The Commissioner Of Income-Tax, Patiala v. Sodhi Harbhajan Singh

ITR No. 350 of 1995 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 350 of 1995Date of Decision: 2.7.2010 The Commissioner of Income-tax, Patiala Versus Sodhi Harbhajan Singh ....Petitioner. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dugga, Advocate for the revenue. None for the assessee. ADARSH KUMAR GOEL, J. 1.The Income Tax Appellate Tribunal, Chandigarh Bench (inshort “the Tribunal”) has referred the following question of law foropinion of this Court under Section 256 (1) of the Income Tax Act, 1961(hereinafter referred to as “the Act”) arising out of its order dated28.7.1993 in ITA No. 1025/Chandi/86 for the assessment year 1980-81:- “Whether, on the facts and in the circumstances ofthe case, the ITAT was right in law in holding that thecapital gain could be taxed only in the assessmentyear relevant to the previous year in which thedelivery of the possession of the property was given and not in the year in which the compensation wasdetermined and the payment was received by theassessee?” 2.The assessee owned property which was acquired underthe provisions of the Punjab Development of Damaged Areas Act, 1951(in short “the Punjab Act”). The Assessing Officer taxed the amount ofcapital gain by taking the transfer of property on 27.8.1979 on whichdate the award of compensation was given. The assessee challengedthis by submitting that date of transfer of property should be whenpossession was taken, i.e. on 21.4.1971 and, therefore, in theassessment year 1980-81, no tax could be assessed as capital gain.The CIT (A) dismissed the appeal of the assessee. However, theTribunal upheld the contention of the assessee in the following terms:- “We have considered the rival contentions and wefind that the question of transfer of land shall have tobe examined in the light of said enactment (thePunjab Act), under which the proceedings took placeregarding acquisition of property. As we havealready seen, the answer was divested of his right assoon as possession was taken. The market valuewas to be determined in the date of publication of thescheme by the Improvement Trust. Therefore, thepayment of compensation under the award was notthe deciding factor for determining the date oftransfer because it was a case of compulsoryacquisition and no conveyance was required to be executed. Under the scheme of the Punjab Act, theproperty was to vest absolutely in the ImprovementTrust, after possession of the area as given to theTrust. We, therefore, find force in the argument ofthe ld. counsel and hold that the transfer of propertytook place on the date of delivery of possession,namely, 21.4.1971 and not on the date of award orthe date of payment. Therefore, ground No.2 isaccepted and the orders of the Revenue authoritieswhereby a sum of Rs.82,310/- has been charged totax, as capital gains, are cancelled to that extent. 3.We have heard learned counsel for the revenue. Noneappeared for the assessee. 4.Learned counsel for the revenue submitted that since theaward was given by the Land Acquisition Collector on 27.8.1979, thatwould be the date when the capital gain was exigible to income tax andthe Assessing Officer had rightly assessed the same in the assessmentyear 1980-81. Learned counsel placed reliance on the judgments ofDelhi High Court in Commissioner of Income Tax v. Ram Mohan Rai(HUF) (1993) 110 CTR (Del) 200 and Gauhati High Court inCommissioner of Income Tax v. Cachar Native Joint Stock Co.Ltd., (1997) 150 CTR (Gau) 59. 5.We do not find any merit in the contention of the learnedcounsel for the revenue. 6.Section 45 of the Act brings to tax any profits or gainsarising from the transfer of a capital asset effected in the previous year. ITR No. 350 of 1995 The following ingredients are required to be satisfied before theaforesaid provision is made applicable to an assessee:- 5.We do not find any merit in the contention of the learnedcounsel for the revenue. 6.Section 45 of the Act brings to tax any profits or gainsarising from the transfer of a capital asset effected in the previous year. ITR No. 350 of 1995 The following ingredients are required to be satisfied before theaforesaid provision is made applicable to an assessee:- (i)the assessee must own a capital asset; (ii)the transfer of capital asset must take place duringthe previous year; and the previous year; and (iii)profits and gains must accrue or arise from suchtransfer of capital asset to the assessee.transfer of capital asset to the assessee. 7.The land of the assessee was acquired under the PunjabAct. Section 6 (2) of the Punjab Act is relevant and it reads as under:- “6. Acquisition of damaged area through theCollector.- (1) XXXXXX (2)Notwithstanding anything contained in anyother law for the time being in force, the Collectormay accept the application made to him under theforegoing sub-section and forthwith deliver or causeto be delivered, to the Trust possession of thedamaged area for which the application has beenmade, and on such order being made, the area shallthenceforth vest absolutely in the Trust free from allencumbrances but subject to the payment in duecourse of compensation by the Trust in accordancewith the provisions of this Act: Provided that possession of any building or part of abuilding shall not be taken unless its occupier hasbeen given at least two weeks' notice, or such longernotice as is considered reasonably sufficient to enable him to remove his movable property fromsuch building without unnecessary inconvenience tohimself.” 8.A plain reading of the aforesaid provision makes it clearthat on delivery of the possession, the land vest absolutely in the Trustfree from all encumbrances which is only subject to payment in duecourse of compensation by the Trust in accordance with the provisionsof the Punjab Act. The transfer of the property thus takes place on thedelivery of possession by the landowner. 9.In view of the aforesaid clear provision, there is no doubtthat the property in dispute was transferred to the Improvement Trustand absolutely vested in it on delivery of possession which took placeon 21.4.1971 and not on 27.8.1979 when compensation was paid to theassessee. 10.Reliance of the learned counsel on Cachar Native JointStock Co.'s case (supra) does not advance the case of the revenue.The Court therein was dealing with Assam Land (Requisition andAcquisition) Act, 1964, where there was no similar provision as Section6 (2) of the Punjab Act. Similar, is the position with regard to thejudgment of the Delhi High Court in Ram Mohan Rai's case (supra). 11.Accordingly, the above question is answered against therevenue and in favour of the assessee. (ADARSH KUMAR GOEL) JUDGE July 2, 2010gbs (AJAY KUMAR MITTAL)JUDGE