TMI Blog1975 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,17,715. The assessee did not accept the compensation so awarded and there was, therefore, a reference to the City Civil Court, which granted further compensation of Rs. 29,264 on 28th November, 1961. The assessee appealed against the order of the City Civil Court contending that the compensation awarded was inadequate. By an order of 31st January, 1967, the High Court granted further compensation amounting to Rs. 1,17,458. The assessee was not content with the compensation given by the High Court and the matter was taken to the Supreme Court in C.A. No. 667 of 1968 ; the Supreme Court dismissed the appeal on 1st May, 1975 (Dollar Company v. Collector of Madras AIR 1975 SC 1670). The assessee-firm included in its return of income for the previous year ended on 31st December, 1960, relevant for the assessment year 1961-62, a sum of Rs. 28,017 as capital gains, which was arrived at as follows : Rs. Compensation awarded on 10-2-1960 1,17,715 Less cost of the lands 89,698 -------------- Balance 28,017 -------------- The Income-tax Officer came to know, during the assessment proceedings, of the additional compensation received consequent on the order of the City Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting aside the assessment with the direction for re-doing it by including the amount that may be finally awarded in this case. The Tribunal, following a decision of this court in Wilfred Pereira Ltd. v. Commissioner of Income-tax [1964] 53 ITR 747 (Mad), held that the " transfer " included both a transfer by act of parties and a transfer by operation of law and that a compulsory acquisition by the Government of property constituted a " transfer " so as to subject it to capital gains. On the question as to whether any compensation awarded in later years could be assessed in the year under consideration, the Tribunal pointed out that if section 12B(1) was analysed, it would be seen that there must be a transfer of capital assets, that the transfer must have been effected after 31st March, 1956, and that profits must have arisen from such transfer. In that event, such profits would be deemed to be income of the previous year in which the transfer took place. The Tribunal was, therefore, of the opinion that, apart from the amount awarded by the City Civil Court, the further sum awarded by the High Court, viz., Rs. 1,17,458, particulars of which were available to the Tribunal by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital gains. This court in Wilfred Pereira Ltd. v. Commissioner of Income-tax [1964] 53 ITR 747 (Mad) came to an identical conclusion and held that the word " transfer " in section 12B included both a transfer by act of parties and a transfer by operation of law. At page 753 it was observed as follows : " In our opinion, any divestiture of title would amount to a transfer. The transferor may not be a willing party. But nevertheless his title to the property is divested from him and the result is, the title is transferred. There is nothing in the context of section 12B(1) of the Act to indicate that the word ' transfer ' should not be interpreted in a comprehensive meaning including both a transfer by act of parties and a transfer by operation of law." To the same effect is another decision of this court in Commissioner of Income-tax v. United India Life Assurance Company Ltd. [1966] 62 ITR 610 (Mad), wherein Wilfred Pereira Ltd. v. Commissioner of Income-tax [1964] 53 ITR 747 (Mad) was followed. The Gujarat High Court has followed these decisions in Vadilal Soda Ice Factory v. Commissioner of Income-tax [1971] 80 ITR 711 (Guj). Therefore, the conclusion of the Tribunal that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he words " sale, exchange, relinquishment or extinguishment of any rights therein or the compulsory acquisition thereof under any law." (Underlined by us). On this provision the notes on clauses appended to the Income-tax Bill stated as follows : " The definition has been expanded to include extinguishment of a right in and the compulsory acquisition of the asset." (Underlined by us) Resting his case on the contrast between the third proviso to section 12B of the Indian Income-tax Act, 1922, as it was in 1947, and the language of section 2(47) of the Act of 1961, and on the aforesaid notes on clauses it was urged on behalf of the assessee that any gain resulting from the compulsory acquisition was not intended to be charged under the provision, as it was under the Finance Act of 1956. This submission has to be rejected. The Supreme Court has pointed out in Commissioner of Income-tax v. Sodra Devi [1957] 32 ITR 615 (SC) and Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC) that aid can be obtained from the statement of objects and reasons, etc., only for the limited purposes of ascertaining the conditions prevailing at the time and the extent and urgency of the evil sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year could be brought to tax under section 12B. In other words, the learned counsel would accept for assessment only the sum of Rs. 28,017 and not the other two sums, which were brought to tax by the Appellate Assistant Commissioner and by the Tribunal. Taking the language of section 12B it would be found that it provides for tax on capital gains. Such tax has to be levied on the profits or gains arising from certain stated transactions after a particular date. Such profits and gains are to be deemed to be the income of the previous year in which the sale, exchange, relinquishment or transfer took place. There is, thus, a statutory fiction introduced in section 12B. The fiction overrides all other considerations. For instance, under the Income-tax Act, the question of method of accounting would be relevant in the matter of arriving at the taxable income under certain heads. That would not be relevant to section 12B as a statutory fiction has been introduced. Under the provision, as it is, we have to find out what are profits and gains in the transaction. Such profits and gains would then have to be deemed to be income of the previous year in which the relevant transaction took pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the compensation amounts were awarded either by the City Civil Court or by the High Court. In our opinion, this contention overlooks that the root of the right for the compensation is in the compulsory acquisition. What the courts did was merely to quantify the compensation. The right arose in the year in which the transaction took place. The right to the correct amount of compensation had already accrued to the assessee. The date of taking possession is only relevant for the purpose of taxation under section 12B. The learned counsel brought to our notice the decision of the Supreme Court in Nonsuch Tea Estates Ltd. v. Commissioner of Income-tax [1975] 98 ITR 189 (SC). Under an agreement Harrisons Crossfield Ltd. were the managing agents of a tea estate. They were entitled to a commission of l 1/2 per cent. on all sales and a sum of Rs. 12,000 per annum for secretarial work. After the Companies Act, 1956, came into force, a new agreement was entered into for the reappointment of Harrisons Crossfield for a period of 10 years, on a remuneration of 5% commission on the net profits of the company. Approval of the Central Government was applied for in August, 1957, as require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, consider this question as it has been referred. The contention for the assessee is that the result of the order of the Appellate Assistant Commissioner is to take away the period of limitation prescribed in section 34 of the Indian Income-tax Act of 1922, which was in force in the relevant year, or the corresponding provision of limitation found in the Act of 1961 whichever Act is taken to govern this case. For the department the submission was that the power of the setting aside or remand available to the Appellate Assistant Commissioner was a comprehensive power and that when the Income-tax Officer worked out the order of the Appellate Assistant Commissioner he was not bound by any period of limitation prescribed in the Act. Any other conclusion would, it was urged, practically result in the stultification of the power of remand. Section 31 deals with the powers of the Appellate Assistant Commissioner in the matter of disposal of the appeals before him. Section 31(3)(b) provides that in disposing of the appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, set aside the assessment and direct the Income-tax Officer to make a fresh asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have been brought within the scope of a reassessment if it were to be made under section 34(1)(b). The submission on behalf of the assessee is, therefore, that the order of the Appellate Assistant Commissioner keeping the assessment open till all the proceedings relating to the compensation got terminated would, in fact, enlarge the time-limit provided under section 34(1)(b), This submission overlooks the scope of section 31(3)(b). Section 31(3)(b) confers power on the Appellate Assistant Commissioner to set aside the assessment and direct the Income-tax Officer to make a fresh assessment. The power is without qualification. This contention further overlooks the second proviso to section 34(3) which is a proviso for the whole provision and not merely for section 34(3). The second proviso lifted the time-limit in cases where the Income-tax Officer acted in pursuance of a direction given by the Appellate Assistant Commissioner. The provisions of section 34(1)(b), the second proviso to section 34(3) and section 31(3)(b) have to be harmoniously construed. In construing these provisions we must see that each one of them is given scope to operate and is not stultified. If no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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