1977 (9) TMI 12 - HC - Income Tax

Acquisition Of Immovable Property Agricultural Land Application For Reference Capital Gains Computation Of Capital Jurisdiction Of High Court Land Whether Agricultural Movable Property

Summary

Issues Involved:
1. Whether the lands acquired by the Government are agricultural lands.
2. Whether the interpretation given by the Tribunal based on the definition of 'capital asset' in s. 2(14)(iii)(a) of the I.T. Act, 1961, is correct.
3. Whether the profits or gains arising from the transfer of a 'capital asset' can be chargeable to income-tax if the transfer is effected in the previous year and if no amount is received.
4. Whether the mere claim of the assessee for additional compensation can be taken into account for determining the capital gains derived by the assessee.

Detailed Analysis:

Issue 1: Agricultural Lands
The Tribunal found that the acquired lands are agricultural lands situated in Gaddimalkapur village, within the Hyderabad Municipal Corporation, which has a population of less than ten thousand. The assessee provided documentary evidence, including the Record of Rights, Pahani Patrak, Pavti bahi, and Tahsildar's certificate, to prove the agricultural nature of the lands. The revenue did not controvert these facts. Thus, the court agreed with the Tribunal's finding that the lands were agricultural.

Issue 2: Definition of 'Capital Asset'
The Tribunal held that the lands do not fall within the meaning of 'capital asset' as defined in s. 2(14)(iii)(a) of the Act because the population of Gaddimalkapur village was less than ten thousand according to the last preceding census. However, the court clarified that it is the population of the entire municipal corporation that should be considered, not just a constituent part. The lands situated within the municipal limits of Hyderabad Municipal Corporation are considered 'capital assets' irrespective of the population of the specific area.

Issue 3: Chargeability to Income-Tax
The court held that for liability to tax under s. 45, it is sufficient if profits have arisen out of the transfer of a capital asset in the accounting year, even if the profits are not actually received. The transfer is effective from the date when the title passes to the other party. In this case, the property vested absolutely in the Central Government on March 12, 1970, the date of publication of the notice in the Official Gazette. Thus, the capital gains are assessable as income of the year in which the transfer took place.

Issue 4: Claim for Additional Compensation
The court held that the mere claim of the assessee for additional compensation cannot be considered as an amount realized or accrued for purposes of capital gain. The amount finally awarded as compensation by the competent authority is the relevant amount for determining capital gains. The claim put in by the assessee does not establish that he received that amount as compensation.

Conclusion:
- Question 1: Answered in the affirmative and in favor of the assessee.
- Question 2: Answered in the negative and in favor of the revenue.
- Question 3: Answered in the affirmative and in favor of the revenue.
- Question 4: Answered in the negative and in favor of the assessee.

The reference is answered accordingly, with no order as to costs. The court also granted a certificate for appeal to the Supreme Court and stayed the operation of the judgment for six weeks to allow the assessee to obtain appropriate orders from the Supreme Court.