1979 (2) TMI 100 - HC - Income Tax

Summary

Issues Involved:
1. Determination of capital gains with reference to the amount of compensation paid by the Land Acquisition Officer.
2. Applicability of section 52(2) of the Income-tax Act to the transfer in the case of the assessee.
3. Direction to the Income-tax Officer to adopt the revised value of compensation as and when determined by the Land Acquisition Authorities.

Summary:

Issue 1: Determination of Capital Gains
The Tribunal held that capital gains should be determined with reference to the amount of compensation paid to the assessee by the Land Acquisition Officer. The High Court affirmed this, referencing the decision in Topandas Kundanmal v. CIT [1978] 114 ITR 237 (Guj), which stated that the right to income in the nature of compensation arises only when the amount is judicially determined. The Court noted that any enhanced compensation determined later by judicial authorities would be taxed in the year the possession was taken, as per s. 45 of the I.T. Act, 1961. The Court also highlighted the relevance of s. 155(7A) for recomputation of capital gains when compensation is enhanced.

Issue 2: Applicability of Section 52(2)
The Court found that s. 52(2) could not be invoked in land acquisition cases. The section applies when the fair market value exceeds the declared consideration by at least 15%, but in land acquisition, the compensation awarded by the Land Acquisition Officer is merely an offer, not a final determination of market value. Therefore, the assessee's declaration of the compensation amount could not be considered below market value. The Court ruled in favor of the assessee, stating that s. 52(2) was not applicable.

Issue 3: Direction to Income-tax Officer
The Tribunal had refused to direct the Income-tax Officer to adopt the revised value of compensation as and when determined by the Land Acquisition Authorities. The High Court agreed, noting that under s. 153(3)(ii), the limitation period does not apply to assessments made to give effect to any court order. Therefore, the Tribunal's refusal to issue such a direction was justified, as the question of limitation would not arise. The Court ruled in favor of the assessee on this issue as well.

Conclusion:
The High Court answered all questions in the affirmative, favoring the assessee and against the revenue. The Commissioner was directed to pay the costs of both references to the assessee.