TMI Blog1977 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. The ITO issued a notice under s. 148 of the Act to the assessee on the ground that the acquisition took place on March 12, 1970, and the property acquired is non-agricultural land and the assessee defaulted in filing voluntary return of the capital gain earned by him which was assessable for the assessment year 1970-71. The assessee, in response to the notice, filed a return with a covering letter claiming that he was not liable to tax on capital gain. The ITO rejected this contention of the assessee, holding that the transfer of the property in question took place only on March 12, 1970, the date on which the acquired property vested in the Government. He also held that the property was situated within the municipal limits of Hyderabad and hence was non-agricultural. He determined the consideration for the transfer as Rs. 1,33,24,475 and, after giving a deduction of Rs. 18,000 towards cost of the land and giving a further relief under s. 80T to the tune of Rs. 59,90,665, determined the capital gain at Rs. 73,15,810. The AAC, on appeal, confirmed the order of the ITO, though he observed that the amount of tax to be recovered will be on the figure of Rs. 21,08,304 as fixed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He has alternatively argued that in the event of the above application not being allowed by us, he should be allowed to sustain the order of the Tribunal on the alternative ground that the transfer of the property acquired took place prior to 1st March, 1970. Before we answer the questions referred for our opinion, it may be convenient to dispose of the miscellaneous petition filed by the assessee, as its maintainability is questioned by Mr. Rama Rao, learned counsel for the revenue. Section 256 of the Act provides for reference to the High Court. Section 256(1) enables either the assessee or the Commissioner, within the time prescribed therein, to require the Tribunal to refer to the High Court any question of law arising out of the Tribunal's order. If the Tribunal allows such an application, it shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court. But, if that application is rejected by the Tribunal, then it would be open either to the assessee or to the Commissioner under sub-s.(2) of the same section, to move the High Court; and the High Court may, if it is not satisfied with the correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Waghray, however, sought to place reliance upon the decision in N.V. Khandvala v. CIT [1946] 14 ITR 635 (Bom), which was referred to with approval by the Supreme Court in Lakshmiratan Cotton Mills Co. Ltd. v. CIT [1969] 73 ITR 634 and CIT v. McLeod Co. Ltd. [1970] 78 ITR 22. The facts of that case are these: An assessee filed an application under s.66(2) of the 1922 Act before the Bombay High Court. The High Court directed the Tribunal to state a case. According to the practice of that High Court, questions of law were not formulated by the High Court but were left to be raised by the Tribunal. The Tribunal prepared a case and submitted for the opinion of the High Court one question of law. The assessees were dissatisfied with the action of the Tribunal and filed a petition praying for an order directing the Tribunal to state four more questions of law for the opinion of the High Court. Kania J. (as he then was), who spoke for the Division Bench, observed that the proper time for the assessees to bring to the notice of the court that certain further and other facts were necessary to be stated or certain further or other questions of law arose was at the hearing of the case sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercised for calling for another statement on questions not referred by the Tribunal. The procedure followed by the High Court in calling for, in exercise of the power under section 66(4), an additional statement of the case on questions which were not incorporated in the applications under section 66(1) and (2) was, in our judgment, irregular." It is for that reason that the Supreme Court proceeded to observe: "Correctness of an order of the High Court calling for a statement of case may be challenged at the hearing of the reference and the court may decline to answer the question referred pursuant to the direction of the High Court, if it did not arise out of the order of the Tribunal, or is a question of fact or is academic or could not have been raised because it was not incorporated in the application under section 66(1) : Commissioner of Income-tax v. Smt. Anusuya Devi [1968] 68 ITR 750 (SC). Counsel for the company has, therefore, rightly confined himself to the question which was originally submitted by the Tribunal by order dated December 29, 1954, and has raised his argument on that question only." In CIT v. McLeod Co. Ltd. [1970] 78 ITR 22 (SC) the CIT move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 22, Civil Procedure Code. The Code of Civil Procedure cannot be called in aid by the assessee when we are called upon to give our opinion on the questions of law referred to us in an advisory capacity under s. 256. The learned counsel, however, sought to place reliance upon the opinion expressed by N. A. Palkhivala and B.A. Palkhivala in their book, The Law and Practice of Income-tax, 7th Edn., Vol. 1, at page 1149. What the learned authors said is : "There is a conflict of judicial opinion on the question whether, when one party has filed a reference application, the other party which has not can ask the Tribunal to refer other questions also to the High Court. A distinction should be made between two classes of cases : (a) the appeal may have been decided by the Tribunal entirely in favour of the other party, and therefore it could not file a reference application though it may have lost on certain grounds; and (b) the other party may have partly lost the appeal (either by losing partly in respect of the sole subject-matter of the appeal or by losing, wholly or partly, in respect of some of several independent items) and could have asked for a reference on the questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal and was specified by the applicant in his application under section 66(1)." The Calcutta High Court followed CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC) in CIT v. A. K. Das [1970] 77 ITR 31 (Cal). A specific question was raised before the Calcutta High Court. "Can the Tribunal raise a question of law under s. 256(1) of the I.T. Act, 1961, where there is no application by the aggrieved party as required and within the time thereunder?" After a review of several cases, it held (See headnote) : "Section 256 of the Act lays down the whole procedure how reference has to be made. That procedure does not give the Appellate Tribunal any jurisdiction or power to admit cross-objections within the meaning of the Civil Procedure Code to raise a question of law not raised by an application in the prescribed form within the time prescribed and make a reference of the same to the High Court." This court in CIT v. Hindustan Shipyard Ltd. [1977] 109 ITR 158 (AP), after referring to the observations of Kania J., which was quoted with approval by the Supreme Court in CIT v. McLeod Co. Ltd. [1970] 78 ITR 22 (SC), observed at page 163 : The observations of the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied. But, as the last census figures given in the hand book show that the population of the village was less than 10,000, the second requirement of the definition has not been satisfied. It is on that basis that the Tribunal held that the lands do not fall within the meaning of the term "capital asset" under s. 2(14)(iii)(a) of the Act. On the question whether they are agricultural or non-agricultural lands, the Tribunal held that they are agricultural lands. The assessee placed documentary evidence to prove that the lands were agricultural in nature. It consists of (1) Record of rights; (2) Pahani Patrak ; (3) Pavti bahi; and (4) Tahsildar's certificate. The assessee in his claim petition filed before the District Collector also set out the number of trees and the income he was deriving from the trees and crops raised on the lands. The assessee claimed that he was getting an average annual income of Rs. 55,200 from cultivation by raising paddy, moong, onion and garlic, chillies and vegetables, etc. The facts stated by the assessee were not controverted by the revenue. We are, therefore, in agreement with the finding recorded by the Tribunal that the lands were agricultural land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e." Section 2(47) defines "transfer" to mean: " '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." Section 45 is attracted when any profit or gain arises from the transfer of a capital asset, effected in the previous year unless otherwise provided therein. We have, therefore, to see when there was a transfer of the capital asset. The Madras High Court in T. V. Sundaram Iyengar and Sons Ltd. v. CIT [1959] 37 ITR 26 opined (per headnote): "In order to attract liability to tax on capital gains under section 12B of the Indian Income-tax Act, 1922, it is sufficient if in the relevant accounting year profits have arisen out of the sale of capital assets, that is to say, if the assessee has a right to receive the profits. It is not necessary that the assessee should have received them. When once profits have arisen in the accounting year out of the sale of capital assets, what the parties did subsequent to that year will not have any bearing on their liability to tax in respect of that year." The Supreme Court in Alapati Venkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." What Mr. Waghray contends is that the acquisition or transfer was prior to March 1, 1970, and, therefore, the compensation received on agricultural lands is not chargeable to income-tax under capital gains prior to March 1, 1970. A few provisions of the Requisitioning and Acquisition of Immovable Property Act, 1952, require to be noticed in this connection. The expression "requisition" should not be mixed up or confused with the expression "acquisition". The power to requisition immovable property is different from the power to acquire the property that has been requisitioned. Section 3 of the said Act empowers the competent authority to requisition any property if it is needed for any public purpose by calling upon the owner or any other person, who is in possession of the property. It also empowers the competent authority to take possession of the requisitioned property. The title to the property does not pass to the competent authority by reason of taking over possession on requisition. It will be open to the Central Government or the competent authority under s. 6 to release from requisition any property requisitioned under the Act. It also enjoins upon the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue that the assessee put in a claim for compensation of Rs.1,33,24,475. The mere fact that he put in such a claim does not by itself establish that he had received that amount as compensation for the transfer effected. The claim put in by the assessee before the competent authority under the Requisitioning and Acquisition of Immovable Property Act cannot be considered as an amount realised or accrued for purposes of capital gain. Unless there is determination of the compensation by the competent authority, it cannot be said that any amount had actually accrued to the assessee on the basis of the amount claimed by him in his claim petition. The amount that was finally awarded as compensation by the competent authority would be the amount to be taken into consideration for purposes of s. 45. In view of the findings recorded by us, we answer the questions referred to us as follows: Question No. 1 is answered in the affirmative and in favour of the assessee. Question No. 2 is answered in the negative and in favour of the revenue. Question No. 3 is answered in the affirmative and in favour of the revenue. Question No. 4 is answered in the negative and in favour of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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