The main legal point established in the judgment is the clarificatory nature of the Second Proviso to S.54-E (1) of the Income-tax Act and its applicability to the original and enhanced compensation received for the compulsory acquisition of property.

Paripoornan, J.

Respondents 1 and 2 in O.P.No. 2379 of 1986 (the revenue) are the appellants herein. The petitioner in the O.P. is the sole respondent herein. He is an assessee to Income-tax. He filed a return for the assessment year 1983-84, wherein he disclosed an amount of Rs.3,11,065/- in Part III of the return, being advance paid to him on 11-3-1983 towards compensation to be yet finally determined in respect of the agricultural land acquired by the Government and which the Government took advance possession on 19-11-1982. The award was passed by the Land Acquisition Officer on 31-3-1984. Deducting the advance amount paid in the sum of Rs.3,11,065/-, a further sum of Rs.4,26,150.58 was paid to the assessee on 30-4-1984. Within six months from the date of the advance payment of Rs. 3,11,065/-, on 26-8-1983 the assessee invested a sum of Rs.3,10,200/- in the three year National Rural Development Bonds (second issue).- The balance of Rs.4,26,150.58, received on 30-4-1984, was invested by the assessee on 28-7-1984 in specified units of the Unit Trust. During the assessment stage, the assessee pleaded that capital gains, if any, which arose by acquisition of the agricultural lands, could not be brought to tax in view of the decision of the Bombay High Court in Manubhai A Sheth v. N.D. Nirgudkar (128 ITR 87). In the alternative, it was also pleaded that by reason of the investments, made by him in the approved assets on 26-8-1983 and 28-7-1984, within six months of the receipt of the installments of the award of compensation, he is entitled to the benefit of S.54-E of the Income-tax Act. Both the please were rejected by the Income-tax Officer. The Income-tax Officer held that both the investments were made beyond the period of six months from 19-11-1982, when the Government took advance possession of the lands in question and title to the said lands vested in the Government. The date, on which the Government took possession of the land, was taken as the date of transfer, from which alone the period for investment is to be reckoned. On this basis, it was further held that the investments made by the petitioner in VII th Year National Rural Development Bonds and Unit Trust were not specified assets for the purpose of S.54-E of the Act on the said date. So stating, Ext.P1 order dated 17-2-1986 was passed, denying the benefit of S.54-E of the Act to the assessee. The assessee filed the O.P. and assailed Ext.P1 on various grounds. KA. Nayar J. by judgment dated 22nd March, 1990, quashed Ext.P1 and directed the 2nd respondent (Income-tax Officer) to re-work the benefit, available to the assessee, in the light of the observations in the judgment. The learned judge, following the Bench decision of the Andhra Pradesh High Court in S. Gopal Reddy v. Commissioner of Income-tax (181 ITR 378) held that Ext.P1, in so far as it construes the date of transfer as 19-11-1982, forgetting the benefit of S.54-E of the Income-tax Act, is erroneous. It was held that the second proviso to sub-section (1) of S.54-E is only clariflcatory in nature, that in the case of compulsory acquisition of property under the statute, if the full amount of compensation, awarded for such acquisition, is not received by the assessee on the date of such transfer, the period of six months referred to in sub-section (1) of S.54-E shall, in relation to so much of such compensation as is not received on the date of transfer, be reckoned from the date on which such compensation is received by the assessee and the said provision should be deemed to have prevailed from the date of enactment ofS.54-E of the Act. The learned Single Judge further concluded that National Rural Development Bonds (Second issue), 1983, has been notified as specified security in pursuance of sub-clause (iii) of clause (c) of Explanation I to sub-section (1) of S.54-E of the Income-tax Act, 1961. The investment made by the petitioner on 26-8-1983 in the National Rural Development Bond (Secon