1986 (11) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Determination of the date of transfer for capital gains tax liability.
2. Interpretation of "vesting" of property u/s 16 and 17 of the Land Acquisition Act.
3. Applicability of the theory of "relating back" in the context of land acquisition.

Summary of Judgment:

1. Determination of the Date of Transfer for Capital Gains Tax Liability:
The Tribunal posed the question of whether the transfer giving rise to the liability to capital gains tax occurred on March 25, 1970, when possession of the assessee's lands was handed over to the Town Planning Trust, Visakhapatnam, or on March 22, 1971, when the award was passed by the Land Acquisition Officer, Visakhapatnam. The Tribunal concluded that the vesting occurred on the date of the award, i.e., March 22, 1971, which was contested by the assessee.

2. Interpretation of "Vesting" of Property u/s 16 and 17 of the Land Acquisition Act:
The court examined the provisions of the Land Acquisition Act, specifically sections 16 and 17, to determine when property vests in the Government. Section 16 states that land vests in the Government when the Collector makes an award and takes possession. Section 17 provides for special cases of urgency where possession can be taken before the award, and the land vests in the Government upon taking possession. The court noted that in this case, possession was taken voluntarily by the assessee before the award was passed, and not under the provisions of section 17.

3. Applicability of the Theory of "Relating Back":
The court rejected the assessee's argument that the vesting should relate back to the date of taking possession. It emphasized that vesting of title to the land is a matter of law, not inference, and must occur as specified by the statute. The court held that taking possession before the award does not bring about vesting unless it is under the specific provisions of section 17. Therefore, the land vests in the Government on the date of the award, March 22, 1971.

Supporting Case Law:
The court referred to several decisions, including the Full Bench decision in Revenue Divisional Officer v. Vasireddy Rama Bhanu Bhupal, which dealt with the payment of interest from the date of taking possession, and the Supreme Court decision in Lt. Governor of Himachal Pradesh v. Sri Avinash Sharma, which supported the view that possession taken earlier should be related to the direction made under section 17(1).

Conclusion:
The court concluded that vesting takes place either when possession is taken consequent upon the passing of the award, or under the specific provisions of section 17. In this case, since possession was taken voluntarily and not under section 17, vesting occurred on the date of the award, March 22, 1971. The Tribunal's decision was upheld, and the question was answered in favor of the Revenue and against the assessee.

Separate Judgment:
Rama Rao J. agreed with the conclusion but elaborated on the statutory provisions of vesting under sections 16 and 17, emphasizing that possession taken voluntarily without reference to these sections does not result in vesting.

Request for Certificate to Appeal:
The court rejected the oral request for a certificate to appeal to the Supreme Court under section 261 of the Income-tax Act, stating that the case was not fit for such an appeal.