration of fifteen days from the publication of the notice mentioned in section 9, subsection (1), take possession of any ...land needed for public purpose ....Such land shall thereupon vest absolutely in the Government, free from all encumbrances."
Under the Land Acquisition Act, vesting of land in the Government takes place:
"(a) when possession is taken consequent upon the passing of the award under section 16; or
(b) when possession is taken consequent upon the direction made under section 17(1) or where possession is taken as contemplated under section 17."
Whenever the urgency provisions of section 17 are invoked, the procedure given under sections 5-A, 11 and 16 of the Act of 1894, is dispensed with. On a declaration issued by the appropriate Government, the Collector without making an award, after 15 days of the publication of the notice under section 9 can take possession and thereafter, the land vests in the Government absolutely free from ail encumbrances. The Government is not required to take possession immediately on the, expiry of 15 days of the publication of notice under section 9(1) but may do so thereafter, at any titre and the land would vest in the Government after taking possession. Section 17 does not provide that the Land Acquisition Collector should take possession of the land immediately after expiry of 15 days of the notice under section 9(1).
In the present case, possession had not been taken till September 17, 1971: In the award, Annexure "E", while making the award, it was noticed by the Collector that possession had not been taken by the Public Works Department. Possession was taken in September 1971, which falls in the assessment year 1972-73 relevant to the financial year April 1, 1971 to March 31, 1972. Under section 45 of the Income Tax Act, 1961, tax on capital gains arises from a transfer of capital asset effected in the previous year. Transfer of the capital asset in the present case took place in September, 1971, after the compensation was paid and possession taken by the Government which falls in the assessment year 1972-73. Therefore, the transfer took place in the year 1972-73 and the land would be deemed to have vested in the Government in that year. The Tribunal was clearly in error in holding that transfer of the land took place in the year 1971-72 in which year the notifications under sections 4, 6 and 17 of the Act of 1894 were issued.
For the reasons stated above, it is held that the Tribunal was not right in taking the view that the capital gains in the present case arose in the assessment year 1971-72 instead of 1972-73. Accordingly the question referred to us is answered in favour of the Revenue and against the assessee.
M.B.A./3071/FC Reference answered.