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2020 (8) TMI 731 - SC - Income TaxCapital gains arising out of land acquisition compensation - date of accrual of capital gains for the purpose of Section 45 - Subject land had been given by the original owner on a lease for 20 years to a Government College - Whether chargeable to income-tax under Section 45 for the previous year referable to the date of award of compensation i.e., 29.09.1970 or date of notification for acquisition - question concerning date of accrual of capital gains - Whether High Court was right in taking the date of award as the date of accrual of capital gains for the purpose of Section 45 of the Act of 1961? - when did the transfer of the land in question, by way of compulsory acquisition, take place and when did the capital gains accrue to the assessee-appellant? - part of the land in question which was given on lease, possession of the College, after determination of the lease on 31.08.1967, was only that of a tenant at sufferance HELD THAT - Statements of law in decisions of Andhra Pradesh High Court 1986 (11) TMI 15 - ANDHRA PRADESH HIGH COURT , based on the enunciations by this Court in the case of Avinash Sharma 1970 (4) TMI 162 - SUPREME COURT , are rather unquestionable and need to be given imprimatur for application to the controversy like the present one. To be more specific, in such cases, capital gains shall be deemed to have accrued (a) upon making of the award, in the case of ordinary acquisition referable to Section 16; and (b) after expiration of fifteen days from the publication of the notice mentioned in Section 9 (1), in the case of urgency acquisition under Section 17. Answer to Point No. 1 is clearly in the negative i.e., against the assessee-appellant and in favour of the revenue that on the facts and in the circumstances of the present case, transfer of the capital asset (land in question), for the purposes of Section 45 of the Act of 1961, was complete only on 29.09.1970, the date of award and not on 15.05.1968, the date of notification for acquisition under Section 4 of the Act of 1894; and hence, capital gains arising out of such acquisition have rightly been charged to tax with reference to the date of award i.e., 29.09.1970. Effect of the decision of ITAT in relation to the other case of the assessee-appellant for the assessment year 1975- 1976 where the issue concerning date of accrual of capital gains was decided against the revenue with reference to the date of taking possession - Admittedly, the said decision for the assessment year 1975- 1976 was not appealed against and had attained finality. Hence, it has been argued on behalf of the appellant that it is not open for the revenue to question the similar decision of ITAT in the present case pertaining to the assessment year 1971-1972. HELD THAT - Matter involved in the said case pertaining to the assessment year 1975-1976 was taken to be an acquisition under the urgency provision contained in Section 17 of the Act of 1894 whereas, the acquisition proceedings in the present case had not been of urgency acquisition but had been of ordinary process where possession could have been taken only under Section 16 after making of the award. As noticed, the very structure of the ordinary process leading to possession under Section 16 of the Act of 1894 has been different than that of the urgency process under Section 17; and the said decision pertaining to the proceedings under Section 17 of the Act of 1894 cannot be directly applied to the present case. Even if we assume that the stand of revenue in the present case is not in conformity with the decision of ITAT in relation to the assessment year 1975-1976, it cannot be said that revenue has no just cause to take such a stand. As noticed, while rendering the decision in relation to the assessment year 1975-1976, the ITAT did not notice the principles available in various decisions including that of this Court in Avinash Sharma 1970 (4) TMI 162 - SUPREME COURT that even in the case of urgency acquisition under Section 17 of the Act of 1894, land was to vest in Government not on the date of taking over possession but, only on the expiration of fifteen days from the publication of the notice mentioned in Section 9(1). Looking to the facts of the present case and the law applicable, in our view, the revenue had every reason to question the correctness of the later decision of ITAT dated 29.06.1990 in the second round of proceedings pertaining to the assessment year 1971-1972. Fact situation of the present case relating to the assessment year 1971-1972 is not similar to that of the other case of the appellant relating to the assessment year 1975-1976 and the revenue is not precluded from taking the stand that the transfer of capital asset in the present case was complete only on the date of award i.e., on 29.09.1970. Answer to Point No. 2 is also clearly in the negative i.e., against the assessee-appellant Conclusion - In the second round of proceeding, the AO had rightly assessed the tax liability of the appellant, on long-term capital gains arising on account of acquisition, on the basis of the amount of compensation allowed in the award dated 29.09.1970 as also the enhanced amount of compensation accrued finally to the appellant; and as regards interest income, had rightly made protective assessment on accrual basis.
Issues Involved:
1. Date of accrual of capital gains. 2. Validity of reassessment by the Income Tax Officer (ITO). 3. Inclusion of enhanced compensation and interest in reassessment. 4. Consistency of revenue's stand in similar cases. Issue-wise Detailed Analysis: 1. Date of Accrual of Capital Gains: The core question was whether the capital gains arising from the land acquisition should be taxed based on the date of the award (29.09.1970) or the date of the notification for acquisition (15.05.1968). The High Court held that the capital gains were chargeable to tax on the date of the award, not the date of notification. The Supreme Court affirmed this view, emphasizing that under the Land Acquisition Act, 1894, the property vests in the government only when possession is taken, which in this case was on the date of the award. The Court stated, "Income tax is not levied on a mere right to receive compensation; there must be something tangible, something in the nature of debt, something in the nature of an obligation to pay an ascertained amount." 2. Validity of Reassessment by the Income Tax Officer (ITO): The appellant argued that the ITO exceeded his jurisdiction by framing a de novo assessment instead of recomputing the income in terms of the ITAT’s order of remand. The CIT(A) rejected this argument, stating that the ITO had the power to consider enhanced compensation in the reassessment. The Supreme Court upheld this view, noting that the ITO was within his rights to combine the reassessment with the directions of the ITAT. 3. Inclusion of Enhanced Compensation and Interest in Reassessment: The appellant contested the inclusion of enhanced compensation and interest in the reassessment. The CIT(A) and ITAT upheld the ITO's inclusion of these amounts, stating that the enhanced compensation was part of the capital gains and should be taxed accordingly. The Supreme Court agreed, noting that the enhanced compensation and interest accrued as part of the award and were rightly included in the reassessment. 4. Consistency of Revenue's Stand in Similar Cases: The appellant argued that the revenue could not challenge the ITAT’s decision in the present case because it had accepted a similar decision for the assessment year 1975-1976. The Supreme Court rejected this argument, stating that the facts of the two cases were different. The case for the assessment year 1975-1976 involved urgency acquisition under Section 17 of the Land Acquisition Act, 1894, whereas the present case did not. The Court emphasized that the revenue had just cause to challenge the ITAT’s decision in the present case. Conclusion: The Supreme Court dismissed the appeal, holding that the capital gains arising from the land acquisition were chargeable to tax in the assessment year 1971-1972, based on the date of the award (29.09.1970). The Court affirmed the validity of the reassessment by the ITO, including the enhanced compensation and interest. The Court also held that the revenue was not precluded from challenging the ITAT’s decision in the present case, despite accepting a similar decision in a different assessment year.
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