TMI Blog1970 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lower selling price which the assessee would be able ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Hudson Co. Ltd. v. Kirkness: To say of a man who has ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation 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 consisting of the totality of right, title and interest in the property and there is, therefore, clearly transfer of property from the owner to the State. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 market value of the property the State shall pay to the expropriated owner a sum of 15 per cent. of such market value. The additional amount directed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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