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TMI Blog2004 (7) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... gains under section 45(5)(b) of the Act. Before adverting to the dispute, the relevant facts may first be noticed: Vide notifications dated December 12,1983, and March 19,1984, 9 kanals 7 marlas land of the assessee was acquired by the Haryana Government and vide award dated August 14, 1985, the assessee was granted a compensation of Rs. 4,69,709 at the rate of Rs. 55 per square yard. On a reference filed at the instance of the assessee, the District Judge vide his award dated October 14, 1992, enhanced the compensation to Rs. 250 per square yard. The State of Haryana challenged the enhancement made by the District Judge in appeal before this court, which was admitted. However, the prayer of the State Government for staying the disbursem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the enhanced compensation received by the assessee was liable to be treated as capital gain under section 45(5)(b) of the Act. Accordingly, he added the said amount to the total income of the assessee vide assessment order dated March 25, 1997. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Chandigarh (for short "the CIT(A)"), who accepted the claim of the assessee that the land at the time of its acquisition in the year 1983 was agricultural land and, therefore, no capital gain had resulted on its acquisition. The Commissioner of Income-tax (Appeals) observed that it was an admitted fact that prior to acquisition of the said land, it was stated to be held as an agricultural land, which fact had not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the revenue records, the land was described as Gair Mumkin or Abi on which no cultivation was possible. It further observed that there was no evidence of cultivation by the assessee nor was any material placed on record to show that the assessee had declared any agricultural income from the same. It was further observed that the land was surrounded on all sides by commercial assets and even the assessee had, at one stage, applied for permission to construct a hotel on the same. Even during the acquisition proceedings, compensation was claimed as a commercial asset. Thus, it was held that the land in question was not agricultural land and was a capital asset within the meaning of section 2(14) of the Act. Accordingly, the action of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the contentions raised by counsel for the parties and have also perused the orders of the authorities below. Income chargeable to tax as capital gain is defined in section 45(1) of the Act, which reads as under: "45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, 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." A perusal of the above shows that income under the head "Capital gain" arises on transfer of a "capital asset". "Capital asset" has been defined in section 2(14) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in para. 9 of its order and the same reads as under: "45. (5) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, tribunal or other authority, the capital gain shall be dealt with in the following manner, namely :- (a) the capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who made the transfer, or for any other reason, the enhanced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head 'Capital gains' of such other person." A bare perusal of the above shows that the provisions of this section are applicable to a case where a capital asset is transferred by way of compulsory acquisition and capital gain arises thereon. In other words, if at the time of transfer the asset does not fall within the definition of "capital asset", there is no occasion to treat the enhanced compensation in a subsequent year as capital gain under section 45(5) of the Act. It is further clear from clause (a) above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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