TMI Blog2007 (10) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 15th of May, 1977 which happened within within two years from the date of receipt of compensation. Therefore, it was submitted that in view of Section 54B of the Income Tax Act, the assessee was not liable to pay capital gains. This was not accepted by the Income-tax Officer who took the view that the possession was taken over on 6th of June, 1971 and the land was purchased by the assessee out of the compensation amount beyond period 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f June, 1977, the taxable event for the purposes of capital gains took place on that date. 6. Considered the submission of learned standing counsel for the department. The assessee out of the amount of compensation received from acquisition of his agricultural land, purchased agricultural land on 15.6.1979. Question, thus, arises as to whether the purchase of agricultural land on 15th of June, 1979 was within the period of two years for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e asset is by way of compulsory acquisition under any law and compensation amount awarded for such acquisition enhanced by any court, the Tribunal or other authority, the capital gain attributable to the enhancement of the compensation, if the assessee had within the period of two years after the date of receipt of the additional compensation purchased any land for being used for agricultural purposes, capital gain attributable to the enhanced 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manufacturing Calico Printing Co. Ltd. Vs. S.G . Mehta ITO [1963] 48 ITR(SC)154; AIR 1963 S.C. 1436 and Biswanath Jhunjhunwalla [1996] 5 SCC 626 has held that, ".....it is the language of the provision that matters and when the meaning is clear, it has to be given full effect. In both these cases, this Court held that the proviso which amended the existing provision gave it retrospectivity. When the provision of law is explicit, it has to operate 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 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, "to tax the income", we are of the view, "owner" is a person who is entitled to receive income from the property in his own right." 17. It is also relevant to note that Legislature subsequently realised the difficulty felt by such assesseess and inserted second proviso in section 54 E of the Income Tax Act with effect 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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