1997 (12) TMI 146 - AT - Income Tax

Summary

Issues Involved:

1. Assessment year for capital gains.
2. Applicability of urgency provisions under Section 17 of the Land Acquisition Act.
3. Nature of the acquired land as a 'capital asset' under Section 2(14) of the Income-tax Act.
4. Validity of the assessment of capital gains in light of a subsequent notification.
5. Relief under Sections 54F and 54B of the Income-tax Act.
6. Cost of acquisition valuation.

Issue-wise Detailed Analysis:

1. Assessment Year for Capital Gains:

The first ground raised by the assessee was that the CIT (Appeals) erred in holding that the capital gains arising on the acquisition of the property was rightly brought to tax for the assessment year 1986-87. The assessee contended that the transfer of the property within the meaning of section 2(47) of the Income-tax Act had taken place in the year ending 31-3-1987. The Tribunal found that the land vested with the Government on the expiry of 15 days after the issue of the notice under section 9(1) of the Land Acquisition Act, which was issued on 1-7-1985. Consequently, the land vested with the Government on 17-7-1985, making the capital gains assessable for the assessment year 1986-87.

2. Applicability of Urgency Provisions under Section 17 of the Land Acquisition Act:

The assessee argued that the acquisition was not made under the urgency provisions contained in section 17 of the Land Acquisition Act. However, the Tribunal noted that the Government had passed an order according sanction to invoke urgency provisions under the Land Acquisition Act. The notification under section 4(1) of the L.A. Act was published, and the declaration under section 6 was approved and published. The enquiry under section 9 was conducted, and the Deputy Collector passed an order stating that the land and improvements would vest with the Government free from all encumbrances. Therefore, the acquisition was indeed made under the urgency provisions.

3. Nature of the Acquired Land as a 'Capital Asset' under Section 2(14) of the Income-tax Act:

The assessee contended that the land was agricultural and thus not liable to capital gains tax. The Tribunal noted that the land was situated in Thrikkakara South Village, which was included in the notification issued by the Central Government on 6th February 1973. This notification classified the land as a 'capital asset' under section 2(14) of the Income-tax Act. Therefore, the capital gains arising on the transfer of the land were assessable to tax.

4. Validity of the Assessment of Capital Gains in Light of a Subsequent Notification:

The assessee argued that a subsequent notification issued on 6th January 1994 superseded the earlier notification and excluded Thrikkakara from the notified areas, thereby affecting the assessment of capital gains. The Tribunal held that the second notification did not have retrospective effect. It was effective from the date of its publication, and the earlier notification was applicable for the assessment year 1986-87. The Tribunal relied on various judicial decisions to support the view that a change in law does not affect pending proceedings unless an intention to the contrary is clearly shown.

5. Relief under Sections 54F and 54B of the Income-tax Act:

The assessee disputed the relief allowed under sections 54F and 54B of the Act. The Tribunal noted that the CIT (Appeals) found the deductions allowed by the Assessing Officer to be reasonable. No arguments were raised before the Tribunal in support of these grounds. Therefore, the Tribunal found no reason to interfere with the decision of the CIT (Appeals).

6. Cost of Acquisition Valuation:

The assessee also raised a ground regarding the value of land as on 1-4-1974 for fixing the cost of acquisition. The Tribunal observed that the cost of acquisition as on 1-4-1974 was considered by the Assessing Officer, even though there was a mistake in the computation showing the date as 1-1-1964. In the absence of any arguments raised by the assessee's counsel, the Tribunal found no reason to interfere with the decision of the CIT (Appeals).

Conclusion:

In conclusion, the Tribunal upheld the assessment of capital gains for the assessment year 1986-87, confirming that the land was acquired under the urgency provisions of the Land Acquisition Act and was a 'capital asset' under section 2(14) of the Income-tax Act. The subsequent notification issued on 6th January 1994 did not have retrospective effect, and the relief allowed under sections 54F and 54B was found to be reasonable. The appeal by the assessee was dismissed.