( 1 ) THE Income-Tax Appellate Tribunal, bangalore Bench has referred the following question of law for our opinion under section 256 (1) of the Income-Tax Act, 1961, at the instance of the assessee :"on the facts and in the circumstances of the case, whether the Tribunal was justified in law in holding that the capital gains in respect of survey- nos. 193, 206 and 207 was assessable to tax for the assessment year 1974-75 ?"

( 2 ) THE Assessee is a HUF owning some agricultural lands in Kodihalli village situated within the urban agglomeration of the city of Banglore. Sy. Nos. 193, 206. 207/1 of the said village were acquired by the City Improvement Trust board, Bangalore, in pursuance to the preliminary Notification under Section 4 and final Notification dated 19-8-1964 issued under Section 6 by the Land acquisition Officer for on behalf of the city Improvement Trust Board (CITB ). The possession of Sy. No. 206 was taken by the LAO. , on 2i-4-l973, and sy. Nos. 193 and 207/1 on 8-11-1973.

( 3 ) IN the assessment of the assessee for the assessment year 1974-75, the income Tax Officer (ITO) brought to tax, under 'capital gains', the compensation received by the assessee in respect of the acquisition of three survey numbers by the CITB. The assessee chanllengcd the assessment before the Appellate Assistant commissioner (AAC) who upheld the assessment in so far as Sy. Nos. 193 and 207/1 was concerned. In respect of Sy. No. 206, he held that the award was passed on 29-3-1973 and that, therefore, the transfer took, place during the accounting year relevant for the assessment years 1973-74 and not 1974-75. The assessment relating to 'capital gains' for tbisyearin respect of the sail Survey number was, therefere, directed to be modified.

( 4 ) BOTH the 1to as well as the assessee preferred second appeals to the tribunal. The Tribunal held that the possession of Sy. No. 206 was taken on 21-4 1973 and Sy. Nos. 193 and 207/1 was taken on 8-11-1973, and both these dates fell during the accounting year ended 31 3-1974 and upheld the assessment made by the 1to. The Tribunal thus dismissed the assessec's appeal and allowed the appeal of the Department. These two references arise out of the common order passed by the Tribunal for the assessment year 1974 75.

( 5 ) THE common question that arises for our decision in these references is : whether the income from the capital gains arising out of transfer by acquisition for the lands during the previous year 1973-74 was rightly brought to tax in the assessment for the assessment year 1974 75 ? this question has to be answered with reference to the LAND ACQUISITION ACT, 1894 (Act) read with Section 2 (47) of the income-Tax Act The acquisition for the citb was done by the Special Land acquisition Officer appointed for this purpose by the Government, under the land ACQUISITION ACT, 1894. Under Section 45 of the Income Tax act, any profits or gains arising from the transfer of capital asset effected in the previous year, is chargeable to Income- tax Act under the head 'capital gains' and shall be deemed to be the income of the previous year in which the transfer took place.

( 6 ) UNDER Section 2 (47) of the income-Tax Act, the term 'transfer' is defined as :"transfer", in relation to a capital asset, includes ihe sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law". Under this definition, compulsory acquisition under any law is also consider, das a transfer for the purpose of computation of capital gains tax under section 45 of the Income-Tax Act.

( 7 ) THE acquisition for the CITB is done under the provisions of LAND ACQUISITION ACT, 1894. The L. A. Act 1984, as amended and adopted by the State Government, provides for the acquisition of land for' public purpose. The proceedings for acquisition start with a preliminniy notification under Section 4 of the Act. The final proposal to acquire is notified under' sect

Click Here to Read the rest of this document