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TMI Blog1970 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition, the assessee had to shift the site of the ice factory to another locality in Gomtipur area. The proceedings for determining the amount of compensation were taken by the land acquisition officer and the award fixing the amount of compensation was made by him on 5th October, 1960, during the previous year relevant to the assessment year 1961-62. The total compensation payable to the assessee was fixed at ₹ 4,62,092 which was very much more than the original cost of acquisition to the assessee. The assessee in its return for the assessment year 1961-62 did not dispute that the compulsory acquisition had resulted in capital gain but, according to it, the extent of the capital gain was only ₹ 81,301. The assessee sought to exclude, in computing the capital gain, ₹ 37,202 being the amount of solatium awarded under section 23 of the Land Acquisition Act, 1894, and ₹ 31,620, made up of ₹ 16,200 representing compensation on account of extra cost of transport which the assessee would have to incur by reason of shifting the site of the ice factory from its present location to Gomtipur area and ₹ 15,420 representing compensation on account of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion raises the point whether compulsory acquisition of property amounts to transfer within the meaning of section 12B(1) so as to give rise to capital gain taxable under that section. Section 12B(1) provides that tax shall be payable by an assessee under the head "Capital gains" in respect of any profits or gains, arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st day of March, 1946, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange, relinquishment or transfer of a capital asset was effected during the year of account. The profits or gains arising to the assessee as a result of compulsory acquisition of the land together with the ice factory cannot, therefore, be brought to charge under section 12B(1) unless it can be shows that compulsory acquisition falls within any one of the following four legal concepts, namely, sale, exchange, relinquishment or transfer. Now, obviously, compulsory acquisition of property cannot be regarded as sale since consensual relation is an essential element in the concept of sale. If we may quote the words of Viscount Simonds in John Hud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er by act of parties. We do not find anything in the section which militates against the broad general connotation of the word "transfer". It was suggested on behalf of the assessee that the words "sale, exchange, relinquishment or transfer...effected after the 31st day of March, 1946" postulated that there must be some one to effect the transfer and that indicated that transfer by operation of law was in intended to be excluded from the scope and ambit of the section. But this suggestion is based on a misreading of the language used by the legislature. The legislature has deliberately used the past-participle "effected" without indicating the causal agency so that transfer may be effected either by the assessee or as a result of operation of law. Now, if the word "transfer" as used in section 12B(1) includes transfer by operation of law, compulsory acquisition of property would undoubtedly come within the scope and ambit of that section. When there is compulsory acquisition of property, the right, title and interest in the property passes from the owner to the State and the State becomes vested with the full ownership of the property consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Land Acquisition Act, 1894. The controversy between the parties is whether this amount received by the assessee is liable to be taken into account in computing capital gain resulting from compulsory acquisition of the land and the ice factory standing on it. The assessee contended that it is not lible to be taken into account since it is not part of the compensation for the capital asset, namely, the land together with the ice factory but it represents compensation given in consideration of the compulsory nature of the acquisition. This contention is not well founded for it proceeds on a wrong assumption as if the amount awarded under section 23(2) of the Land Acquisition Act, 1894, which is commonly known as solatium is by way of compensation for something other than the property acquired by the State. The amount of solatium provided under section 23(2) of the Land Acquisition Act, 1894, is undoubtedly given in consideration of the compulsory nature of the acquisition but it still represents consideration for the property acquired. It is because the transfer of the property is involuntary, i.e., against the will of the owner, that section 23(2) says that in addition to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts and loss of profits must be held to be revenue receipts and the view taken by the Tribunal that they were taxable as revenue receipts must be upheld. The fourth question must also, therefore, be answered in the affirmative. So far as the fifth and last question is concerned, the learned Advocate-General appearing on behalf of the revenue stated before us that if the salary paid to employees who could not be discharged immediately on the acquisition of the ice factory by the State, for which compensation of ₹ 5,310 was awarded to the assessee, was not allowed as a deduction by way of business expenditure in the assessment of the assessee to income-tax, the revenue would delete the addition of ₹ 5,310 in the taxable income of the assessee. On this statement being made by the learned Advocate-General, Mr. Thakore, learned advocate appearing on behalf of the assessee, did not press this question and hence it is not necessary to answer it. The result, therefore, is that questions Nos. 1, 2 and 4 are answered in the affirmative and questions Nos. 3 and 5 are not answered as they are not pressed on behalf of the assessee. The assessee will pay the costs of the refe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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