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TMI Blog2007 (10) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... of two years. The case of the assessee was that the possession was taken on 26th of June, 1977 and the compensation was received on 12th of July, 1977, no capital gain was leviable because the agricultural land was purchased on 15th of June, 1979. In appeal, the Commissioner of Income-tax (Appeals) held that even when the possession was taken over on 6th of June, 1977, there was no liability to pay capital gain in view of section 54 B (2), as he then stood. The initial amount of compensation was received on 12th of July, 1977, therefore the capital gains could arise only on that date and not earlier to it. He further held that the tube wells, trees etc. were parts of the agricultural land. This order has been confirmed by the Tribunal in further appeal filed by the department. 2. At the instance of the department the following three questions of law relevant to the assessment year 1978-79 have been referred by the Tribunal as per direction of the High Court for its opinion:- "1.Whether the finding of the Tribunal that the date of transfer should be taken as 26.6.1977 and not 6..1977 is vitiated in law in as much as the Tribunal has ignored the evidence which was relied on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of section 54 B of the Income Tax Act so as the assessee may not be charged for capital gain on transfer of land used for agricultural purposes. Section 54B (2) as it then stood reads as follows:- "54-B (2) Where the transfer of the original asset is by way of compulsory acquisition under any law and the compensation awarded for such acquisition is enhanced by any court, tribunal or other authority, then; (a) So much of the capital gain, computed under section 48 by taking the compensation as so enhanced as the full value of the consideration received or accruing as a result of such transfer, as is not excluded under sub-section (1) from being charged to tax under sec 45, or (b) The capital gain attributable to the enhancement of the compensation, whichever is less (that which is less being hereinafter referred to as the unadjusted capital gain), shall if the assessee has within a period of two years after the date of receipt of the additional compensation purchased any land for being used for agricultural purposes (herein after referred to as the relevant asset be dealt with-in the following manner that is to say - (i) if the amount of the unadjusted capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed value of compensation shall be dealt with as provided for in section 54 B(2), according to which if the enhanced compensation as received has been invested in the agricultural land within two years of its receipt, to that extent no capital gain will be charged. This provision gives an insight that section 54 B has taken into consideration the possibility of enhancement of compensation amount by the courts, Tribunal etc. at the subsequent stages. If the agricultural land is purchased within a period of two years from such enhancement, the capital gain or no capital gain as the case may be will be charged under section 54B (2) of the Act. In other words, the period of two years in such cases will commence from the date of enhancement of the compensation amount by the court etc. This is indicative of the legislative intent to the effect that for the purposes of section 54B, the date of receipt of enhancement of the compensation amount is the relevant consideration and not the date of transfer. It follows, therefore, that for a delay on the part of the acquiring body in making payment of compensation amount, the assessee should not be deprived of the benefit of section 54 B provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perate fully and there could not be any limits to its operation. This Court in Biswanath Jhunjhunwalla, case [1996] 5 SCC 626 said that if the language expressly so states or clearly implies, retrospectivity must be given to the provision." 14. Keeping the above principle in mind, if the word 'transfer' is literally interpreted it may make section 54 B unworkable and may lead to absurdity. Take for example that the land is acquired and the possession is also taken for instance on 1st of April, 2000 but the compensation is not paid by the acquiring body within a period of two years. The assessee/tenure-holder would not be able to avail the advantage of section 54B by purchasing the agricultural land as provided for therein within a period of two years. He would be deprived of the benefit of such section for no fault of his own. Section 54 B is a beneficial provision for an assessee who is otherwise liable to pay income-tax under the head 'capital gain'. On a conjoint reading of section 45 with section 54 B, to avoid such absurdity as pointed out above, the word 'transfer' should be read for the purposes of income tax the date on which the compensation amount is paid to such assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 1st of April, 1984 by Taxation Laws (Amendment) Act 1994. The said provision reads as follows:- "54E. (1) ...................................................................... (a)................................................................................. (b)................................................................................. Provided further that in a case where the transfer of the original asset is by way of compulsory acquisition under any law and the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee or the 31st day of March, 1992, whichever is earlier." 18. The said proviso being procedural in nature and has been introduced with a view to remove the absurdity and clear anomaly will operate retrospectively being procedural in nature. 19. The assessee was an agriculturist and he received the initial compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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