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TMI Blog1976 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Income-tax Act, 1922, is correct in law ? " T.C. No. 177171 : " (1) Whether, on the facts and in the circumstances of the case, the decision of the Tribunal in holding that the compulsory acquisition by the Andhra Pradesh Government of the Ellore Electric Supply Undertaking of the applicant under the Andhra Pradesh Electricity Supply Undertakings (Acquisition) Act is a transfer liable to capital gains tax under section 12B of the Indian Income-tax Act, 1922, is correct in law ? (2) Whether, on the facts and in the circumstances of the case, the decision of the Tribunal that where an undertaking as a going concern is compulsorily acquired by the Government, the said undertaking would constitute capital asset within the meaning of section 12B of the Indian Income-tax Act, 1922, is correct in law ? " It may be seen that the questions are identical in both the cases except for the difference in the enactments under which the acquisitions were made by the respective State Governments. We shall first set out the facts in the case of West Coast Electric Supply Corporation Ltd. concerned in T.C. No. 175 of 1971. This is a company which was distributing electric energy unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined was not correct, as the valuation of the assets as on 1st January, 1954, should have been taken at an increased value. There was a similar assessment for the assessment year 1961-62 in the case of Ellore Engineering Company Ltd., which is the assessee in T.C. No. 177 of 1971. That was a company to which a licence was granted for supply and distribution of electric energy to the Ellore area. This area was part of the then Madras State and later it became part of Andhra Pradesh on the re-organisation of States. The Andhra Pradesh Electricity Undertakings (Acquisition) Act was passed by the Andhra Pradesh legislature to compulsorily acquire the electricity undertakings. Acting under the provisions of that Act, the Andhra Pradesh Government acquired the Ellore Electric Supply Undertaking belonging to the assessee-company. The date of vesting under that Act was 10th December, 1960. The compensation payable for the compulsory acquisition was provided for under section 5 which gave the option to the assessee to adopt one of the three methods specified therein. The assessee adopted basis A under which compensation equal to twenty times the average annual profits of the undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel is that compulsory acquisition will not amount to a sale or transfer of a capital asset. It is common ground that there is no question of exchange or relinquishment on the facts of the present case. This point is concluded by more than one decision of this court. In Wilfred Pereira Ltd. v. Commissioner of Income-tax [1964] 53 ITR 747 (Mad) the assessee had purchased some lands. The lands were compulsorily acquired by the State Government and the assessee received as compensation a sum which was in excess of the price paid for the lands by the assessee. This excess was sought to be taxed as capital gains. The assessee contended, inter alia, that as the lands were compulsorily acquired there was no transfer within the meaning of section 12B. A Bench of this court held that a compulsory acquisition by the Government of property constitutes transfer and that the profit obtained by the transfer is taxable as capital gains. Similarly, in Commissioner of Income-tax v. United India Life Assurance Company Ltd. [1966] 62 ITR 610 (Mad) by virtue of the Life Insurance (Emergency Provisions) Ordinance, 1956, the management of the company in that case which was carrying on life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition was of the entire undertaking as a going concern and that the provisions of section 12B read with section 2(4A) of the Indian Income-tax Act, 1922, would not apply. In other words, the contention was that the expression " capital asset " would not comprehend an undertaking acquired as a whole. There is no substance in this submission. The expression " capital assets " has been defined in section 2(4A) as meaning " property of any kind held by an assessee, whether or not connected with his business, profession or vocation but not including, (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business, profession or vocation, etc., etc. " We have not reproduced clauses (ii) and (iii) of this section as they are not relevant for the purposes of this case. The expression " capital asset " has been given a wide meaning as " property of any kind ". That a business undertaking is property cannot be open to any debate. In fact the Supreme Court had occasion to pronounce on the content of the expression " property " in R. C. Cooper v. Union of India [1970] 40 Comp Cas 325, 353, 354 (SC). In that case, which related to the nationalisation of banks, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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