The date of transfer of property under Section 45 of the Income-tax Act, 1961, in the case of compulsory acquisition of property under Section 17(1) of the Land Acquisition Act, 1894, is the date on which the Government takes actual possession of the property.

1. This is an income-tax reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue. The following, questions of law have been referred by the Tribunal for answer by this court :

"(1) Whether the transfer of property within the meaning of Section 45 of the Income-tax. Act, 1961, takes place in consequence of acquisition proceedings under Section 17(1) of the Land Acquisition Act, 1894, on the basis of notification, i.e., October 19, 1973, and published during the period February 13, 1974, to February 18, 1974, or the date of order of the Land Acquisition Officer passed on August 5, 1974 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the capital gains arising from the compulsory acquisition of the property arose in the previous year corresponding to the assessment year 1975-76 and became taxable in that assessment year ?"

2. The brief facts giving rise to this reference are that the assessee was the owner of a Bungalow No. 427, South Civil Lines, Jabalpur, along with land appurtenant thereto. This property was acquired under Section 17(1) of the Land Acquisition Act, 1894. The proposals to acquire the property was notified in the M.P. Official Gazette, Part I, dated October 19, 1973. The notification for acquisition of the property was published during the period February 13, 1974, to February 18, 1974. The final date of hearing was also fixed on March 12, 1974, on which date in the absence of any adverse claim, the property was alleged to have been acquired.

3. The Land Acquisition Officer made the order on August 5, 1974, awarding a compensation of Rs. 2,13,400. An additional compensation of Rs. 3,08,461 was also awarded by the court on May 3, 1980. The possession of the land in question was handed over to the Sanchalak, Telecom Training Centre, Jabalpur, on January 4, 1975. The assessee offered the income assessable under the head "Capital gains" in regard to the property in the return filed for 1976-77. The said return was subsequently revised on September 1, 1976. The assessee also claimed before the Income-tax Officer that the capital gains on the acquisition of the property would fall to be considered only in the year 1975-76 as the assessee had received compensation award from the Land Acquisition Officer on August 5, 1974, which date fell in the financial year 1974-75.

4. The Income-tax Officer did not accept the assessee's above plea and assessed the compensation in 1976-77. His findings were reversed by the Commissioner of Income-tax (Appeals), who observed that the capital gains arising out of the compulsory acquisition of the property would not fall to be considered in the assessment year 1976-77. The Income-tax Officer, thereafter initiated action under Section 148 of the Act for the assessment years 1974-75 and 1975-76. For the assessment year 1975-76, he did so because the Commissioner of Income-tax (Appeals) in his appellate order had observed that it would be open to the Income-tax Officer to take appropriate action for the assessment year 1975-76 if he were of the opinion that the capital gains was taxable in the assessment year 1975-76. This was probably construed by him as a direction given by the Commissioner of Income-tax (Appeals).

5. For the assessment year 1974-75, the Income-tax Officer reopened the assessment, taking the view that the property vested in the Government on the date of notification which in this case was March 12, 1974. The Income-tax Officer completed the assessment for this year, including in the total income, inter alia, a sum of Rs. 2,64,087 which was the capital gains determined by him on the transfer of the property. When the matter was carried in appeal, this action of the Income-tax Officer was confirmed by the Commissioner of Income-tax (Appeals).

6. The Tribunal took the view that the material date is the date on which the property vested in the Government absolutely and that, a