1996 (9) TMI 112 - HC - Income Tax

Summary

Issues:
Proper assessment of capital gains for the assessment year 1971-72 in respect of properties acquired by the Government under the Requisition and Acquisition Act, 1964.

Analysis:
The case involved a company whose assets were acquired by the Government under the Requisition and Acquisition Act, 1964. The Income-tax Officer assessed capital gains and profit under section 41(2) based on the compensation claimed by the company. However, the Appellate Assistant Commissioner found that since the compensation amount had not been determined, the assessment of capital gains and profit was premature. The Tribunal upheld this decision, leading to the Revenue's appeal. The key question was whether the compensation amount claimed should be regarded as capital gains before its determination.

The Court analyzed the provisions of the Assam Land (Requisition and Acquisition) Act, 1964, under which the land was acquired. It highlighted that under section 9 of the Act, the land vests in the Government only after the order of acquisition is served or published. The compensation amount is determined under section 11 of the Act, and payment is made from the date the property vests in the Government. Therefore, until the compensation amount is determined, capital gains cannot be ascertained. The Court emphasized that capital gains would only arise when the compensation amount is finalized.

Considering the legal framework and the sequence of events under the 1964 Act, the Court concluded that the Tribunal's decision was justified. It held that the determination of capital gains could only occur once the compensation amount was determined. Therefore, the Court answered the question in favor of the assessee and against the Revenue. The judgment was to be transmitted to the Income-tax Appellate Tribunal, Guwahati for further action.