TMI Blog1995 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. 16,23,117 received by the assessee for the assessment years 1967-68, 1968-69 and 1969-70 for acquisition of its lands by the Government are assessable to tax as profits of the assessee's business ? (2) Whether, on the facts and in the circumstances of the case, the above compensation amounts can be said to be agricultural income within the meaning of section 2(1)(a) of the Income-tax Act, 1961, and as such exempt from income-tax ? (3) Whether, on the facts and in the circumstances of the case, the character of the assessee's lands changed from stock-in-trade and the same stood sterilised and converted into a capital asset as a result of the issue of the notifications under section 4 of the Land Acquisition Act, 1894 ? (4) Whether, on the facts and in the circumstances of the case, income from one-half of the property situate at 16, Aurangzeb Road, has rightly been held to be assessable under the head 'Property' ? (5) If the answer to question No. 4 is in the negative, whether the claim for repairs and depreciation has been rightly restricted to onehalf of the claim ? " DLF Housing and Construction Co. Pvt. Ltd. was a company carrying on business as colonizers by p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "(1) Whether, on the facts and in the circumstances of the case, compensation of Rs. 11,802 received by the assessee for 'the acquisition of its lands by the Government is assessable to tax as profits of the assessee's business ? (2) Whether, on the facts and in the circumstances of the case, compensation of Rs. 11,802 was its agricultural income within the meaning of section 2(1)(a) of the Income-tax Act, 1961, and as such exempt from income-tax ? (3) Whether, on the facts and in the circumstances of the case, the character of the assessee's lands changed from stock-in-trade and the same stood sterilised and was converted into a capital asset as a result of the issue of notifications under sections 4 and 6 of the Land Acquisition Act, 1894 ? (4) Whether, on the facts and in the circumstances of the case, income from one-half of the property situate at 16, Aurangzeb Road, New Delhi, has rightly been held to be assessable under the head 'Property' ?" The facts of this reference, out of which the aforesaid questions of law have arisen are similar and identical with those of the Income-tax. References Nos. 259 to 261 of 1977 and in order to avoid repetition of the facts we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly restricted to onehalf of the claim ? " This court, while answering the questions of law referred to this court in the said reference, considered the ratio of the decision of this court in respect of the same assessee in DLF Housing and Construction Pvt. Ltd. v. CIT [1983]141 ITR 806. On a consideration of the ratio of the aforesaid decision, this court while answering the reference held that except for the amounts, questions Nos. 1, 2, 4 and 5, now referred, are the same with some textual changes. Question No. 3, according to this court, was different and that question No. 3 was a new question. After considering the arguments put forward by learned counsel for the rival parties, this court, in the said reference, held that the compensation amount is not assessable as profit from the business, and, accordingly, answered question No. 1 referred to in the said reference in the negative. This court further held in respect of question No. 2 that the compensation paid to the assessee is not agricultural income of the assessee but is a capital gain which is exempt under the Income-tax Act and, accordingly, the said question was H answered in the negative. Question No. 3 was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at on the facts, the questions of law which were referred to this court for its opinion had to be answered in favour of the assessee because this court found that the reference made to this court from the order of the Special Bench, referred to earlier had been answered in favour of the assessee so far as the three questions which wer involve in the said reference were concerned. The said decision in the case of DLF United Ltd. v. CIT is reported in [1986] 161 ITR 709 (Delhi). In the said decision of this court, it was held that the High Court is bound to confine itself to the facts as found by the Tribunal or as admitted before it., Relying upon the decisions of the Supreme Court in the case of CIT v. Panipat Woollen and General Mills Co. Ltd. [1976] 103 ITR 66, this court held that while answering the reference, the High Court cannot go behind the statement of facts. In the aforesaid decision in the case of DLF United Ltd. v. CIT, this court held in respect of question No. 1 that prior to the acquisition of the land in question and even till the date of the award, the assessee made no attempt to transfer or alter the character of the agricultural land and that the assessee had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their business, namely, purchasing the same, plotting into house sites for the purpose of sale of the same in the course of their ordinary course of business. He submitted that the questions, so far as these years of assessments are concerned, have to be decided, therefore, on materially different facts. We have given our anxious consideration to the submissions made by learned counsel for the parties. It is a well-settled proposition of law that a reference in income-tax matters is on a question of law and that this question of law has to be answered by the High Court on the basis of facts and circumstances either found by the Tribunal or admitted by the parties before the Tribunal. The questions referred to us for our opinion start with the words "whether, on the facts and in the circumstances of the case". The Supreme Court has interpreted the aforesaid wordings in the decisions in CIT v. Calcutta Agency Ltd. [1951] 19 ITR 191 (SC) and CIT v. Panipat Woollen and General Mills Co. Ltd. [1976] 103 ITR 66 (SC), wherein the Supreme Court held that the aforesaid wordings imply that the High Court is bound to confine itself to the facts as found by the Tribunal and, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this court in respect of the reference in DLF United Ltd. v. CIT [1986] 161 ITR 714 (Delhi) inasmuch as we respectfully agree with the reasoning of this court in the aforesaid references. Besides, the said view appears to be the consistent view of this court with which we respectfully agree. Learned counsel appearing for the Revenue submitted before us that as to whether the surplus arising on the acquisition of land in the hands of the assessees is a profit of business or adventure in the nature of trade or is a capital receipt or revenue receipt is a finding of fact and, therefore, this court is not entitled to disturb the said finding of fact. In support of the aforesaid submission, learned counsel for the Revenue also relied upon two decisions of the Supreme Court in the case of CIT v. Associated Industrial Development Co. (P.) Ltd. [1971] 82 ITR 586 and CIT v. Greaves Cotton and Co. Ltd. [1968] 68 ITR 200. We have carefully gone through the ratio of the aforesaid two decisions and, in our opinion, the judgment of the Supreme Court in the case of CIT v. Greaves Cotton and Co. Ltd. [1968] 68 ITR 200 does not support the case of the Revenue. On the other hand, the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospective effect from April 1, 1970, i.e., prior to the decisions of this court on the identical facts rendered in respect of the same assessee for the earlier years of assessment. As we have already held that the surplus of the compensation amount arising as a result of acquisition of the agricultural land in question was a capital receipt and not income at all, the question of change in the definition of "agricultural income" because of the insertion of the Explanation has no relevance in the present context. However, even assuming the said Explanation to section 2(1A) inserted with effect from April 1, 1970, by the Finance Act, 1989, is applicable to the facts and circumstances of the case as submitted by learned counsel for the Revenue, let us now examine whether the contention raised by learned counsel for the Revenue that it is clarificatory in nature and would apply to all the assessments even prior to April 1, 1970, is valid or has any substance in it. Learned counsel submitted before us that the said Explanation inserted in the definition of "agricultural income" in section 2(1A) of the Act by the Finance Act, 1989, although was given retrospective effect from April 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mething from the contents of a provision. It is also true that an Explanation may--this is what Sri Ramachandran suggests in this case--be introduced by way of abundant caution in order to clear any mental cobwebs surrounding the meaning of a statutory provision spun by interpretative errors and to place what the Legislature considers to be the true meaning beyond any controversy or doubt. Hypothetically, that such can be the possible purpose of an 'Explanation' cannot be doubted. But the question is whether, in the present case, Explanation 1 inserted into section 40(b) in the year 1984 has had that effect. The 'Notes on Clauses' appended to the Taxation Laws (Amendment) Bill, 1984, say that clause 10 which seeks to amend section 40 will take effect from 1st April, 1985, and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years. The express prospec tive operation and effectuation of the 'Explanation' might, perhaps, be a factor necessarily detracting from any evincement of the intent on the part of the Legislature that the Explanation was intended more as a legislative exposition or clarification of the existing law than as a change in the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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