1983 (9) TMI 7 - HC - Income Tax

Summary

Issues:
1. Taxability of long-term capital gains arising from the compensation for acquired land in the assessment year 1971-72.
2. Taxability of long-term capital gains in the assessment year 1972-73.

Analysis:

Issue 1:
The High Court addressed the first issue concerning the taxability of long-term capital gains arising from the compensation for the acquired land in the assessment year 1971-72. The assessee, a Hindu Undivided Family (HUF), had their land acquired for the public purpose of the Reserve Bank of India's main office building. The Special Land Acquisition Officer made the order and award on February 3, 1971, for the acquisition. The Income Tax Officer (ITO) brought the capital gains to tax in the assessment year 1971-72, considering the compensation received. The assessee appealed, and the Commissioner of Income-tax (Appeals) upheld the taxability but reduced the capital gains amount. However, the Tribunal held that since the title to the land would vest in the Government upon possession being taken over by the Collector as per the Land Acquisition Act, the capital gains were not liable to be taxed in the assessment year 1971-72. The High Court, in response to the reference, ruled in favor of the assessee, stating that the capital gains were not taxable in the said assessment year.

Issue 2:
The second issue involved the taxability of long-term capital gains in the assessment year 1972-73. The ITO made a protective assessment for this year as well, but the Tribunal deleted the capital gains amount based on a previous court decision. The Revenue appealed, questioning whether the capital gains should be assessed in the hands of the assessee-HUF for the assessment year 1972-73. The High Court reiterated the legal position that capital gains are taxable in the year when possession is taken over pursuant to the award under the Land Acquisition Act. As the award was made on February 3, 1971, and the possession did not vest the title to the property in the Government until then, the capital gains could be taxed in the year 1972-73. Therefore, the High Court ruled in favor of the Revenue, stating that the capital gains were liable to be assessed in the said assessment year.

In conclusion, the High Court decided in favor of the assessee regarding the taxability of long-term capital gains in the assessment year 1971-72 but ruled in favor of the Revenue for the assessment year 1972-73. The judgment clarified the legal principles regarding the taxation of capital gains arising from land acquisition and emphasized the significance of possession and title transfer in determining the tax liability.