1985 (4) TMI 50 - HC - Income Tax

Summary

Issues Involved: Determination of tax liability on capital gains arising from the acquisition of lands by the City Improvement Trust Board.

Summary:

Issue 1: Assessment of Capital Gains
The High Court of Karnataka was tasked with deciding whether the capital gains from the acquisition of specific survey numbers were taxable for the assessment year 1974-75. The lands in question were acquired by the City Improvement Trust Board (CITB) under the Land Acquisition Act.

The Income-tax Officer (ITO) included the compensation received by the assessee under "capital gains" for the assessment year. The assessee disputed the assessment, leading to appeals and ultimately a decision by the Tribunal upholding the assessment based on the possession dates of the acquired lands falling within the relevant accounting year.

Issue 2: Legal Interpretation
The key legal question revolved around the definition of "transfer" under the Income Tax Act and the Land Acquisition Act. The Tribunal relied on precedents to determine that the transfer of title to the acquired lands took place upon possession being taken by the Deputy Commissioner under the Land Acquisition Act, as per section 16 of the Act.

Judgment
The High Court upheld the Tribunal's decision, emphasizing that under the Land Acquisition Act, once an award is made and possession is taken, the lands automatically vest in the Government. Therefore, the transfer of title occurred when possession was taken by the Deputy Commissioner, making the dates of possession crucial for determining the capital gains tax liability under section 45 of the Income Tax Act.

In conclusion, the Court ruled that the transfer of the lands acquired occurred on specific dates in 1973, falling within the previous year ending March 31, 1974, and thus taxable for the assessment year 1974-75.