TMI Blog1999 (4) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Bombay Merged Territory and Area (Jagir Abolition) Act, 1953 with effect from 1-8-1954. Maharaja Naharsinhji made an application for compensation and the Jagir Abolition Officer, Baroda passed the award on 29-7-1959 for an amount of Rs. 38,456 under section 1(3) of the Jagir Abolition Act. The Jagirdar did not make any claim for compensation in respect of the forest areas in the two villages viz., Zar and Dadigam measuring about 2500 acres and the trees standing thereon presumably because the Jagirdar believed that these lands had not vested in the State Government. 3. In the year 1965, the Hon'ble Supreme Court handed down the judgment in the case of Mavinkarva v. Madhavsinghji, AIR 1965 SC 1747, popularly known as 'Waghach Case' the State Government prevented the Jagirdar from cutting and removing the trees and also tried to exercise the rights of ownership and possession in respect of these lands. Meanwhile, Maharaja Naharsinhji died in the year 1966 and his only son, the assessee Maharaja Sajjansinhji, made an application in 1969 to the Collector, Baroda claiming Rs. 52,03,001 as compensation for the trees. Since the application was filed by the Collector without ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23,97,697 vide its order dated 12th September, 1984. Interest. at the rate of 3% on the aforesaid sum of Rs. 23,97,697 was also payable from 1-8-1954 till the date of payment if no payment was made by the State Government. Both the parties viz., the State Government and the assessee filed writ petitions before the Hon. High Court of Gujarat. Vide its interim order dated 31-12-1985 the order of the Revenue Tribunal was stayed to the extent of payment other than Rs. 5 lacs. Protracted litigation ultimately concluded with a compromise agreement between the assessee and the Government on 29-08-1988 whereunder --- (i) The Government of Gujarat gave up its contention as regards principal amount of Rs. 25,18,264-30. (ii) The assessee gave up his claim for interest beyond 20 years only. The writ petitions filed before the Hon. High Court of' Gujarat by the assessee as well as the State Government were withdrawn. The assessee received balance amount of compensation of Rs. 18,97,697 along with interest of Rs. 6,53,385 as per the compromise agreement. 6. From the above facts it would be seen that the assessee has received a sum of Rs. 5 lacs by way of interim compensation in the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first time in assessment year 1989-90." The additional ground raised by the assessee does rise from the orders of the CIT(A). After hearing both the sides and in the interest of justice we hereby admit the additional ground. 9. The learned counsel for the assessee argued that the compensation received by the assessee for the trees under the Jagir Abolition Act partakes of the nature of agricultural income and is, therefore, exempt. The learned counsel placed reliance on the decision of Calcutta High Court in the case of CIT v. All India Tea Trading Co. Ltd. [1978] 113 ITR 545/[1929] 2 Taxman 247. In the alternative, the learned counsel argued that the compensation is a capital receipt in view of the Hon'ble Supreme Court decision in CIT v. Ambal Echukutty Menon [1979] 120 ITR 70/2 Taxman 293 and capital gains tax is not exigible. Without prejudice to this contention, the learned counsel argued that even if capital gains has accrued to the assessee, provisions of section 45 for levy of capital gains tax are not attracted since there was no cost of acquisition of the Jagir acquired in 1919. Reliance is placed by the learned counsel on the decision of the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planting of the trees have been carried out by the assessee on these lands. The quantification of the compensation made by the Revenue Tribunal on the basis of section 11(3)(i) amply indicates the fact that lands in question are not cultivated and no agricultural operations had been carried out on these waste lands by the assessee. Even otherwise, no evidence has been led by the assessee in support of its claim that agricultural operations by way of planting, nurturing and rearing of the trees has been carried out at any point of time by the assessee. Vide para 11 of the assessment order dated 30-3-1992 the Assessing Officer has observed that undated statements of two persons viz., Shri Shivashankar P. Joshi and Shri Virendraprasad G. Joshi have been filed where it has been claimed that these persons were looking after the work of sowing, growing, ploughing, etc. However, these persons have not been produced for examination by the Assessing Officer. Such undated statements without production of the witnesses have been rightly rejected by the Assessing Officer by arriving at a finding that the trees on the assessee's lands in Zar and Dadigam villages are forest trees having spontan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to receipt of enhanced compensation, the Finance Act, 1987 brought in important legislative changes inasmuch as the enhancement in the compensation has been deemed to be the income chargeable under the head 'capital gains' in the previous year in which such amount is received by the assessee. Explanation (i) has been appended to the sub-section 45(5)(b) providing that the cost of acquisition and the cost of improvement of the capital asset under question shall be taken to be Nil for the purpose of section 45(5)(b). These amendments brought in by the Finance Act, 1987 are effective with effect from 1-4-1988. Since these amendments brought about a change bringing to tax under section 45 even those capital assets in respect of which cost of acquisition is Nil, the Hon'ble Supreme Court decision in B.C. Srinivasa Setty's case as well as other decisions of Madhva Pradesh High Court in B.C. Srinivasa Setty's case 162 ITR 93 and B.C. Srinivasa Setty' case 232 ITR 754 are not applicable in the instant case in so far as assessment of compensation under section 45 for assessment year 1989-90 is concerned. Both the MP High Court decisions Pertain to assessment years prior to 1-4-1988 and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 15th March, 1972 the Hon. High Court of Gujarat while disposing of the writ petitions filed by the assessee as well as the State of Gujarat remitted the matter to the Collector, Baroda for adjudicating the issue of ownership of the private forest in the two villages and if any compensation in respect thereof was payable to the assessee. The Dy. Collector, Chhotaudepur thereupon passed an award dated 21-10-1977 for Rs. 1,20,567. Spate of litigations again ensued as per facts indicated hereinbefore and ultimately on 29-8-1988 litigations came to an end with an agreement reached between the assessee and the State of Gujarat under which compensation amounting to Rs. 25,18,264 was agreed to be payable as against Rs. 1,20,567 determined by the Dy. Collector, Chhotaudepur in October, 1977. This additional amount of Rs. 23,90,697 was determined to be payable along with interest for a period of 20 years. From these facts, it is evidently clear that the original compensation determined as payable in respect of the Jagir of the assessee was for an amount of Rs. 38,456 on 29-7-1959. Subsequently, additional claim has been filed by the assessee which was strongly resisted and opposed by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86]161 ITR 524/27 Taxman 450A is a direct authority in support of the view being taken by us. The Hon'ble Supreme Court approvingly referred to the two decisions of Hon'ble High Court of Gujarat in the case of Topandas Kundanmal v. CIT [1978] 114 ITR 237 and Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849 /1 Taxman 291 and held that it was on a final determination of the amount of compensation that the right to receive such income in the nature of compensation would arise or accrue and till then there was no liability in praesenti in respect of the additional amount of compensation claimed by the owner of the land. Having regard to the aforesaid discussion, we hold that this is a case of additional compensation in terms of the provisions of section 45(5)(b) and the additional amount of compensation amounting to Rs. 23,97,697 is liable to be assessed as capital gains in the assessment year 1989-90. 14. At this stage we may refer to the order of the Tribunal in assessee's own case in WTA Nos. 811 and 813/Ahd/1992 relating to assessment year 1985-86 to 1987-88 wherein vide order dated 12-3-1998 it has been held that the right to receive additional compensation aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oute traversed by the entire controversy involving several round of litigations before the Hon'ble Gujarat High Court provides eloquent proof of the fact that there was no liability in praesenti to pay an enhanced compensation till it was finally determined by the High Court on 16-9-1988 when the question is set at rest finally and an enforceable right to the compensation arose and accrued to the assessee along with interest thereon. As long ago as E.D. Sassoon Co. Ltd. v. CIT [1954] 26 ITR 27 the Hon'ble Supreme Court considered the question as to the point at which income could be said to accrue or arise to an assessee for the purpose of Income-tax Act. In the majority judgment the Hon'ble Supreme Court held that "the words 'arising or accuring' described a right to receive profits and that there must be a debt owed by somebody. Unless and until there is credit in favour of the assessee a debt due by some body", it was observed, "it cannot be said that he has acquired a right to receive the income or the income has accrued to him". This decision has been referred and approved by the Hon'ble Supreme Court in its subsequent decision in Hindustan Housing Land Development Trust L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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