RAJ PAL SINGH versus COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK

Citation: [2020] 9 S.C.R. 185 · Decided: 25-08-2020 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Dismissed

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Judgment (excerpt)

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RAJ PAL SINGH
v.
COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK
(Civil Appeal No. 2416 of 2010)
AUGUST 25, 2020
[A. M. KHANWILKAR,  HEMANT GUPTA AND
DINESH MAHESHWARI, JJ.]
Income Tax Act, 1961 – s. 45 – Land Acquisition Act, 1894 –
A land was on lease with a college and the lease was to expire on
31.08.1967 – The college moved the State Government for
compulsory acquisition of the subject land – While acting on this
proposition, a notification u/s. 4 of the 1894 Act was issued by the
State on 15.05.1968, seeking to acquire the subject land – This was
followed by the declaration u/s. 6 of the 1894 Act – After submission
of the claim for compensation, the Land Acquisition Collector
proceeded to make the award on 29.09.1970 – Thereafter, a question
concerning date of accrual of capital gains arose – Before reaching
the High Court in the reference proceedings, the matter had
undergone two rounds of proceedings up to the stage of appeal
before ITAT – The High Court while answering the reference under
the then existing s. 256 of the 1961 Act disapproved the order dated
29.06.1990 passed by the ITAT for the assessment year 1971-1972
and held that the capital gains arising out of land acquisition
compensation were chargeable to income-tax u/s. 45 of the 1961
Act for the previous year referable to the date of award of
compensation i.e. 29.09.1970 and not the date of notification for
acquisition i.e. 15.05.1968 – The High Court also concluded that
the land vested in the Government on the date of making of the
award – The root question is whether the High Court was right in
taking the date of award as the date of accrual of capital gains for
the purpose of s. 45 of the 1961 Act – On appeal, held: The decisions
cited by the parties are not of direct application to the instant case
for, they essentially relate to the right to receive compensation and
not about the date of vesting of the land, with which the instant
matter is concerned – In the matters of compulsory acquisition,
accrual of capital gain depends upon completion of transfer of
property from the owner to the Government and not upon accrual
[2020] 9 S.C.R. 185
185
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SUPREME COURT REPORTS
[2020] 9 S.C.R.
of right to receive compensation – Further, the matters relating to
compulsory acquisition of land under the 1894 Act, completion of
transfer with vesting of land in the Government essentially correlates
with taking over of possession of the land under acquisition by the
Government – However, where possession is taken over before
arriving of the relevant stage for such taking over, capital gains
shall be deemed to have accrued upon arrival of the relevant stage
and not before – To be more specific, capital gains shall be deemed
to have accrued: a) upon making of the award, in the case of
ordinary acquisition referable to s.16; and (b) after expiration of
fifteen days from the publication of the notice mentioned in s.9(1),
in the case of urgency acquisition u/s.17 – In the instant case, the
land in question was subjected to acquisition under the 1894 Act
by adopting the ordinary process leading to award u/s.11 –
Therefore, capital gains would have accrued upon taking over of
possession after making of the award – Consequently, capital gains
to the assessee-Appellant for the acquisition in question could not
have accrued before the date of award i.e. 29.09.1970 – The
assessment of capital gains as income of the appellant for the
previous year relevant to the assessment year 1971-1972 does not
suffer from any infirmity or error – Thus, in facts and the
circumstances of the present case, transfer of the capital asset (land
in question), for the purposes of s.45 of the Act of 1961, was
complete only on 29.09.1970, the date of award and not on
15.05.1968, the date of notification.
Dismissing the appeal, the Court
HELD: 1. The following principal points have arisen for
determination: -
(i) As to whether, on the facts and in the circumstances of
the present case, transfer of the capital asset (land in question),
resulting in capital gains for the purposes of Section 45 of the Act
of 1961, was complete on 15.05.1968, the date of notification for
acquisition under Section 4 of the Act of 1894; and hence, capital
gains arising out of such acquisition and interest accrued could
not have been charged to tax with reference to the date of award
i.e., 29.09.1970?[Para 23][215-A-B]
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(ii) As to whether the fact situation of the prese

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