TMI Blog2020 (8) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... GH COURT] , based on the enunciations by this Court in the case of Avinash Sharma [ 1970 (4) TMI 162 - SUPREME COURT] , are rather unquestionable and need to be given imprimatur for application to the controversy like the present one. To be more specific, in such cases, capital gains shall be deemed to have accrued: (a) upon making of the award, in the case of ordinary acquisition referable to Section 16; and (b) after expiration of fifteen days from the publication of the notice mentioned in Section 9 (1), in the case of urgency acquisition under Section 17. Answer to Point No. 1 is clearly in the negative i.e., against the assessee-appellant and in favour of the revenue that on the facts and in the circumstances of the present case, transfer of the capital asset (land in question), for the purposes of Section 45 of the Act of 1961, was complete only on 29.09.1970, the date of award and not on 15.05.1968, the date of notification for acquisition under Section 4 of the Act of 1894; and hence, capital gains arising out of such acquisition have rightly been charged to tax with reference to the date of award i.e., 29.09.1970. Effect of the decision of ITAT in relation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessment year 1975-1976 and the revenue is not precluded from taking the stand that the transfer of capital asset in the present case was complete only on the date of award i.e., on 29.09.1970. Answer to Point No. 2 is also clearly in the negative i.e., against the assessee-appellant Conclusion:- In the second round of proceeding, the AO had rightly assessed the tax liability of the appellant, on long-term capital gains arising on account of acquisition, on the basis of the amount of compensation allowed in the award dated 29.09.1970 as also the enhanced amount of compensation accrued finally to the appellant; and as regards interest income, had rightly made protective assessment on accrual basis. - CIVIL APPEAL NO. 2416 OF 2010 - - - Dated:- 25-8-2020 - JUSTICE A.M.KHANWILKAR, JUSTICE HEMANT GUPTA And JUSTICE DINESH MAHESHWARI For the Appellant : Mr. Rameshwar Prasad Goyal, AOR For thew Respondent : Mr. Chidananda, Adv. Mr. B. V. Balaram Das, AOR JUDGMENT Dinesh Maheshwari , J . PRELIMINARY AND BRIEF OUTLINE 1. This appeal takes exception to the judgment and order dated 23.04.2008 passed by the High Court of Punjab and Haryana at Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the reference proceedings, had undergone two rounds of proceedings up to the stage of appeal before ITAT. THE ASSESSEE; THE SUBJECT LAND; AND THE ACQUISITION 5. The assessment in question is for the assessment year 1971-1972 in relation to the assessee Amrik Singh HUF- Hindu Undivided Family . The appellant Raj Pal Singh is son of late Shri Amrik Singh and is Karta of the assessee HUF. As noticed, the dispute essentially concerns the chargeability of tax for capital gains arising out of the award of compensation towards acquisition of land belonging to the assessee-appellant. 6. It is noticed from the material placed on record and the observations in the orders passed in this matter that the subject land, admeasuring 41 kanals and 14 marlas and comprising Khasra Nos. 361 to 369 and 372 to 375 at village Patti Jattan, Tehsil and District Ambala- For short, the subject land or the land in question , became an evacuee property after its original owner migrated to Pakistan; and the same was, as such, allotted to the said Shri Amrik Singh, who had migrated to India, in lieu of his property left in Pakistan. However, a substantial part of the subject land, exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blish the claim. As per application of the Principal S.A. Jain College, Ambala City, this fact as confirmed that the land in question was on the lease with the College upto 31.8.67 only and the college wanted to acquire the same so that its possession remains with the college. In addition to it, Shri Amar Chand President S.A. Jain College, Management Committee stated on oath before the Revenue Assistant Ambala on 21.3.68 that the Management committee was prepared to pay the price of the land fixed by the Collector to the land owners. From the copy of the jamabandi attached with this file, khasra Nos. 361 and 364 measuring 5 kanals and 7 marlas were not on the lease with the college. But the Management is claiming compensation for this land also. In these circumstances, the college management cannot be awarded any amount from the compensation of this land being tenant. I therefore, allow the compensation to the land owners according to their share entered in the jamabandi . (sic) First round of assessment proceedings By the Income Tax Officer, B Ward, Ambala 8. For the assessment year 1971-1972, the assessee declared its income at ₹ 1,408/- inclusive of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the acquisition of this land be not charged to tax in the assessment year under consideration. The assessee filed a written reply dated 26.12.1983 to this notice and stated, inter alia, that in the urgency acquisition under Section 17 of the Act, the transfer takes place immediately after the notification and the owner ceases to be in possession of the land in question. 9.2. The CIT(A), in his order dated 17.05.1984, rejected the submissions made on behalf of the assessee and held that the capital gains on the acquisition of the land amounting to ₹ 23,146/- were required to be added to the income of the previous year relevant to the assessment year under consideration. The CIT(A) ordered such addition while observing and holding as under:- 9 . ITO has not given any reason in the assessment order why the capital gain on the acquisition of the land is not taxable. Moreover, powers conferred on me under the Income-Tax Act does not preclude me from considering this issue at the appellate stage. 10. There is no doubt that the notifications were published much earlier that the date of award and the possession of land was also taken earlier that the date of awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d made by the Land Acquisition Collector under Section 11 of the Act of 1894. It was also argued that the interest amount could not have been treated separately and was required to be considered as a part of the compensation amount. 11. The appeal so filed, relating to the assessment year 1971-1972, was considered and decided by ITAT by its order dated 19.12.1985. Interestingly, on the same date, i.e., on 19.12.1985, the ITAT also considered and decided another appeal of the appellant pertaining to the assessment year 1975-1976, being ITA No.635/Chandi/84, wherein too, similar question of capital gains arising out of another award of compensation for acquisition of another parcel of land was involved. Since the said decision pertaining to the assessment year 1975-1976 has formed a part of submissions in the present appeal, we may usefully take note of its relevant features before proceeding further. 11.1. It appears that in the said appeal pertaining to the assessment year 1975-1976, the question of capital gains arose in the backdrop of the facts that another parcel of land of the appellant, in village Rangrnan, Tehsil and District Ambala admeasuring 15 kanals and 10 marlas, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter to the file of AO to find out the date when the Government took over possession, while observing that if possession was taken before the award and before 01.04.1970, capital gains were not to be included in the income for the assessment year 1971-1972 but, if possession was taken during the period 01.04.1970 to 31.03.1971, capital gains would be assessable for this assessment year 1971-1972. The material part of the order dated 19.12.1985 in ITA No.634/Chandi/84 pertaining to the present case reads as under:- 5. We have carefully considered the rival submission. The first Notification for the acquisition of the lands in 15.5.68 as mentioned in the order of the ITO. The date of award u/s 11 of the Land Acquisition Act is 29.9.70 which is also mentioned in the order of the ITO. The actual date of possession of the lands by the Government is neither mentioned in the order of the ITO nor of the AAC though the learned counsel for the assessee at the time of hearing stated that it was on 15.5.68. The AAC has also stated in para 10 of his order that the notifications were published much earlier than the date of the award and the possession of the land was also taken earlier than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred an appeal, being Regular First Appeal No. 390 of 1975 before the Punjab and Haryana High Court, seeking further enhancement. The High Court allowed this appeal by its judgment dated 25.10.1985 and awarded compensation by applying the rate of ₹ 8/- per sq. yd. against ₹ 3.50 and ₹ 2.50 per sq. yd., as allowed by the Additional District Judge and the Land Acquisition Collector respectively. The High Court also allowed 30% solatium and corresponding interest- 10 As per the material on record, the High Court allowed interest @12% p.a. on the market value of the land from the date of notification under Section 4 of the Act of 1894 until the date of taking possession; 9% p.a. after the date of possession for one year; and 15% p.a. thereafter . Second Round of Proceedings for assessment By the Income Tax Officer, C Ward, Ambala. 14. Having noticed the relevant facts concerning acquisition of the land in question, the award of compensation for such acquisition and enhancement of the amount of compensation as also the first round of proceedings for assessment for the assessment year 1971-1972, we may now take note of the orders passed in the second rou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of taking over possession (04.09.1972) having been mentioned in the said case pertaining to the assessment year 1975-1976. The AO also noticed that the appellant failed to place on record the date of publication of notice under Section 9 of the Act of 1894 and observed that there was no reference to urgency acquisition in the present case nor any such mention was found in the award dated 29.09.1970. In the given circumstances, the AO held that the acquisition in question was not a matter of urgency under Section 17 of the Act of 1894 and this acquisition had only been under the normal powers . 15.4. With the findings aforesaid, the AO proceeded to assess the tax liability of the appellant, on long-term capital gains arising on account of acquisition, on the basis of the amount of compensation allowed in the award dated 29.09.1970 as also the enhanced amount of compensation accruing finally as a result of the aforesaid order dated 30.12.1984 passed by the Additional District Judge and the judgment dated 25.10.1985 passed by the High Court. As regards interest income, the AO carried out protective assessment on accrual basis @ 12% per annum for the previous year relevant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be usefully reproduced as under:- 9 It is an admitted fact that the special procedure prescribed u/s 17 of the Land Acquisition Act for exercising of the emergency powers of the Govt. for taking possession of lands to be compulsorily acquired, earlier than the date of award u/s 11 of Land Acquisition Act, was not followed in this case. Neither there is any direction of the Govt. to the Collector to take over possession earlier then the date of award u/s 11 of Land Acquisition Act and nor the possession was so taken by the collector after 15 days of the publication of notice u/s 9(1) of the Land Acquisition Act. These two conditions are absolutely necessary if the possession was to be taken u/s 17 of the Land Acquisition Act. The possession of the lands already with S.A. Jain College Ambala was obviously regularized in the instant case u/s 16 of the Land Acquisition Act which is the general Section for taking the possession of lands acquired under the Land Acquisition Act. The possession of compulsorily acquired land u/s 16 of the Land Acquisition Act can be taken by the Govt. only after the date of award u/s 11 of the Land Acquisition Act which in the instant case was 29.9.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition of his lands, for computation of capital gains, I hold that appellant has no case in respect of the interest amount of ₹ 27255/- as mentioned in ground of Appeal No.5 of the original grounds of appeal. No arguments having been advanced in respect of appeal No. 4,6,7 of the original grounds of appeal, these grounds of appeal are, therefore, rejected as, on the face of it, there is nothing wrong in the order of the learned ITO in this respect. In the result, appeal is dismissed. (emphasis in bold supplied) Before the Income Tax Appellate Tribunal, Chandigarh Bench 17. Being aggrieved by the order so passed by the CIT(A), the appellant preferred an appeal before the ITAT, being ITA No. 739(Chandi)89, raising essentially three issues for consideration namely, (i) about the date of taking over physical possession of the land in question by the Government; (ii) about the ITO s power to frame the re-assessment instead of re- computing the income in terms of the ITAT s order of remand; and (iii) against the inclusion of enhanced compensation and interest, etc., in the re-assessment by the ITO. This appeal was considered and allowed by the ITAT by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al possession was inferable from the intention of the parties and the language of such stipulation in the award. On this reasoning, the ITAT held that since the actual physical possession exchanged hands on 15.05.1968, the transaction should be considered as having taken place on that date and not on the date of award i.e., 29.09.1970; and hence, capital gains were not to be taxed for the year under consideration. Having reached this conclusion, the ITAT held that the very basis of assessing capital gains having been knocked out, the other issues were rendered redundant. The ITAT, accordingly, allowed the appeal with the following observations and findings:- 14. According to the stipulation in the award, the possession of land is supposed to have taken place on 15.5.68 as from that date, the assessee was entitled in interest at 6% per annum on the amount of compensation. This is infact the date i.e. 15.5.68, from which date the assessee was supposed to have parted with the ownership of the land in lieu of the compensation. The assessee was to have the compensation and the land was supposed to have parted company. Thus to sort out the controversy we are required to heavily depe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15.05.1968 and not on the date of award on 29.09.1970? The reference proceedings in High Court 19. The High Court of Punjab and Haryana considered and answered the question aforesaid by its impugned judgment and order dated 23.04.2008 in Income Tax Reference No.53-A of 1991. 19.1. It was argued on behalf of the revenue before the High Court that any profits or gains arising from the transfer of the capital asset effected in the previous year shall be deemed to be income of the previous year in which the transfer took place and thus, would fall within the ambit of Section 45(1) of the Act of 1961; and as such, the date of award 29.09.1970 ought to be considered for the purpose of calculating capital gains and not the date of notification i.e., 15.05.1968. As against these submissions, it was submitted on behalf of the assessee-appellant that the referred question was required to be decided in the light of the observations made by ITAT in its order dated 19.12.1985; and that it had been a matter of urgency acquisition where the possession of land was taken on the date of notification i.e., 15.05.1968 and hence, in view of the provisions contained in Section 17 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. the date of award on which date the land vested in State. 14. Under the Income Tax Act, an income is chargeable to tax only when it accrues or is deemed to accrue or arise in the year of assessment. The deeming provision can have no relevance unless the income is receivable and if it is receivable, then the determination of the question whether it is actually received or is deemed to have been receive depends upon the method of accounting. If the actual amount of compensation has not been fixed by the Land Acquisition Collector, no income could be said to have accrued to the appellant. It cannot be contended that the mere claim by the assessee after taking of possession by the Govt. at a particular rate is the compensation. It is the amount actually awarded by the Collector accrues on the date on which the award is passed. Income tax is not levied on a mere right to receive compensation. There must be something tangible, something in the nature of debt, something in the nature of an obligation to pay an ascertained amount. Till such time no income can be said to have accrued. On the date when the Collector awarded the compensation, it is only that amount which had accrued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was immediately divested of the rights in the land in question, as amply established by the recital about possession of land in the award dated 29.09.1970, where the appellant was allowed interest over the amount of compensation and solatium from 15.05.1968. Therefore, according to the learned counsel, the transfer, for the purposes of Section 2(47) of the Act of 1961, was complete on the date of notification i.e., on 15.05.1968 and capital gains, if any, could have only been charged for the previous year referable to that date of notification and not with reference to the date of award. 21.1.1. Taking this line of argument further, learned counsel has referred to the Full Bench decision of Kerala High Court in the case of Peter John (supra) to submit that in land acquisition proceedings, the owner of property is entitled to compensation on the day on which he is dispossessed; and that such right does not await quantification of compensation by the Land Acquisition Officer or the Court. On application of these principles to the case at hand, according to the learned counsel, the date of award i.e., 29.09.1970 for quantification of compensation has no relevance for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in question in the assessment year 1971-1972 and the High Court has committed manifest error in upturning the view of ITAT. Respondent 22. Per contra, learned counsel for the revenue has supported the order passed by the High Court, essentially with the submissions that in the present case, transfer of capital asset i.e., the land of assessee, took place only on the date of award falling within the previous year relevant for the assessment year 1971-1972. 22.1. Learned counsel for the revenue has referred to the definitions of capital asset and transfer in the Act of 1961 and has contended that though possession of the subject land was with the College in the year 1968 and continued as such but, no gain on account of transfer of land accrued to the assessee on the date of notification i.e., 15.05.1968 because, at the relevant point of time, compensation had not been determined; and the same was determined only in the award dated 29.09.1970. Therefore, according to the learned counsel, capital gains chargeable to income-tax accrued only on the date of award and, in this position, the date of notification i.e., 15.05.1968 is not relevant for the purpose of taxing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrued could not have been charged to tax with reference to the date of award i.e., 29.09.1970? 2. As to whether the fact situation of the present case is similar to that of the other case of the appellant in relation to the assessment year 1975-1976 where the same issue relating to the date of accrual of capital gains was decided by the ITAT in favour of the appellant with reference to the date of taking possession by the Government; and having not challenged the same, it is not open for the revenue to question the similar decision of ITAT in the present case pertaining to the assessment year 1971-1972? 24. For appropriate dealing with the controversy at hand, we may take note of the relevant statutory provisions in the Income-tax Act, 1961, as applicable to the assessment year 1971-1972, as also in the Land Acquisition Act, 1894, as existing at the relevant time. Statutory Provisions 25. In the Income-tax Act, 1961, the heads of income for the purpose of computation of total income are defined in Section 14 that carries, inter alia, the heading E. Capital gains . Part-E of Chapter IV carries the provisions relating to Capital gains arising from the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the additional compensation or consideration was received by the assessee. :- Section 45. Capital gains.-Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54 and 54B be chargeable to income-tax under the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place. Section 2(47) transfer , in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law; 26. For an overview of the processes envisaged by the Land Acquisition Act, 1894 to bring about lawful acquisition of land, we may put a glance over the principal parts of relevant provisions therein, as existing at the relevant point of time. 26.1. The process of acquisition, as contained in Part II of the Act of 1894 could be reasonably taken into comprehension by reference to Sections 4, 5A, 6, 9, 11 and 16 therein, respectively occurring under the headings Preliminary Investigation , Objections , Declaration of Intended Acquis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke a report in respect of the land which has been notified under Section 4, sub- section (1), or make different reports in respect of different parcels of such land to the appropriate Government, containing his recommendations on the objections, together with the record of the proceedings held by him, for the decision of that Government. The decision of the appropriate Government on the objections shall be final. (3) For the purposes of this section, a person shall be deemed to be interested in land who would be entitled to claim an interest in compensation if the land were acquired under this Act. 6. Declaration that land is required for a public purpose.- (1) Subject to the provisions of Part VII of this Act, when the appropriate Government is satisfied after considering the report, if any, made under section 5A, sub-section (2), that any particular land is needed for a public purpose, or for a company, a declaration shall be made to that effect under the signature of a Secretary to such Government or of some officer duly authorised to certify its orders and different declarations may be made from time to time in respect of different parcels of any land covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation which in his opinion should be allowed for the land; and (iii) the apportionment of the said compensation among all the persons known or believed to be interested in the land, of whom, or of whose claims, he has information, whether or not they have respectively appeared before him. 16. Power to take possession.- When the Collector has made an award under Section 11, he may take possession of the land, which shall thereupon vest absolutely in the Government, free from all encumbrances. 26.2. A different process was, however, envisaged by Section 17 of the Act of 1894 for taking possession in cases of urgency even before making of award but upon the directions of the appropriate Government. The relevant part of that provision had been as under:- 17. Special powers in cases of urgency.- (1) In cases of urgency, whenever the appropriate Government so directs, the Collector, though no such award has been made, may, on the expiration of fifteen days from the publication of the notice mentioned in Section 9, sub-section (1), take possession of any waste or arable land needed for public purposes or for a company. Such land shall thereupon vest absolutely in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Transfer of Property Act, 1882- For short, the Act of 1882 concerning the general connotation of transfer of property as also those relating to the transaction of lease of immovable property. 27.1. In Section 5, occurring in Chapter II of the Act of 1882, the phrase transfer of property is defined as under:- 5. Transfer of property defined.- In the following sections transfer of property means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons; and to transfer property is to perform such act. In this section living person includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals. 27.2. The rights and liabilities of lessor and lessee of immovable property are delineated in Section 108 of the Act of 1882 and its clause (q) postulates an implied obligation of the lessee to put the lessor into possession of the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gains are those profits or gains which arise out of the transfer of capital asset. The expression capital asset is defined in Section 2(14) of the Act of 1961. In the present case, much dilation on this definition is not required because the subject land had indisputably been a capital asset of the assessee-appellant. We may, however, observe that such definition of capital asset is of wide amplitude, taking in its fold the property of any kind held by an assessee, except what has been expressively excluded therein, like stock-in-trade, consumables stores, personal effects, etc. 29.2. The expression transfer in relation to a capital asset has been defined in Section 2(47) of the Act of 1961. The said definition has also been of substantially wide amplitude so as to include sale, exchange or relinquishment of a capital asset; or extinguishment of any rights therein; or compulsory acquisition thereof. It is also noteworthy that as per the fundamentals in the Act of 1882, transfer of property means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it only informed about the intention of the Government to acquire the land for a public purpose. After this notification, in the ordinary course, under Section 5A, the Land Acquisition Collector was required to examine the objection, if any, to the proposed acquisition; and after examining his report, if so made, the Government was to issue declaration under Section 6, signifying its satisfaction that the land was indeed required for public purpose. These steps were to be followed by notice under Section 9, stating that the Government intended to take possession of the land and inviting claims for compensation. Thereafter, the Collector was to make his award under Section 11. As noticed hereinbefore, as per Section 16 of the Act of 1894, the Land Acquisition Collector, after making the award, could have taken possession of the land under acquisition and thereupon, the land vested in the Government free from all encumbrances. 31.2. A deviation from the process above-noted and a somewhat different process was permissible in Section 17 of the Act of 1894 whereunder, in cases of urgency and if the Government had so directed, the Collector could have taken possession of any waste or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will presently appear, the term vesting has a variety of meaning which has to be gathered from the context in which It has been used. It may mean full ownership, or only possession for a particular purpose, or clothing the authority with power to deal with the property as the agent of another person or authority . That the word vest is a word of variable import is shown by provisions of Indian statutes also. For example, S. 56 of the Provincial Insolvency Act (5 of 1920) empowers the Court at the time of the making of the order of adjudication or thereafter to appoint a receiver for the property of the insolvent and further provides that such property shall thereupon vest in such receiver. The property vests in the receiver for the purpose of administering the estate of the insolvent for the payment of his debts after realising his assets. The property of the insolvent vests in the receiver not for all purposes but only for the purpose of the Insolvency Act and the receiver has no interest of his own in the property. On the other hand, Ss. 16 and 17 of the Land Acquisition Act (Act 1 of 1894), provide that the property so acquired, upon the happening of certain events, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnataka-2: (1985) 155 ITR 277 wherein, the High Court referred to the aforesaid decision of this Court in Fruit Vegetable Merchants Union and held that since title of land passes to the Government on possession being taken by the Deputy Commissioner under Section 16 of the Act of 1894, such date of taking possession becomes relevant for the purposes of Section 45 of the Act of 1961. The High Court said (at p. 281 of ITR),- The assessee s contention, therefore, is contrary to the provisions of s. 16 of the Land Acquisition Act. Since the title of the owner of the lands acquired under the Land Acquisition Act passes to the Government on possession being taken by the Deputy Commissioner under s. 16 of the Act, the date of taking possession becomes relevant for purposes of s. 45 of the I.T. Act, so far as transfer of title is concerned. (emphasis in bold supplied) 33. However, the propositions aforesaid do not directly apply to a case where, for any reason, possession of the land had already been taken by the Government or delivered by the owner before completion of process envisaged by Section 16 or Section 17 of the Act of 1894. In such a case, the question, obvious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations contemplated by section 17 (1) and (2). The question is what is the reasonable view to take in such a situation? Should we relate back the award to the date of taking possession or should we relate the possession already taken to the date of the award? We think it more reasonable, and consistent with the provisions of the Act, to adopt the latter view. Since possession taken before the award continues to be with the Government, we must say that the moment the award is passed, possession from that moment onwards should be related to the award. It is on that date that the land vests in the Government. (emphasis in bold supplied) 33.1.1. While affirming that in the given set of facts, the liability to tax for capital gains arose on the date of award, the High Court referred to various decisions on relating back, of the possession previously taken, to the date envisaged by the Act of 1894; and took guidance, inter alia, from the following enunciation by this Court in the case of Lt. Governor of Himachal Pradesh v. Avinash Sharma: (1971) 1 SCR 413:- In the present case a notification under s. 17 (1) and (4) was issued by the State Government and possession which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 80,253 included by the Income Tax Officer under section 5(1)(b) of the Income-tax Act, 1961, in the total income for 1968-69 assessment, accrued de die in diem from the date of taking possession of the lands during the years 1961 and 1962 up to March 31, 1968, inclusive and, therefore, only ₹ 12,626 which accrued de die in diem during the concerned previous year of 366 calendar dates from April 1, 1967, to March 31, 1968, inclusive should have been included in the total income for 1968-69 assessment and the balance interest of ₹ 67,627 should be similarly included on accrual basis under section 5(1)(b) of the I.T. Act, 1961, in the income for the six assessment years from 1962-63 to 1967-68 inclusive, as had already been done by the Income Tax Officer by his orders dated June 6, 1972, for the 1967-68 and 1969-70 assessments? 34.1.1. In relation to the question as to when does the compensation accrue or when it is deemed to accrue, the High Court referred to the enunciation by this Court in the case of Joginder Singh (supra) and held that such right arises immediately on dispossession and does not await quantification of compensation. The High Court said (at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty, no question of right to interest would survive. It is only where the compensation payable is not paid on the date when it was actually due, in order to compensate the loss arising out of the deprival of the use of the amount, that interest is paid till the date of actual payment. That the right to receive interest arises on the date of dispossession on which date the land owner is entitled to receive compensation, admits of no doubt . *** *** *** In the light of the foregoing discussions, our conclusion is that interest on compensation awarded with respect to the land acquired under the Land Acquisition Act runs from day to day, accruing from the date on which the Government took possession of the land, that being the date on which the land owner's right to receive the entire compensation arises, though determined and paid later . 34.1.3. The principles aforesaid, that the right to receive compensation comes into being the moment Government takes possession of the property acquired; and the right to receive interest also accrues at the point of time when the right to receive compensation accrues and runs day to day, do not correspondingly result in compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for the period 01.04.1970 to 31.03.1971. 34.3. Again, the decision of this Court cited by learned counsel for the revenue in the case of Joginder Singh (supra), which was followed by the Kerala High Court in Peter John (supra), relates to the right to receive compensation and the right to receive interest. In that case, the question was about the date from which interest had to be granted and arose in the circumstances that though the High Court enhanced the amount of compensation for acquisition and awarded 6% per annum as the rate of interest on the amount of compensation determined by the Land Acquisition Officer and the District Judge but, restricted such rate of interest on the amount of compensation enhanced by it at 4% per annum from the date of possession and 6% per annum from the date of its judgement. In that context, this Court held that the High Court erred in restricting the rate of interest on the enhanced amount of compensation because owner of the land was entitled to be paid the true value of land on the date of taking over of possession; and merely because the amount was determined later did not mean that the right to amount came into existence at a later dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9(1) of the Act of 1894. In S. Appala Narasamma and Pandari Laxmaiah (supra), the Andhra Pradesh High Court applied these principles to the cases pertaining to ordinary process of acquisition and held that if possession had been taken earlier, it would relate to the award; and the date of award would be the relevant date for vesting of the land in the Government. 35.2. In an overall conspectus of the matter, we are clearly of the view that the statements of law in the aforesaid decisions of Andhra Pradesh High Court, based on the enunciations by this Court in the case of Avinash Sharma (supra), are rather unquestionable and need to be given imprimatur for application to the controversy like the present one. 36. For what has been discussed hereinabove, in our view, in the matters relating to compulsory acquisition of land under the Act of 1894, completion of transfer with vesting of land in the Government essentially correlates with taking over of possession of the land under acquisition by the Government. However, where possession is taken over before arriving of the relevant stage for such taking over, capital gains shall be deemed to have accrued upon arrival of the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard dated 29.09.1970 make it clear that the learned Land Acquisition Collector only awarded interest from the date of initial notification for the reason that the land was in possession of the College but, it was nowhere stated that he had received any directions from the Government to take possession of the land before making of the award while acting under Section 17. 38.2.2. Secondly, if at all the proceedings were taken under Section 17 of the Act of 1894, the land could have vested in the Government only after expiration of fifteen days from the date of publication of notice under Section 9(1); and, in any case, could not have vested in the Government on the date of publication of initial notification under Section 4 of the Act of 1894. Significantly, the assessee-appellant did not divulge the date of publication of notice under Section 9(1) of the Act of 1894 despite the queries of the Assessing Officer. The suggestion about application of the process contemplated by Section 17 of the Act of 1894 remains totally unfounded. 39. In view of the above, the only question that remains is as to what is the effect of possession of College over a part of the subject land at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for more than twelve months, the lease had come to end and, therefore, he had no right to claim any share in the compensation. Later on, a part of the land was de-notified from acquisition and that part remained in possession of the defendant-lessee. Thereafter, the plaintiff-lessor took up action claiming possession of the land by filing a suit against the defendant- lessee. The suit was decreed by the Trial Court and the decree was affirmed by the First Appellate Court. However, the High Court allowed the second appeal holding that the finding recorded in the award about the lease coming to an end operated as res judicata and the suit was filed beyond the period of limitation. In further appeal, this Court did not approve the decision of High Court and, in the course of allowing the appeal, exposited on the principles relating to the status of parties after expiry of the lease but retention of possession by the lessee, inter alia, in the following passage:- 29. The Defendant was inducted as a lessee for a period of 20 years. The lease period expired on 23rd September, 1974. Even if the lessee had not paid rent, the status of the lessee would not change during the continuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinuance of possession by the landlord expressed by acceptance of rent or otherwise. (emphasis in bold supplied) 39.3.1. Further, in Nand Ram (supra), this Court also quoted with approval the principles stated by Delhi High Court in the case of MEC India Pvt. Ltd. v. Lt. Col. Inder Maira Ors.: 80 (1999) Delhi Law Times 679. A relevant part of such quotation from the decision of Delhi High Court may also be usefully noticed for the present purpose as under:- 43. Thus, a tenant at sufferance is one who wrongfully continues in possession after the extinction of a lawful title and that a tenancy at sufferance is merely a legal fiction or device to avoid continuance in possession from operating as a trespass. A tenant remaining in possession of the property after determination of the lease does not become a trespasser, but continues as a tenant at sufferance till possession is restored to the landlord. The possession of an erstwhile tenant is juridical and he is a protected from dispossession otherwise than in due course of law. Although, he is a tenant, but being one at sufferance as aforesaid, no rent can be paid since, if rent is accepted by the landlord he w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the College was to result in vesting of the land in the Government, such vesting happened only on the date of award i.e., 29.09.1970 and not before. In other words, the transfer of land from the assessee-appellant to the Government reached its completion not before 29.09.1970 and hence, the earliest date for accrual of capital gains because of this acquisition was the date of award i.e., 29.09.1970. Therefore, the assessment of capital gains as income of the appellant for the previous year relevant to the assessment year 1971-1972 does not suffer from any infirmity or error. 40. An incidental aspect of the submissions on behalf of the appellant that interest and solatium accrued on 15.05.1968 as per the award and that being the income pertaining to the financial year 1968-1969 could not have been taxed in the assessment year 1971-1972, also deserves to be rejected for the reasons foregoing and for additionally the reason that in his order dated 25.01.1988, the AO has consciously made protective assessment on accrual basis on the interest component referable to the previous year 1970-1971, relevant for the assessment year 1971-72. 40.1. We may also usefully obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... di/84, the ITAT accepted the contention that the case fell under the urgency provision contained in Section 17 of the Act of 1894 where the assessee was divested of the title to the property, that vested in the Government with effect from 04.09.1972, the date of taking over possession. Hence, the ITAT held that the capital gains arising from the said acquisition were not assessable for the accounting period relevant for the assessment year 1975-1976. 43.1. Learned counsel for the appellant has strenuously argued that the revenue is not entitled to take a different stand in the present case pertaining to the assessment year 1971 1972, after having accepted the said decision pertaining to the assessment year 1975 1976 where it was held that capital gains accrued on the date of taking over possession of the land under acquisition by the Government. The learned counsel has relied upon the following observations in Berger Paints India Ltd. (supra):- In view of the judgments of this court in Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219; CIT v. Narendra Doshi [2002] 254 ITR 606 and CIT v. Shivsagar Estate [2002] 257 ITR 59, the principle established is that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also in law, for the reasons mentioned hereinbefore in Point No. 1. 44.3. Thirdly, even if we assume that the stand of revenue in the present case is not in conformity with the decision of ITAT in relation to the assessment year 1975-1976, it cannot be said that revenue has no just cause to take such a stand. As noticed, while rendering the decision in relation to the assessment year 1975-1976, the ITAT did not notice the principles available in various decisions including that of this Court in Avinash Sharma (supra) that even in the case of urgency acquisition under Section 17 of the Act of 1894, land was to vest in Government not on the date of taking over possession but, only on the expiration of fifteen days from the publication of the notice mentioned in Section 9(1). Looking to the facts of the present case and the law applicable, in our view, the revenue had every reason to question the correctness of the later decision of ITAT dated 29.06.1990 in the second round of proceedings pertaining to the assessment year 1971-1972. 44.4. Fourthly, the ITAT itself on being satisfied about the question of law involved in this case, made a reference by its order dated 15.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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