whether the capital gains arising out of land acquisition compensation were chargeable to income-tax under Section 45 of the Act of 1961 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 or date of taking over the possession.? -=Viewed from any angle, it is clear that accrual of capital gains in the present case had not taken place on 15.05.1968. If at all possession of the College was to result in vesting of the land in the Government, such vesting happened only on the date of award i.e., 29.09.1970 and not before. In other words, the transfer of land from the assessee-appellant to the 60 Government reached its completion not before 29.09.1970 and hence, the earliest date for accrual of capital gains because of this acquisition was the date of award i.e., 29.09.1970. Therefore, 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.; whether if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause.? -=No.;

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2416 OF 2010
RAJ PAL SINGH …..APPELLANT
Vs.
COMMISSIONER OF INCOME-TAX, ….RESPONDENT
HARYANA, ROHTAK
JUDGMENT
Dinesh Maheshwari, J.
PRELIMINARY AND BRIEF OUTLINE

  1. This appeal takes exception to the judgment and order dated
    23.04.2008 passed by the High Court of Punjab and Haryana at
    Chandigarh1
    in Income Tax Reference No. 53-A of 1991 whereby the High
    Court, while answering the reference under the then existing Section 256(1)
    of the Income-tax Act, 19612
    , disapproved the order dated 29.06.1990
    passed by the Income Tax Appellate Tribunal, Chandigarh Bench3
    in ITA No.
    739/Chandi/89 for the assessment year 1971-1972; and held that the
    capital gains arising out of land acquisition compensation were chargeable
    to income-tax under Section 45 of the Act of 1961 for the previous year
    1 For short, ‘the High Court’.
    2 For short, ‘the Act of 1961’ or ‘the Act’.
    3 For short, ‘ITAT’.
    1
    referable to the date of award of compensation i.e., 29.09.1970 and not the
    date of notification for acquisition.
  2. In the present case, the question concerning date of accrual of
    capital gains arose in the backdrop that though the proceedings for
    acquisition in question were taken up by way of notification dated
    15.05.1968 and award of compensation was made on 29.09.1970 but, as a
    matter of fact, at the time of issuance of the initial notification for acquisition,
    the subject land was already in possession of the beneficiary under a lease,
    though the period of lease had expired on 31.08.1967. In the light of these
    facts, the ITAT did not approve of charging tax over capital gains with
    reference to the date of award while observing that the date of notification
    (i.e., 15.05.1968) would be treated as the date of taking over physical
    possession and the transaction (leading to capital gains) would be
    considered as having taken place on that date and not on the date of award
    (i.e., 29.09.1970). The High Court, however, did not agree with this line of
    reasoning and held that the amount of compensation was determined only
    on passing of the award dated 29.09.1970 and, therefore, if any capital gain
    was chargeable to tax, it would be chargeable for the previous year
    referable to the date of award.
  3. Thus, the root question is as to whether, on the facts and in the
    circumstances of the present case, the High Court was right in taking the
    date of award as the date of accrual of capital gains for the purpose of
    Section 45 of the Act of 1961?
    2
  4. Keeping the question aforesaid in view, we may briefly summarise
    the relevant factual and background aspects of this case while indicating at
    the outset that the matter relating to the assessment in question, before
    reaching the High Court in the reference proceedings, had undergone two
    rounds of proceedings up to the stage of appeal before ITAT.
    THE ASSESSEE; THE SUBJECT LAND; AND THE ACQUISITION
  5. The assessment in question is for the assessment year 1971-1972
    in relation to the assessee Amrik Singh HUF4
    . The appellant Raj Pal Singh
    is son of late Shri Amrik Singh and is Karta of the assessee HUF. As
    noticed, the dispute essentially concerns the chargeability of tax for capital
    gains arising out of the award of compensation towards acquisition of land
    belonging to the assessee-appellant.
  6. It is noticed from the material placed on record and the observations
    in the orders passed in this matter that the subject land, admeasuring 41
    kanals and 14 marlas and comprising Khasra Nos. 361 to 369 and 372 to
    375 at village Patti Jattan, Tehsil and District Ambala5
    , became an evacuee
    property after its original owner migrated to Pakistan; and the same was, as
    such, allotted to the said Shri Amrik Singh, who had migrated to India, in
    lieu of his property left in Pakistan. However, a substantial part of the
    subject land, except that comprising Khasra Nos. 361 and 364 admeasuring
    5 kanals and 7 marlas, had been given by the original owner on a lease for
    20 years to a Government College, being S.A. Jain College, Ambala City6
    ;
    4 Hindu Undivided Family.
    5 For short, ‘the subject land’ or ‘the land in question’.
    6 For short, ‘the College’.
    3
    and the lease was to expire on 31.08.1967. Later on, the College moved
    the Government of Haryana for compulsory acquisition of the subject land.
    While acting on this proposition, a notification under Section 4 of the Land
    Acquisition Act, 18947
    was issued by the Government of Haryana on
    15.05.1968, seeking to acquire the subject land for public purpose, namely,
    playground for the College. This was followed by the declaration dated
    13.08.1969 under Section 6 of the Act of 1894. Ultimately, after submission
    of the claim for compensation, the Land Acquisition Collector, Ambala
    proceeded to make the award on 29.09.1970.
  7. The relevant features concerning possession of the land in question
    and computation of the amount of compensation are duly recorded in the
    award dated 29.09.1970 and for their relevance, the material parts of the
    award need to be taken note of.
    7.1. As regards possession of the land in question, the learned Collector
    observed as under:-
    “Possession of land:
    The land in question was on lease with the Jain College,
    managing Society upto 31st August 1967. Thereafter the
    acquisition proceedings were started and the society was in
    possession of the same since then. Therefore the land owners are
    entitled to the interest from the date of notification u/s 4 which was
    issued on the 15th May, 1968. The interest at the rate of 6% per
    annum will be paid to the land owners in addition to the
    compensation and Solatium from 15th May,1968, to date.”
    7.2. As regards entitlement to compensation, the learned Collector
    examined the cross-claims made by the land owners and the Managing
    7 For short, ‘the Act of 1894’.
    4
    Society of the College; and found it justified to award compensation to the
    land owners while observing as under:-
    “Mode of Payment:
    The land owners have claimed that the compensation be paid
    to them whereas the S.A. Jain College, trust and Management
    Society has applied that the Society be paid 2/3rd of the
    compensation being the 99 years lease of the land or otherwise as
    tenant under the East Punjab Urban Rent Restriction Act. The
    society has neither produced any documentary record nor any to
    establish the claim. As per application of the Principal S.A. Jain
    College, Ambala City, this fact as confirmed that the land in
    question was on the lease with the College upto 31.8.67 only and
    the college wanted to acquire the same so that its possession
    remains with the college. In addition to it, Shri Amar Chand
    President S.A. Jain College, Management Committee stated on
    oath before the Revenue Assistant Ambala on 21.3.68 that the
    Management committee was prepared to pay the price of the land
    fixed by the Collector to the land owners. From the copy of the
    jamabandi attached with this file, khasra Nos. 361 and 364
    measuring 5 kanals and 7 marlas were not on the lease with the
    college. But the Management is claiming compensation for this
    land also. In these circumstances, the college management
    cannot be awarded any amount from the compensation of this
    land being tenant. I therefore, allow the compensation to the land
    owners according to their share entered in the jamabandi….”(sic)
    First round of assessment proceedings
    By the Income Tax Officer, ‘B’ Ward, Ambala
  8. For the assessment year 1971-1972, the assessee declared its
    income at Rs. 1,408/- inclusive of Rs. 408/- from the house property and
    Rs. 1,000/- being the amount of interest earned. While not accepting the
    income so declared, the Assessing Officer8
    , in his assessment order dated
    12.02.1982, enhanced the income from house property to Rs. 1,200/- and
    also enhanced the interest income to Rs. 11,596/- with reference to the
    interest received under the award in question. However, the AO observed
    8 Hereinafter referred to as ‘the AO’ or ‘the ITO’.
    5
    that capital gains were not relevant for the year under consideration for the
    reason that the land in question had been acquired in the earlier years. The
    relevant part of the assessment order dated 12.02.1982 reads as under:-
    “……..The assessee has shown intt. at Rs. 1000/- only. The
    assessee’s lands were required by Haryana Govt. vide notification
    date 16.05.68, 11.06.69 and 13.08.69. Since the lands were
    acquired in the earlier years and the capital gains are not relevant
    for the year under consideration. However, the assessee received
    compensation late vide award dated 29.07.70 by land Acquisition
    Controller, the assessee received interest of Rs.10596/- which the
    assessee has not shown in the return. As such the intt. Income is
    taken at 11596 including 1000/- so-moto shown by the
    assessee….” (sic)
    Before the Appellate Commissioner
  9. Being aggrieved by the order so passed by the Assessing Officer,
    the assessee preferred an appeal before the Appellate Assistant
    Commissioner of Income Tax, Ambala9
    in B/Amb/82-83 on the grounds,
    inter alia, that the AO was not justified in enhancing the annual letting value
    of the house property and was also not justified in including the interest
    amount of Rs.11,596/- received from Land Acquisition Collector on the
    compensation paid for acquisition of land for the reason that the said
    interest amount was required to be treated as part of compensation.
    9.1. Though the ground of appeal concerning house property was
    accepted and the addition made by AO in that regard was deleted but, on
    examination of the award dated 29.09.1970, the CIT(A) found that the
    assessee was paid Rs.62,550/- as compensation and Rs.9,532/- as
    solatium and yet, capital gains on this account were not taxed by the
    9 For short, ‘the CIT(A)’.
    6
    Assessing Officer. Accordingly, a show cause notice dated 18.11.1983 was
    issued to the assessee as to why capital gains relating to the acquisition of
    this land be not charged to tax in the assessment year under consideration.
    The assessee filed a written reply dated 26.12.1983 to this notice and
    stated, inter alia, that in the urgency acquisition under Section 17 of the Act,
    the transfer takes place immediately after the notification and the owner
    ceases to be in possession of the land in question.
    9.2. The CIT(A), in his order dated 17.05.1984, rejected the submissions
    made on behalf of the assessee and held that the capital gains on the
    acquisition of the land amounting to Rs. 23,146/- were required to be added
    to the income of the previous year relevant to the assessment year under
    consideration. The CIT(A) ordered such addition while observing and
    holding as under:-
    “9…. … ITO has not given any reason in the assessment order
    why the capital gain on the acquisition of the land is not taxable.
    Moreover, powers conferred on me under the Income-Tax Act
    does not preclude me from considering this issue at the appellate
    stage.
  10. There is no doubt that the notifications were published much
    earlier that the date of award and the possession of land was also
    taken earlier that the date of award but it does not mean that the
    capital gain is to be taxed in the earlier years on that basis. When
    the land is taken possession of by the Government, no
    compensation has, in fact been determined but it has become only
    payable. The right of the owner is, therefore, an inchoate
    right…….. The deeming provisions can have no relevance unless
    the income is receivable can have it is receivable, then the
    determination of the question whether it is actually received or is
    deemed to have been received depends upon the method of
    accounting. If the actual amount of compensation has not
    been fixed by the Land Acquisition Collector, no income
    could be said to have occurred to the appellant…… Income
    Tax is not levied on a mere right to receive compensation,
    there must be something tangible, something in the nature of
    7
    debt, something in nature of an obligation to pay an
    ascertained amount. Till such time, no income can be said to
    have accrued. On the date when the collector awarded the
    compensation, it is only that amount which had accrued
    whether in fact paid or not. Accordingly, in the present case,
    even though the possession of land was taken in 1968, no amount
    can be said to accrued on the date of possession because the
    compensation at that point of time was not determined at all. This
    amount of compensation was determined only after the award
    dated 29.9.70. Therefore, if any income on account of capital gain
    is chargeable to tax, it will be chargeable on the date of award. It is
    held accordingly that the capital gain arising out of acquisition of
    land is chargeable to tax in the previous year, relevant to
    assessment year under consideration because the date of award
    i.e. 29.9.70 is within the relevant previous year.”
    (emphasis in bold supplied)
    Before the Income Tax Appellate Tribunal, Chandigarh Bench
  11. Against the order so passed by the CIT(A), the assessee-appellant
    preferred an appeal before the Income Tax Appellate Tribunal, Chandigarh
    Bench, being ITA No.634/Chandi/84 and argued, inter alia, that it had been
    a matter of urgent acquisition under Section 17 of the Act of 1894 and
    possession of the land in question was taken on 15.05.1968 when the
    notification under Section 4 of the said Act of 1894 was issued and hence,
    the CIT(A) exceeded his jurisdiction in taxing the capital gains for the year
    under reference on the basis of the date of award made by the Land
    Acquisition Collector under Section 11 of the Act of 1894. It was also argued
    that the interest amount could not have been treated separately and was
    required to be considered as a part of the compensation amount.
  12. The appeal so filed, relating to the assessment year 1971-1972, was
    considered and decided by ITAT by its order dated 19.12.1985.
    Interestingly, on the same date, i.e., on 19.12.1985, the ITAT also
    8
    considered and decided another appeal of the appellant pertaining to the
    assessment year 1975-1976, being ITA No.635/Chandi/84, wherein too,
    similar question of capital gains arising out of another award of
    compensation for acquisition of another parcel of land was involved. Since
    the said decision pertaining to the assessment year 1975-1976 has formed
    a part of submissions in the present appeal, we may usefully take note of its
    relevant features before proceeding further.
    11.1. It appears that in the said appeal pertaining to the assessment year
    1975-1976, the question of capital gains arose in the backdrop of the facts
    that another parcel of land of the appellant, in village Rangrnan, Tehsil and
    District Ambala admeasuring 15 kanals and 10 marlas, was acquired for the
    purpose of construction of warehouse of Ambala City. The notification under
    Section 4 of the Act of 1894 for that acquisition was issued on 26.06.1971;
    possession of the said land was taken on 04.09.1972; and award of
    compensation was made on 27.06.1974. In the given set of facts and
    circumstances, the ITAT accepted the contention that the case fell under the
    urgency provision contained in Section 17 of the Act of 1894 where the
    assessee was divested of title to the property, that vested in the
    Government with effect from 04.09.1972, the date of taking possession.
    Thus, the ITAT held that the capital gains arising from the said acquisition
    were not assessable for the accounting period relevant for the assessment
    year 1975-1976. The material part of findings of ITAT in the said order dated
    9
    19.12.1985, in ITA No.635/Chandi/84 pertaining to the assessment year
    1975-1976, reads as under:-
    “9…The case, therefore, falls under the urgency provision
    contained in section 17 of the Land Acquisition Act, 1894. The
    transfer within the meaning of section 2(47) took place on the date
    the possession of land was taken by the Government. Section
    2(47)(i) provides that the transfer in relation to a capital asset
    includes the extinguishment of any rights therein. Section 17 of
    the Act provides that after taking possession of the land in urgent
    cases, such land shall thereupon vest absolutely in the
    Government free from all encumbrances. The assessee was,
    therefore, divested of the title to the lands and the lands thereafter
    vested in the Government w.e.f. 4-9-72 i.e. the date of possession
    of the lands. In this view of the matter, we are of the opinion that
    the capital gains arising from the acquisition of the lands in
    question were not assessable for the accounting period relevant to
    the assessment year 75-76. The income from capital gains
    included in the total income by the ITO and confirmed by the AAC
    and also further enhanced by Rs. 28,379/- therefore, cannot be
    sustained. The same is deleted.”
  13. Reverting to the assessment year 1971-1972, it is noticed that in the
    appeal relating to this case, the ITAT referred to its aforesaid order of the
    even date pertaining to the assessment year 1975-1976 but found that in
    the present case, actual date of taking possession by the Government was
    not forthcoming and hence, proceeded to restore the matter to the file of AO
    to find out the date when the Government took over possession, while
    observing that if possession was taken before the award and before
    01.04.1970, capital gains were not to be included in the income for the
    assessment year 1971-1972 but, if possession was taken during the period
    01.04.1970 to 31.03.1971, capital gains would be assessable for this
    assessment year 1971-1972. The material part of the order dated
    19.12.1985 in ITA No.634/Chandi/84 pertaining to the present case reads
    as under:-
    10
    “5. We have carefully considered the rival submission. The first
    Notification for the acquisition of the lands in 15.5.68 as mentioned
    in the order of the ITO. The date of award u/s 11 of the Land
    Acquisition Act is 29.9.70 which is also mentioned in the order of
    the ITO. The actual date of possession of the lands by the
    Government is neither mentioned in the order of the ITO nor of the
    AAC though the learned counsel for the assessee at the time of
    hearing stated that it was on 15.5.68. The AAC has also stated in
    para 10 of his order that the notifications were published much
    earlier than the date of the award and the possession of the land
    was also taken earlier than the date of award but that did not
    mean that the capital gains was to be taxed in the earlier years on
    that basis. He has, however, not specified the actual date of
    possession of the lands by the Government. The date given by the
    learned counsel for the assessee also cannot be accepted firstly
    because no evidence in relation there to has been furnished
    before us. Secondly the date of notification is 16.5.68 and it was
    not elaborated as to how the possession of the land could be
    taken even prior to the date of notification. One thing, however, is
    certain that the possession of the lands was taken before the
    award was made u/s 11 of the Land Acquisition Act.
  14. Similar issue came up for consideration before us in the case of
    the assessee itself for the assessment year 1975-76 and vide our
    orders of even date in I.T.A. No. 635/Chandi we have held that it
    was a case which fell u/s 17 of the Act and, therefore, capital gains
    were assessable on the basis that the transfer took place on the
    date of possession of lands by the Government. Since the actual
    date of possession of the land is not available, we are of the
    opinion that the matter should be restored to the file of the ITO
    who should find out the actual date of possession of the lands by
    the Government. In case the possession of the lands was taken by
    the Government prior to the date of award and before Ist
    April,1970, the capital gains will not be included in the income for
    the assessment year 71-72. If the possession of the lands was
    also taken during the period 1-4-70 to 31-3-71, the capital gains
    will be assessable for the assessment year 71-72. After finding the
    actual date of possession by Govt. the ITO, he shall recompute
    the income on the above basis.”
    Supplementary facts concerning enhancement of compensation
  15. Before entering into the orders passed in second round of
    proceedings after remand by the ITAT, apposite it would be to take note of a
    set of supplementary facts relating to the enhancement of the amount of
    compensation. It is noticed that as against the aforesaid award dated
    11
    29.09.1970, the appellant took up the proceedings in LA Case Nos. 37 and
    38 of 1971 before the Additional District Judge, Ambala who, by the order
    dated 30.12.1984, allowed a marginal enhancement of the amount of
    compensation and corresponding solatium and interest. Not satisfied yet,
    the appellant preferred an appeal, being Regular First Appeal No. 390 of
    1975 before the Punjab and Haryana High Court, seeking further
    enhancement. The High Court allowed this appeal by its judgment dated
    25.10.1985 and awarded compensation by applying the rate of Rs. 8/- per
    sq. yd. against Rs. 3.50 and Rs. 2.50 per sq. yd., as allowed by the
    Additional District Judge and the Land Acquisition Collector respectively.
    The High Court also allowed 30% solatium and corresponding interest10
    .
    Second Round of Proceedings for assessment
    By the Income Tax Officer, ‘C’ Ward, Ambala.
  16. Having noticed the relevant facts concerning acquisition of the land
    in question, the award of compensation for such acquisition and
    enhancement of the amount of compensation as also the first round of
    proceedings for assessment for the assessment year 1971-1972, we may
    now take note of the orders passed in the second round of proceedings for
    this assessment after the matter was remanded by the ITAT.
  17. In compliance of the directions of ITAT in the aforesaid order dated
    19.12.1985 in ITA No.634/Chandi/84, the AO took up the matter in GIR No.
    920A and, on 17.07.1987, served specific question to the assessee10 As per the material on record, the High Court allowed interest @12% p.a. on the market value
    of the land from the date of notification under Section 4 of the Act of 1894 until the date of taking
    possession; 9% p.a. after the date of possession for one year; and 15% p.a. thereafter.
    12
    appellant about the date on which possession of the acquired land was
    taken by the Government of Haryana. In his reply dated 22.07.1987, the
    appellant stated such date of possession as 15.05.1968, being the date of
    notification under Section 4 of the Act of 1894. Though no evidence in this
    regard was adduced but, the appellant relied upon the decision of Kerala
    High Court in the case of Peter John v. Commissioner of Income-Tax:
    (1986) 157 ITR 711 to submit that capital gains, if any, arise at the point of
    time when the land vests in the Government and such a date in the present
    case was 15.05.1968. Further, by way of communications dated
    28.09.1987 and 11.01.1988, the AO asked the assessee-appellant to give
    the exact date-wise calculation of interest in terms of the aforesaid
    judgment of High Court dated 25.10.1985 but not much of assistance came
    up from the appellant in that regard.
    15.1. As the appellant was unable to bring forth the requisite information
    with evidence, the AO also made enquiries from the revenue authorities,
    particularly regarding the date of taking over possession. In response, the
    AO received information that the land in question was on lease with the
    College; and that as per the procedure adopted, the date of taking
    possession by the Government was ‘in consonance’ with the date when the
    award was announced.
    15.2. The AO took note of all the facts and features of this case in his reassessment order dated 25.01.1988 and observed that ‘since in the instant
    case, the award was announced on 29.09.1970, the said date viz
    13
    29.09.1970 is deemed to be the date of taking possession by the
    Government’. In this view of the matter, the AO held that ‘taxability of
    capital gains arose in the previous year relevant to the assessment year
    under consideration’.
    15.3. It was also suggested by the appellant before the AO that
    acquisition was of urgent nature, as was the case in relation to the other
    acquisition relevant for the assessment year 1975-1976. The AO found
    such a suggestion incorrect because of different purposes of acquisition;
    and specific date of taking over possession (04.09.1972) having been
    mentioned in the said case pertaining to the assessment year 1975-1976.
    The AO also noticed that the appellant failed to place on record the date of
    publication of notice under Section 9 of the Act of 1894 and observed that
    there was no reference to urgency acquisition in the present case nor any
    such mention was found in the award dated 29.09.1970. In the given
    circumstances, the AO held that the acquisition in question was not a
    matter of urgency under Section 17 of the Act of 1894 and this acquisition
    had only been under the ‘normal powers’.
    15.4. With the findings aforesaid, the AO proceeded to assess the tax
    liability of the appellant, on long-term capital gains arising on account of
    acquisition, on the basis of the amount of compensation allowed in the
    award dated 29.09.1970 as also the enhanced amount of compensation
    accruing finally as a result of the aforesaid order dated 30.12.1984 passed
    by the Additional District Judge and the judgment dated 25.10.1985 passed
    14
    by the High Court. As regards interest income, the AO carried out protective
    assessment on accrual basis @ 12% per annum for the previous year
    relevant to the assessment year in question i.e., for the period 01.04.1970
    to 31.03.1971 while providing that such calculation would be subject to
    amendment, if necessary.
    Before the Commissioner of Income Tax (Appeals), Karnal
  18. The aforesaid order of re-assessment dated 25.01.1988 was
    challenged by the appellant before the CIT(A) in Appeal No. 87/87-88. This
    appeal was considered and dismissed by the CIT(A) by way of his
    elaborate order dated 31.03.1989.
    16.1. It was argued in the first place before the CIT(A) that the ITAT, by its
    order dated 19.12.1985, had only restored the issue as regards the date of
    possession to the file of AO and therefore, the AO was not justified in
    proceeding as if making a de-novo assessment; and was not justified in
    bringing the enhanced amount of compensation to tax for which, he should
    have passed a separate order under Section 155(7A) of the Act of 1961. In
    regard to this contention, the CIT(A) noted that indisputably, for
    computation of capital gains, the ITO had the power to take into
    consideration the enhanced compensation received by the appellant for
    compulsory acquisition of the land; and when the ITO could have drawn up
    a separate order under Section 155(7A), he was well within the powers to
    combine such an order with his order for carrying out the directions of ITAT.
    The contention on the frame of the order was, therefore, rejected.
    15
    16.2. The CIT(A), thereafter, extensively dealt with the facts of the case
    on the issue as to whether the ITO had correctly held that possession of the
    appellant’s compulsorily acquired land was taken over by the Government
    during the previous year relevant to the assessment year in question. The
    CIT(A) held that it had not been a case of compulsory acquisition under
    Section 17 of the Act 1894; and that awarding of interest from 15.05.1968
    was of no effect on the date of accrual of capital gains, particularly when
    such interest could have been awarded under Section 28 of the Act of
  19. The CIT(A) further observed that the College remained in
    unauthorized possession of the land in question after the expiry of lease on
    31.08.1967 but, it was only on the date of award i.e., 29.09.1970, that the
    possession legally passed on to the College so as to vest it with the
    ownership through the Government. The relevant observations and findings
    of the CIT(A) in the order dated 31.03.1989 could be usefully reproduced
    as under:-
    “9…It is an admitted fact that the special procedure
    prescribed u/s 17 of the Land Acquisition Act for exercising
    of the emergency powers of the Govt. for taking possession
    of lands to be compulsorily acquired, earlier than the date of
    award u/s 11 of Land Acquisition Act, was not followed in this
    case. Neither there is any direction of the Govt. to the
    Collector to take over possession earlier then the date of
    award u/s 11 of Land Acquisition Act and nor the possession
    was so taken by the collector after 15 days of the
    publication of notice u/s 9(1) of the Land Acquisition Act.
    These two conditions are absolutely necessary if the
    possession was to be taken u/s 17 of the Land Acquisition
    Act. The possession of the lands already with S.A. Jain
    College Ambala was obviously regularized in the instant
    case u/s 16 of the Land Acquisition Act which is the general
    16
    Section for taking the possession of lands acquired under
    the Land Acquisition Act. The possession of compulsorily
    acquired land u/s 16 of the Land Acquisition Act can be
    taken by the Govt. only after the date of award u/s 11 of the
    Land Acquisition Act which in the instant case was 29.9.70.
    Therefore, it is only on 29.9.70 that the possession
    legally passed to S.A. Jain College, Ambala so as to vest
    the ownership in the property in S.A. Jain College City
    through the Govt. …… If the possession of the lands had
    been taken u/s 17 of the Land Acquisition Act, then interest
    would have been awarded to the appellant only from the
    date after 15 days of the publication of notice u/s 9(1) of the
    Land Acquisition Act, whereas in the instant case, the
    interest has been awarded from the date of notification u/s 4
    of the Land Acquisition Act i.e. 15.5.68. This goes to show
    that the interest was awarded to the appellant from a date
    prior to the date of award u/s 11 of the Land Acquisition Act
    which is dated 29.9.70 not because the possession had
    been taken u/s 17 of the Land Acquisition Act but because of
    various Court, rulings be holding, as mentioned above, that
    on equitable interpretation of Sec. 28 of the Land Acquisition
    Act, interest should be awarded from the date of possession
    even in cases where the possession had been taken before
    the date of award u/s 11 of the Land Acquisition Act, even
    though the possession was unauthorized or taken with or
    without the consent of the landlord.
  20. In view of the above discussion, it is obvious that the
    possession of the lands in the instant case legally
    passed to S.A. Jain College, Ambala City through the
    Govt. on the date of the award u/s 11 of the Land
    Acquisition Act and it is only on this date that the
    ownership in the lands got vested in the Govt……. As
    discussed above, the fact that S.A. Jain College, Ambala
    was already in unauthorized possession of the lands and
    that interest has been awarded to the appellant from part of
    the period during which S.A. Jain College, Ambala were in
    unauthorized possession of the lands, would not effect the
    above mentioned legal position i.e. that the possession and
    ownership in the lands got transferred from the landlord to
    the Government on 29.9.70 i.e. the date of the award u/s 11
    of the Land Acquisition Act. Therefore, the capital gain on the
    compulsory acquisition of these lands is to be taxed in this
    year and has been rightly so taxed. The order of the learned
    I.T.O. on this point also is upheld.
    11…..Since I have already held that the learned ITO was
    justified in including the enhanced compensation in the total
    consideration received by the appellant for acquisition of his
    lands, for computation of capital gains, I hold that appellant
    has no case in respect of the interest amount of Rs.27255/-
    17
    as mentioned in ground of Appeal No.5 of the original
    grounds of appeal. No arguments having been advanced in
    respect of appeal No. 4,6,7 of the original grounds of appeal,
    these grounds of appeal are, therefore, rejected as, on the
    face of it, there is nothing wrong in the order of the learned
    ITO in this respect.
    In the result, appeal is dismissed.”
    (emphasis in bold supplied)
    Before the Income Tax Appellate Tribunal, Chandigarh Bench
  21. Being aggrieved by the order so passed by the CIT(A), the appellant
    preferred an appeal before the ITAT, being ITA No. 739(Chandi)89, raising
    essentially three issues for consideration namely, (i) about the date of
    taking over physical possession of the land in question by the Government;
    (ii) about the ITO’s power to frame the re-assessment instead of recomputing the income in terms of the ITAT’s order of remand; and (iii)
    against the inclusion of enhanced compensation and interest, etc., in the
    re-assessment by the ITO. This appeal was considered and allowed by the
    ITAT by way of its order dated 29.06.1990.
    17.1. The ITAT took up the first issue concerning the date of taking over
    physical possession of the land in question and, with reference to the
    relevant background aspects as noticed hereinabove, observed that though
    it had earlier directed the ITO to ascertain the actual date of possession but
    the matter presented a complex scenario, where a clear finding about this
    date was difficult to emerge. The ITAT observed thus:-
    “12. The direction of the Bench earlier was for determination of
    actual date of possession. The Ld. ITO in his own way came to
    the conclusion that the date of award was the date of possession
    whereas assessee’s case depended on the date of notification.
    Both the dates appear to be misconceived as the actual physical
    possession of the land was already with the college, under a
    18
    lease, since 1.1.47. Thus as a consequence of the acquisition
    proceedings only some of symbolic or constructive possession
    was to be taken as the physical possession was already there. In
    terms of the order under challenge and so also the assessment
    order and the position of law also, the ownership exchanges
    hands from the date of award which in the present case is 29.9.70,
    but before recording a firm finding in this respect, we have to keep
    in mind the earlier finding of the Bench dated 19.12.85 wherein it
    was observed that the actual date of possession be ascertained
    and capital gains assessed in the year in which the possession
    was taken. The determination of this aspect is slightly difficult in
    view of the complex factual position existing on the record. We
    cannot take 29.9.70 as on the date of doubt (sic) the award was
    given but the possession was already with the college. We also
    cannot take 15.5.68 because no doubt the notification was there
    but before that date the college was in possession of land under a
    lease. Thus clear finding is difficult to emerge.”
    17.2. Having said that, the ITAT referred to the observations regarding
    “possession of land”, as occurring in the award dated 29.09.197011 and
    observed that as per those observations in the award, possession of the
    land in question was supposed to have been taken on 15.05.1968. The
    ITAT further observed that to sort out the controversy, such stipulation in the
    award was required to be depended upon; and the date of actual physical
    possession was inferable from the intention of the parties and the language
    of such stipulation in the award. On this reasoning, the ITAT held that since
    the actual physical possession exchanged hands on 15.05.1968, the
    transaction should be considered as having taken place on that date and
    not on the date of award i.e., 29.09.1970; and hence, capital gains were not
    to be taxed for the year under consideration. Having reached this
    conclusion, the ITAT held that the very basis of assessing capital gains
    having been knocked out, the other issues were rendered redundant. The
    11 Reproduced in paragraph 7.1 hereinbefore.
    19
    ITAT, accordingly, allowed the appeal with the following observations and
    findings:-
    “14. According to the stipulation in the award, the possession of
    land is supposed to have taken place on 15.5.68 as from that
    date, the assessee was entitled in interest at 6% per annum on
    the amount of compensation. This is infact the date i.e. 15.5.68,
    from which date the assessee was supposed to have parted
    with the ownership of the land in lieu of the compensation. The
    assessee was to have the compensation and the land was
    supposed to have parted company. Thus to sort out the
    controversy we are required to heavily depend upon this
    stipulation in the award. The date of actual physical
    possession is inferable from the intention of parties and
    the language of the stipulation. The date of dispossession
    is inferable to be 15.5.68. The issue is now required to be
    decided, in the light of the earlier observation of the Bench that
    since the physical possession(ownership) exchanged hands on
    15.5.68, the transaction should be considered as having taken
    place on the date and not on the date of award on 29.9.70. For
    coming to this conclusion we are dependent upon the intention
    of the parties and the mention in the award that the interest
    became payable to the assessee from that date only and not
    from any other date. In the light of the above discussion, we are
    inclined to hold that the capital gains could not be assessed for
    the year under consideration as the transaction did take place
    on 15.5.68. The revenue authorities were thus not justified to
    include the capital gains for the year under consideration and
    the Ld (CIT(A) was not justified to confirm such action. We
    vacate the finding of this aspect. The Revenue authorities are
    at liberty to look into the matter in respect of capital gains taking
    the date of possession as 15.5.1968. Dispossession or actual
    date of taking physical possession is to be understood in the
    context of the facts to the present case as the change of the
    ownership as the possession was already with the college
    under the lease.
  22. Since we have held that capital gains are not to be taxed for
    the year under consideration, other issues connected with this
    aspect and raised by the assessee not to be gone into as the
    very basis has knocked down.”
    (emphasis in bold supplied)
  23. Taking exception against the order so passed in appeal, the
    revenue made an application before the ITAT seeking reference to the
    High Court under Section 256(1) of the Act of 1961. The ITAT, in its order
    20
    dated 15.07.1991, took note of all the relevant facts; and, after finding it to
    be a fit case for making reference, drew up the statement of case and
    referred the matter to the High Court for determination of the following
    question:-
    “Whether on the facts and in the circumstances of the case, the
    Tribunal was right in Law in holding that the capital gains are not
    assessable in the year under consideration as the transaction did
    take place on the date of notification i.e. 15.05.1968 and not on
    the date of award on 29.09.1970?”
    The reference proceedings in High Court
  24. The High Court of Punjab and Haryana considered and answered
    the question aforesaid by its impugned judgment and order dated
    23.04.2008 in Income Tax Reference No.53-A of 1991.
    19.1. It was argued on behalf of the revenue before the High Court that
    any profits or gains arising from the transfer of the capital asset effected in
    the previous year shall be deemed to be income of the previous year in
    which the transfer took place and thus, would fall within the ambit of
    Section 45(1) of the Act of 1961; and as such, the date of award
    29.09.1970 ought to be considered for the purpose of calculating capital
    gains and not the date of notification i.e., 15.05.1968. As against these
    submissions, it was submitted on behalf of the assessee-appellant that the
    referred question was required to be decided in the light of the observations
    made by ITAT in its order dated 19.12.1985; and that it had been a matter
    of urgency acquisition where the possession of land was taken on the date
    of notification i.e., 15.05.1968 and hence, in view of the provisions
    21
    contained in Section 17 of the Act of 1894, the transfer took place on that
    date (15.05.1968) and not on the date of award (29.09.1970).
    19.2. After taking into consideration the rival submissions, the facts of this
    case and the scheme of the Act of 1894, particularly Sections 16 and 17
    thereof, the High Court answered the reference in favour of the revenue
    while holding that the Collector had not taken possession of the land under
    Section 17 of the Act of 1894 and that the said provision was not invoked
    by the State Government. The High Court further held that for the purpose
    of assessment of capital gains, the date of award (i.e., 29.09.1970) was
    required to be taken as the date of taking over possession because, on that
    date, the land in question vested in the Government under Section 16 of
    the Act of 1894.
    19.3. The High Court further examined the ambit and scope of Section 45
    of the Act of 1961 and on its conjoint reading with Section 16 of the Act of
    1894, came to the conclusion that the transfer of capital asset (the land in
    question) and its vesting in the Government took place on 29.09.1970, the
    date of award. The High Court further held that under the Income-tax Act,
    1961, an income was chargeable to tax only when it had accrued or was
    deemed to have accrued in the year of assessment; and in the present
    case, if any income on account of capital gains was chargeable to tax, it
    would be chargeable on the date when the Collector determined the
    compensation because, the income accrued to the appellant only upon
    such determination. The High Court, therefore, held that the capital gains
    22
    arising out of acquisition of land were chargeable to tax in the previous year
    relevant to assessment year under consideration because the date of
    award i.e., 29.09.1970 fell within the relevant previous year.
    19.4. Accordingly, the High Court disapproved the ITAT’s order dated
    29.06.1990 and answered the reference in favour of the revenue while
    holding, inter alia, as under:-
    “13…..It is clear from Section 45(1) of the Income Tax Act that the
    capital gains are chargeable to income-tax arising from the
    transfer of capital assets effected in the previous year in which the
    transfer took place. On a conjoint reading of Section 16 of the
    Land Acquisition Act and Section 45(1) of the Act, it is clear that
    the transfer of the capital asset (land of the assessee) has to be
    taken as 29.09.1970 i.e. the date of award on which date the land
    vested in State.
  25. Under the Income Tax Act, an income is chargeable to tax
    only when it accrues or is deemed to accrue or arise in the
    year of assessment. The deeming provision can have no
    relevance unless the income is receivable and if it is receivable,
    then the determination of the question whether it is actually
    received or is deemed to have been receive depends upon the
    method of accounting. If the actual amount of compensation
    has not been fixed by the Land Acquisition Collector, no
    income could be said to have accrued to the appellant. It
    cannot be contended that the mere claim by the assessee
    after taking of possession by the Govt. at a particular rate is
    the compensation. It is the amount actually awarded by the
    Collector accrues on the date on which the award is passed.
    Income tax is not levied on a mere right to receive
    compensation. There must be something tangible, something in
    the nature of debt, something in the nature of an obligation to pay
    an ascertained amount. Till such time no income can be said to
    have accrued. On the date when the Collector awarded the
    compensation, it is only that amount which had accrued. This
    amount of compensation was determined only on passing of the
    award date 29.09.70. Therefore, if any income on account of
    capital gain is chargeable to tax, it will be chargeable on the date
    of award. It is held accordingly that the capital gain arising out of
    acquisition of land is chargeable to tax in the previous year
    relevant to assessment year under consideration because the date
    of award i.e. 29.09.70 is within the relevant previous year.”
    (emphasis in bold supplied)
    23
  26. Being aggrieved by the judgment and order dated 23.4.2008 so
    passed by the High Court, holding that the capital gains arising out of the
    acquisition in question were chargeable to tax in the assessment year 1971-
    1972, the assessee-appellant has preferred this appeal by special leave.
    Rival Submissions
    Appellant
  27. Assailing the view taken by the High Court, learned counsel for the
    appellant has essentially crusaded on two-fold arguments: One, that on the
    facts and in the circumstances of the present case, where the land in
    question was already in possession of the beneficiary College, the
    assessee-appellant was divested of its title and right to this property with
    issuance of notification under Section 4 of the Act of 1894 when the State
    took up the acquisition in urgency; and the transfer for the purposes of
    Section 2(47) of the Act of 1961 was complete on the date of that
    notification itself i.e., on 15.05.1968 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. Secondly, it is not open
    for the revenue to question the decision of ITAT in the present case
    pertaining to the assessment year 1971-1972 because, the fact situation of
    the present case is similar to that of the other case of the appellant in
    relation to the assessment year 1975-1976, where the same issue was
    decided by the ITAT in favour of the appellant and the revenue accepted the
    said decision by not challenging the same any further.
    24
    21.1. Elaborating on the first limb of arguments, learned counsel for the
    appellant has contended that indisputably, the land in question was already
    in possession of the beneficiary College when the State Government took
    up the proceedings for its acquisition by issuing notification under Section 4
    of the Act of 1894 on 15.05.1968; and the appellant was immediately
    divested of the rights in the land in question, as amply established by the
    recital about “possession of land” in the award dated 29.09.1970, where the
    appellant was allowed interest over the amount of compensation and
    solatium from 15.05.1968. Therefore, according to the learned counsel, the
    transfer, for the purposes of Section 2(47) of the Act of 1961, was complete
    on the date of notification i.e., on 15.05.1968 and capital gains, if any,
    could have only been charged for the previous year referable to that date of
    notification and not with reference to the date of award.
    21.1.1. Taking this line of argument further, learned counsel has referred
    to the Full Bench decision of Kerala High Court in the case of Peter John
    (supra) to submit that in land acquisition proceedings, the owner of property
    is entitled to compensation on the day on which he is dispossessed; and
    that such right does not await quantification of compensation by the Land
    Acquisition Officer or the Court. On application of these principles to the
    case at hand, according to the learned counsel, the date of award i.e.,
    29.09.1970 for quantification of compensation has no relevance for the
    purpose of assessing capital gains; and the only relevant date is
    25
    15.05.1968, when the appellant was legally dispossessed of the land in
    question and its rights therein stood extinguished.
    21.1.2. Learned counsel for the appellant has further contended, with
    reference to the decision of this Court in the case of Rama Bai v.
    Commissioner of Income-Tax, Andhra Pradesh: (1990) 181 ITR 400,
    that the interest income in cases of land acquisition accrues from year to
    year and is taxable in the respective year of its accrual; and, in the present
    case, since the possession was taken on 15.05.1968, capital gains and
    interest accrued were taxable only in the assessment year 1969-1970 and
    not in the assessment year 1971-1972.
    21.2. In the second limb of submissions, learned counsel for the appellant
    has referred to the order dated 19.12.1985, as passed by the ITAT in ITA
    No. 635/CHD/84 for the assessment year 1975-1976 (Annexure P-5) and
    has submitted that in the similar facts and circumstances, pertaining to the
    acquisition of another land of the appellant, the ITAT specifically decided
    that capital gains were not relatable to the date of award but were relatable
    to the date of dispossession; and the revenue indeed accepted the said
    decision by not challenging it any further. While strongly relying upon the
    decision of this Court in Berger Paints India Ltd. v. Commissioner of
    Income-Tax: (2004) 266 ITR 99, the learned counsel has contended that
    where the order passed in favour of the very same assessee and against
    the revenue in a similar matter has attained finality, the revenue cannot
    seek re-opening of the issue in relation to the other case without a just
    26
    cause. Thus, according to the learned counsel, the view as taken in relation
    to the similar case for the assessment year 1975-1976 squarely covers the
    present case and the revenue cannot take a different stand in relation to the
    assessment year 1971-1972.
    21.3. Learned counsel for the appellant has also contended that the
    interest income and solatium accrued on 15.05.1968 as per the award itself
    and hence, the income to be taxed pertains to the financial year 1968-1969,
    relevant to the assessment year 1969-1970 and the same cannot be taxed
    in the assessment year 1971-1972. Therefore, according to the learned
    counsel, the ITAT had rightly taken the view against taxability of the income
    pertaining to the acquisition in question in the assessment year 1971-1972
    and the High Court has committed manifest error in upturning the view of
    ITAT.
    Respondent
  28. Per contra, learned counsel for the revenue has supported the order
    passed by the High Court, essentially with the submissions that in the
    present case, transfer of capital asset i.e., the land of assessee, took place
    only on the date of award falling within the previous year relevant for the
    assessment year 1971-1972.
    22.1. Learned counsel for the revenue has referred to the definitions of
    “capital asset” and “transfer” in the Act of 1961 and has contended that
    though possession of the subject land was with the College in the year
    1968 and continued as such but, no gain on account of transfer of land
    27
    accrued to the assessee on the date of notification i.e., 15.05.1968
    because, at the relevant point of time, compensation had not been
    determined; and the same was determined only in the award dated
    29.09.1970. Therefore, according to the learned counsel, capital gains
    chargeable to income-tax accrued only on the date of award and, in this
    position, the date of notification i.e., 15.05.1968 is not relevant for the
    purpose of taxing the capital gains.
    22.2. Learned counsel for the revenue has further elaborated on the
    submissions that the acquisition in question had not been under the
    urgency provisions contained in Section 17 of the Act of 1894 because
    thereunder, the Government was to issue directions to the Collector to take
    possession after the expiry of fifteen days from the date of publication of
    notice under Section 9(1) but, no such direction was issued by the
    Government in the present case. According to the learned counsel, the only
    applicable provision for taking possession in the present case had been
    Section 16 of the Act of 1894 whereunder, possession could be taken by
    Collector after making the award under Section 11 and only thereupon the
    land under acquisition vests in the Government, free from all
    encumbrances. The learned counsel would maintain that on the facts of the
    present case, the possession legally passed on to the College through the
    Government only on 29.09.1970 i.e., the date of award; and this date of
    award shall alone be relevant for chargeability of tax against capital gains of
    the assessee with transfer of capital asset. In support of his contentions, the
    28
    learned counsel has referred to and relied upon various decisions including
    those in Joginder Singh and Ors. v. State of Punjab and Anr.: AIR 1985
    SC 382 and Bombay Burmah Trading Corporation Ltd. v.
    Commissioner of Income-Tax: (1988) 169 ITR 148.
    22.3. Learned counsel for revenue has also submitted that reliance by the
    appellant on the case of Berger Paints (supra) is entirely misplaced
    because the said case relates to business expenditure under Section 34B
    of the Act of 1961 and has no relevance to the present case.
    Points for determination
  29. We have heard learned counsel for the parties at length and have
    scanned through the material on record. Having regard to the submissions
    made and the contents of judgment/orders under consideration, the
    following principal points arise for determination in this appeal: –
  30. 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?
    29
  31. As to whether the fact situation of the present case is similar to
    that of the other case of the appellant in relation to the assessment
    year 1975-1976 where the same issue relating to the date of accrual
    of capital gains was decided by the ITAT in favour of the appellant
    with reference to the date of taking possession by the Government;
    and having not challenged the same, it is not open for the revenue to
    question the similar decision of ITAT in the present case pertaining to
    the assessment year 1971-1972?
  32. For appropriate dealing with the controversy at hand, we may take
    note of the relevant statutory provisions in the Income-tax Act, 1961, as
    applicable to the assessment year 1971-1972, as also in the Land
    Acquisition Act, 1894, as existing at the relevant time.
    Statutory Provisions
  33. In the Income-tax Act, 1961, the heads of income for the purpose of
    computation of total income are defined in Section 14 that carries, inter alia,
    the heading “E. Capital gains”. Part-E of Chapter IV carries the provisions
    relating to Capital gains arising from the transfer of a capital asset. For the
    purpose of present appeal, the provision relating to chargeability of capital
    gains to tax as contained in Section 45 and the definition of the expression
    “transfer” as occurring in clause (47) of Section 2 of the Act of 1961 are
    relevant and these provisions, as applicable to the assessment year 1971-
    1972 had been as follows.12:-
    12 In the re-assessment order dated 25.01.1988, the AO had included the amount of enhanced
    compensation for computing the quantum of capital gains and this inclusion was questioned before
    the CIT(A) but, it was held that as regards enhanced compensation, the AO could have passed the
    30
    “Section 45. Capital gains.-Any profits or gains arising from the
    transfer of a capital asset effected in the previous year shall, save
    as otherwise provided in sections 53, 54 and 54B be chargeable to
    income-tax under the head “Capital gains”, and shall be deemed
    to be the income of the previous year in which the transfer took
    place.”
    “Section 2(47) “transfer”, in relation to a capital asset, includes
    the sale, exchange or relinquishment of the asset or the
    extinguishment of any rights therein or the compulsory acquisition
    thereof under any law;”
  34. For an overview of the processes envisaged by the Land
    Acquisition Act, 1894 to bring about lawful acquisition of land, we may put
    a glance over the principal parts of relevant provisions therein, as existing
    at the relevant point of time.
    26.1. The process of acquisition, as contained in Part II of the Act of 1894
    could be reasonably taken into comprehension by reference to Sections 4,
    5A, 6, 9, 11 and 16 therein, respectively occurring under the headings
    ‘Preliminary Investigation’, ‘Objections’, ‘Declaration of Intended
    Acquisition’, ‘Enquiry into Measurements, Value and Claims, and Award by
    order by virtue of his powers under sub-section (7A) of Section 155 of the Act of 1961. Though, this
    aspect is not directly involved in the present appeal but, for the sake of reference, we may indicate
    that Section 155 of the Act deals with the power of amendments of assessment; and sub-section
    (7A) thereto was inserted by Finance Act, 1978 with retrospective effect from 01.04.1974 and was
    omitted by Act No. 4 of 1988 with effect from 01.04.1992. This sub-section (7A) of Section 155, as
    existing at the relevant time of passing the order by the AO, had been as under:-
    “(7A) Where in the assessment for any year, the capital gain arising from the
    transfer of a capital asset, being a transfer by way of compulsory acquisition
    under any law, or a transfer the consideration for which was determined or
    approved by the Central Government or the Reserve Bank of India, is computed
    under section 48 and the compensation for such acquisition or the consideration
    for such transfer is enhanced or further enhanced by any court, tribunal or other
    authority, the computation or, as the case may be, computations made earlier
    shall be deemed to have been wrongly made and the Assessing Officer shall,
    notwithstanding anything contained in this Act, recompute in accordance with
    section 48 the capital gain arising from such transfer by taking the
    compensation or the consideration as enhanced or further enhanced, as the
    case may be, to be the full value of the consideration received or accruing as a
    result of such transfer and shall make the necessary amendment; and the
    provisions of section 154 shall, so far as may be, apply thereto, the period of
    four years specified in sub-section (7) of that section being reckoned from the
    end of the previous year in which the additional compensation or consideration
    was received by the assessee.”
    31
    the Collector’ and ‘Taking Possession’. These provisions or relevant parts
    thereof, as applicable to the acquisition in question, had been as under:-
    “4. Publication of preliminary notification and powers of
    officers thereupon.- (1) Whenever it appears to the appropriate
    Government that land in any locality is needed or is likely to be
    needed for any public purpose a notification to that effect shall be
    published in the Official Gazette, and the Collector shall cause
    public notice of the substance of such notification to be given at
    convenient places in the said locality.
    (2) Thereupon it shall be lawful for any officer, either, generally or
    specially authorised by such Government in this behalf, and for his
    servants and workmen, –
    to enter upon and survey and take levels of any land in such
    locality;
    to dig or bore into the sub-soil;
    to do all other acts necessary to ascertain whether the land is
    adapted for such purpose;
    to set out the boundaries of the land proposed to be taken and
    the intended line of the work (if any) proposed to be made
    thereon;
    to mark such levels, boundaries and line by placing marks and
    cutting trenches; and,
    where otherwise the survey cannot be completed and the
    levels taken and the boundaries and line marked, to cut down
    and clear away any part of any standing crop, fence or jungle:
    Provided that no person shall enter into any building or upon any
    enclosed court or garden attached to a dwelling house (unless
    with the consent of the occupier thereof) without previously giving
    such occupier at least seven days’ notice in writing of his intention
    to do so.”
    “5A. Hearing of Objections.- (1) Any person interested in any
    land which has been notified under section 4, sub-section (1), as
    being needed or likely to be needed for a public purpose or for a
    company may, within thirty days after the issue of the notification,
    object to the acquisition of the land or of any land in the locality, as
    the case may be.
    (2) Every objection under sub-section (1) shall be made to the
    Collector in writing, and the Collector shall give the objector an
    opportunity of being heard either in person or by pleader and shall,
    after hearing all such objections and after making such further
    inquiry, if any, as he thinks necessary, either make a report in
    respect of the land which has been notified under Section 4, subsection (1), or make different reports in respect of different parcels
    of such land to the appropriate Government, containing his
    recommendations on the objections, together with the record of
    the proceedings held by him, for the decision of that Government.
    32
    The decision of the appropriate Government on the objections
    shall be final.
    (3) For the purposes of this section, a person shall be deemed to
    be interested in land who would be entitled to claim an interest in
    compensation if the land were acquired under this Act.”
    “6. Declaration that land is required for a public purpose.- (1)
    Subject to the provisions of Part VII of this Act, when the
    appropriate Government is satisfied after considering the report, if
    any, made under section 5A, sub-section (2), that any particular
    land is needed for a public purpose, or for a company, a
    declaration shall be made to that effect under the signature of a
    Secretary to such Government or of some officer duly authorised
    to certify its orders and different declarations may be made from
    time to time in respect of different parcels of any land covered by
    the same notification under Section 4, sub-section (1), irrespective
    of whether one report or different reports has or have been made
    (wherever required) under section 5-A, sub-section (2).

(3) The said declaration shall be conclusive evidence that the land
is needed for a public purpose or for a company, as the case may
be; and, after making such declaration the appropriate
Government, may acquire the land in manner hereinafter
appearing.”
“9. Notice to persons interested.- (1) The Collector shall then
cause public notice to be given at convenient places on or near
the land to be taken, stating that the Government intends to take
possession of the land, and that claims to compensation for all
interests in such land may be made to him.
(2) Such notice shall state the particulars of the land so needed,
and shall require all persons interested in the land to appear
personally or by agent before the Collector at a time and place
therein mentioned (such time not being earlier than fifteen days
after the date of publication of the notice), and to state the nature
of their respective interests in the land and the amount and
particulars of their claims to compensation for such interests, and
their objections (if any) to the measurements made under Section

  1. The Collector may in any case require such statement to be
    made in writing and signed by the party or his agent.
    (3) The Collector shall also serve notice to the same effect on the
    occupier (if any) of such land and on all such persons known or
    believed to be interested therein, or to be entitled to act for
    persons so interested, as reside or have agents authorised to
    receive service on their behalf, within the revenue district in which
    the land is situate.
    *** *** ***”
    “11. Enquiry and award by Collector.- On the day so fixed, or
    any other day to which the enquiry has been adjourned, the
    33
    Collector shall proceed to enquire into the objections (if any),
    which any person interested has stated pursuant to a notice given
    under Section 9 to the measurements made under Section 8, and
    into the value of the land and at the date of the publication of the
    notification under Section 4, sub-section (1), and into the
    respective interests of the persons claiming the compensation,
    and shall make an award under his hand of–
    (i) the true area of the land;
    (ii) the compensation which in his opinion should be allowed for
    the land; and
    (iii) the apportionment of the said compensation among all the
    persons known or believed to be interested in the land, of
    whom, or of whose claims, he has information, whether or not
    they have respectively appeared before him.”
    “16. Power to take possession.- When the Collector has made
    an award under Section 11, he may take possession of the land,
    which shall thereupon vest absolutely in the Government, free
    from all encumbrances.”
    26.2. A different process was, however, envisaged by Section 17 of the
    Act of 1894 for taking possession in cases of urgency even before making
    of award but upon the directions of the appropriate Government. The
    relevant part of that provision had been as under:-
    “17. Special powers in cases of urgency.- (1) In cases of
    urgency, whenever the appropriate Government so directs, the
    Collector, though no such award has been made, may, on the
    expiration of fifteen days from the publication of the notice
    mentioned in Section 9, sub-section (1), take possession of any
    waste or arable land needed for public purposes or for a company.
    Such land shall thereupon vest absolutely in the Government free
    from all encumbrances.
    *** *** ***”
    13
    13 We have not extracted the other sub-sections of Section 17 of the Act of 1894, for being not
    relevant in the present case but, for completing the reference to the broad features of process
    contemplated by Section 17, we may also indicate that sub-section (4) thereof, as existing at the
    relevant time had been as under: –
    “(4) In the case of any land to which in the opinion of the appropriate
    Government, the provisions of sub-section (1) or sub-section (2) are applicable,
    the appropriate Government may direct that the provisions of Section 5A shall
    not apply, and, if it does so direct, a declaration may be made under Section 6
    in respect of the land at any time after the publication of the notification under
    Section 4, sub-section (1).”
    34
    26.3. One peripheral aspect relating to the treatment of interest on
    enhanced compensation has also occurred in the present case for which,
    the CIT(A) in his order dated 31.03.1989, has referred to Section 28 of the
    Act of 1894. This provision, as existing at the relevant time, had been as
    under:-
    “28. Collector may be directed to pay interest on excess
    compensation.- If the sum which, in the opinion of the Court, the
    Collector ought to have awarded as compensation is in excess of
    the sum which the Collector did award as compensation, the
    award of the Court may direct that the Collector shall pay interest
    on such excess at the rate of six per centum per annum from the
    date on which he took possession of the land to the date of
    payment of such excess into Court.”14
  2. Having regard to the relevant provisions of the Act of 1961 whereby
    and whereunder, “capital gains” essentially relate to the transfer of capital
    asset by the assessee; and the background aspects of the present case,
    where the capital asset of the assessee-appellant (land in question) was in
    possession of the beneficiary College even after expiry of the lease on
    31.08.1967, it shall also be apposite to take note of a few provisions of the
    Transfer of Property Act, 188215 concerning the general connotation of
    “transfer of property” as also those relating to the transaction of lease of
    immovable property.
    27.1. In Section 5, occurring in Chapter II of the Act of 1882, the phrase
    “transfer of property” is defined as under:-
    14 Note: We may again observe that the extractions in paragraph 25 are of the provisions of the
    Act of 1961 as applicable for the assessment year 1971-1972. Similarly, the extractions in
    paragraphs 26.1, 26.2 and 26.3 are of the provisions of the Act of 1894 as applicable in the year
    1968 when the notification under Section 4 pertaining to the subject land was issued.
    15 For short, ‘the Act of 1882’
    35
    “5. “Transfer of property” defined.- In the following sections
    “transfer of property” means an act by which a living person
    conveys property, in present or in future, to one or more other
    living persons, or to himself, or to himself and one or more other
    living persons; and “to transfer property” is to perform such act.
    In this section “living person” includes a company or association
    or body of individuals, whether incorporated or not, but nothing
    herein contained shall affect any law for the time being in force
    relating to transfer of property to or by companies, associations or
    bodies of individuals.”
    27.2. The rights and liabilities of lessor and lessee of immovable property
    are delineated in Section 108 of the Act of 1882 and its clause (q)
    postulates an implied obligation of the lessee to put the lessor into
    possession of the property on determination of the lease in the following
    words:-
    “108. Rights and liabilities of lessor and lessee. – In the
    absence of a contract or local usage to the contrary, the lessor and
    the lessee of immovable property, as against one another,
    respectively, possess the rights and are subject to the liabilities
    mentioned in the rules next following, or such of them as are
    applicable to the property leased:-

(q) on the determination of the lease, the lessee is bound to put
the lessor into possession of the property.”
27.2.1. Determination of lease by efflux of time is envisaged in clause (a) of
Section 111 of the Act of 1882 as follows:
“111. Determination of lease.- A lease of immovable property
determines-
(a) by efflux of the time limited thereby;
*** *** ***”
27.2.2. One of the features of the transaction of lease, in the case where
lessee remains in possession after determination thereof and the lessor
assents to his possession, is dealt with by Section 116 of the Act of 1882
that reads as under:-
36
“116. Effect of holding over.- If a lessee or under-lessee of
property remains in possession thereof after the determination of
the lease granted to the lessee, and the lessor or his legal
representative accepts rent from the lessee or under-lessee, or
otherwise assents to his continuing in possession, the lease is, in
the absence of an agreement to the contrary, renewed from year
to year, or from month to month, according to the purpose for
which the property is leased, as specified in section 106.”
Point No. 1.

  1. As noticed, the first point for determination revolves around the
    basic questions as to when did the transfer of the land in question, by way
    of compulsory acquisition, take place and when did the capital gains accrue
    to the assessee-appellant? The assessee maintains that this transfer,
    leading to capital gains, took place on the very date of preliminary
    notification (15.05.1968) because, possession of the land in question was
    already with the beneficiary College. The revenue, however, asserts that
    such transfer reached its completion, resulting in capital gains, only on the
    date of award (29.09.1970).
  2. For effectual determination of the questions involved, we may take
    into comprehension the basic features of the head of income described as
    “capital gains”.
    29.1. As noticed, capital gains are those profits or gains which arise out of
    the transfer of capital asset. The expression “capital asset” is defined in
    Section 2(14) of the Act of 1961. In the present case, much dilation on this
    definition is not required because the subject land had indisputably been a
    “capital asset” of the assessee-appellant. We may, however, observe that
    such definition of ‘capital asset’ is of wide amplitude, taking in its fold the
    37
    property of any kind held by an assessee, except what has been
    expressively excluded therein, like stock-in-trade, consumables stores,
    personal effects, etc.
    29.2. The expression “transfer” in relation to a capital asset has been
    defined in Section 2(47) of the Act of 1961. The said definition has also
    been of substantially wide amplitude so as to include sale, exchange or
    relinquishment of a capital asset; or extinguishment of any rights therein; or
    compulsory acquisition thereof. It is also noteworthy that as per the
    fundamentals in the Act of 1882, “transfer of property” means an act by
    which a living person conveys property, in present or in future, to one or
    more other living persons, or to himself, or to himself and one or more other
    living persons.
    29.3. Thus, the contents of the then existing Section 45 of the Act of 1961
    read with the relevant definitions would make it clear that such profits or
    gains are chargeable to income-tax as “capital gains” that arise out of the
    transfer of a capital asset by any of the recognized modes, including sale,
    exchange, relinquishment and even compulsory acquisition; and, by fiction,
    it has been provided that such profits or gains shall be deemed to be the
    income of the previous year in which transfer took place. Differently put,
    capital gains of an assessee, arising from transfer of capital asset, are
    chargeable to tax as income of the previous year in which transfer had
    taken place.
    38
  3. Applying the aforesaid concepts of “transfer” and “transfer of
    property” to the facts of the present case, it could be readily found that
    when the subject land has been compulsorily acquired, its transfer from the
    assessee-appellant to the Government is directly covered by Section 2(47)
    of the Act of 1961.
    30.1. Thus, the basic elements for chargeability of the gains, arising from
    compulsory acquisition of the subject land, to income-tax under the head
    “capital gains”, do exist in the present case. However, the gains so arising
    would be deemed to be the income of the previous year in which transfer
    took place.
  4. Entering into the enquiry as to when had the transfer, of subject land
    from the assessee-appellant to the Government, taken place, we need to
    take into account the principles governing completion of transfer of land
    from the owner to the Government in the matters of compulsory acquisition.
    Ordinarily, in such matters of compulsory acquisition, there is a structured
    process prescribed by law, which is required to be complied with for a
    lawful acquisition and which has the legal effect of transfer of ownership of
    the property in question to the acquiring body, usually the appropriate
    Government. The controversy in the present matter has its genesis in the
    compulsory acquisition of the land of assessee-appellant under the Act of
    1894 and hence, pertinent it would be to look at the processes
    contemplated by the said enactment.
    39
    31.1. A brief overview of the scheme of the Act of 1894, as existing at the
    relevant point of time, makes it clear that publication of preliminary
    notification under Section 4 by itself did not vest the property in the
    Government; it only informed about the intention of the Government to
    acquire the land for a public purpose. After this notification, in the ordinary
    course, under Section 5A, the Land Acquisition Collector was required to
    examine the objection, if any, to the proposed acquisition; and after
    examining his report, if so made, the Government was to issue declaration
    under Section 6, signifying its satisfaction that the land was indeed required
    for public purpose. These steps were to be followed by notice under
    Section 9, stating that the Government intended to take possession of the
    land and inviting claims for compensation. Thereafter, the Collector was to
    make his award under Section 11. As noticed hereinbefore, as per Section
    16 of the Act of 1894, the Land Acquisition Collector, after making the
    award, could have taken possession of the land under acquisition and
    thereupon, the land vested in the Government free from all encumbrances.
    31.2. A deviation from the process above-noted and a somewhat different
    process was permissible in Section 17 of the Act of 1894 whereunder, in
    cases of urgency and if the Government had so directed, the Collector
    could have taken possession of any waste or arable land after fifteen days
    from the publication of the notice mentioned in Section 9(1), even though
    the award had not been made; and thereupon, the land was to vest in the
    Government free from all encumbrances.
    40
    31.3. In the case of Special Land Acquisition Officer, Bombay and
    Ors. v. Godrej and Boyce: (1988) 1 SCC 50, while dealing with the power
    of the Government to withdraw from the acquisition under Section 48 of the
    Act of 1894, this Court exposited on the gamut of the ordinary process of
    taking possession of the land under acquisition and legal requirements as
    also implications thereof, in the following words:-
    “5……Under the scheme of the Act, neither the notification
    under Section 4 nor the declaration under Section 6 nor the
    notice under Section 9 is sufficient to divest the original
    owner of, or other person interested in, the land of his rights
    therein. Section 16 makes it clear beyond doubt that the title
    to the land vests in the government only when possession is
    taken by the government. Till that point of time, the land
    continues to be with the original owner and he is also free
    (except where there is specific legislation to the contrary) to deal
    with the land just as he likes, although it may be that on account of
    the pendency of proceedings for acquisition intending purchasers
    may be chary of coming near the land. So long as possession is
    not taken over, the mere fact of a notification under Section 4
    or declaration under Section 6 having been made does not
    divest the owner of his rights in respect of the land or relieve
    him of the duty to take care of the land and protect it against
    encroachments. Again, such a notification does not either confer
    on the State Government any right to interfere with the ownership
    or other rights in the land or impose on it any duty to remove
    encroachments therefrom or in any other way safeguard the
    interests of the original owner of the land. It is in view of this
    position, that the owner’s interests remain unaffected until
    possession is taken, that Section 48 gives a liberty to the State
    Government to withdraw from the acquisition at any stage before
    possession is taken…….”
    (emphasis in bold supplied)
    31.4. In the case of Fruit & Vegetable Merchants Union v. Delhi
    Improvement Trust: AIR 1957 SC 344, this Court expounded on
    variegated features of the term “vesting” as follows:-
    “As will presently appear, the term “vesting” has a variety of
    meaning which has to be gathered from the context in which It has
    been used. It may mean full ownership, or only possession for a
    41
    particular purpose, or clothing the authority with power to deal with
    the property as the agent of another person or authority……. That
    the word “vest” is a word of variable import is shown by provisions
    of Indian statutes also. For example, S. 56 of the Provincial
    Insolvency Act (5 of 1920) empowers the Court at the time of the
    making of the order of adjudication or thereafter to appoint a
    receiver for the property of the insolvent and further provides that
    “such property shall thereupon vest in such receiver.” The property
    vests in the receiver for the purpose of administering the estate of
    the insolvent for the payment of his debts after realising his assets.
    The property of the insolvent vests in the receiver not for all
    purposes but only for the purpose of the Insolvency Act and the
    receiver has no interest of his own in the property. On the other
    hand, Ss. 16 and 17 of the Land Acquisition Act (Act 1 of
    1894), provide that the property so acquired, upon the
    happening of certain events, shall “vest absolutely in the
    Government free from all encumbrances”. In the cases
    contemplated by Ss. 16 and 17 the property acquired
    becomes the property of Government without any conditions
    or limitations either as to title or possessions. The legislature
    has made it clear that the vesting of the property is not for
    any limited purpose or limited duration. It would thus appear
    that the word “vest” has not got a fixed connotation, meaning in all
    cases that the property is owned by the person or the authority in
    whom it vests. It may vest in title, or it may vest in possession, or it
    may vest in a limited sense, as indicated in the context in which it
    may have been used in a particular piece of legislation…..”
    (emphasis in bold supplied)
    31.5. The expositions aforesaid leave nothing for debate that in the matter
    of compulsory acquisition of land under the Act of 1894 for public purpose,
    the property was to vest absolutely in the Government (thereby divesting
    the owner of all his rights therein) only after taking of possession in either of
    the methods i.e., after making of award, as provided in Section 16; or
    earlier than making of award, as provided in Section 17. In other words, the
    owner was divested of the property and same vested in the Government in
    absolute terms only if, and after, the possession was taken by either of the
    processes envisaged in Sections 16 and 17. However, so long as
    possession was not taken, the mere fact of issuance of notification under
    42
    Section 4 of the Act of 1894 or declaration under Section 6 thereof, did not
    divest the owner of his right in respect of the property in question.
  5. Having thus taken note of the general principles governing “capital
    gains” and “transfer of capital asset in compulsory acquisition”, we may
    now examine as to when capital gains accrue on transfer of a capital asset
    in compulsory acquisition.
    32.1. The features above-noticed, relating to completion of transfer by
    way of compulsory acquisition under the Act of 1894 upon taking of
    possession by the Government; and such event of taking possession being
    the relevant happening for the purpose of Section 45 of the Act of 1961,
    were duly applied by the Courts in various decisions related with taxing of
    capital gains. As an example, we may usefully refer to a decision of
    Karnataka High Court in the case of Buddaiah v. Commissioner of
    Income-Tax, Karnataka-2: (1985) 155 ITR 277 wherein, the High Court
    referred to the aforesaid decision of this Court in Fruit & Vegetable
    Merchants Union and held that since title of land passes to the
    Government on possession being taken by the Deputy Commissioner
    under Section 16 of the Act of 1894, such date of taking possession
    becomes relevant for the purposes of Section 45 of the Act of 1961. The
    High Court said (at p. 281 of ITR),-
    “The assessee’s contention, therefore, is contrary to the provisions
    of s. 16 of the Land Acquisition Act. Since the title of the owner of
    the lands acquired under the Land Acquisition Act passes to the
    Government on possession being taken by the Deputy
    Commissioner under s. 16 of the Act, the date of taking
    possession becomes relevant for purposes of s. 45 of the I.T.
    Act, so far as transfer of title is concerned.”
    43
    (emphasis in bold supplied)
    TT
  6. However, the propositions aforesaid do not directly apply to a case
    where, for any reason, possession of the land had already been taken by
    the Government or delivered by the owner before completion of process
    envisaged by Section 16 or Section 17 of the Act of 1894. In such a case,
    the question, obviously, would be as to when has capital gain accrued? And
    this is the core of the present matter.
    33.1. Taking up the core question, as to when capital gains would accrue
    in a case of compulsory acquisition of land where possession had already
    been taken before reaching of the relevant stage for taking over possession
    in the structured process contemplated by the statute, we may usefully
    refer to the decision of Andhra Pradesh High Court in the case of S.
    Appala Narasamma v. Commissioner of Income-Tax: (1987) 168 ITR
  7. Therein, the land of the assessee was acquired for the Town Planning
    Trust but, during the course of land acquisition proceedings, possession of
    the land was delivered voluntarily by the assessee to the Town Planning
    Trust on 25.03.1970. The award of compensation was made on
    22.03.1971. In the assessment proceedings, the question arose, as to in
    which year did the capital gain arise? Thus, similar question was involved
    therein, i.e., as to whether the land must be deemed to have vested in the
    State on the date when the possession was taken with the consent of the
    landlord or on the date of award? The Tribunal took the view that the land
    vested in the Government on the date of making of the award and this
    44
    conclusion was affirmed by the High Court. While dealing with the principles
    relating to vesting of title and examining the fact situation where possession
    was taken before making of award, the High Court held that vesting of title
    to the land was a matter of law and not a matter of inference; and in the
    given situation, the moment the award was made, possession from that
    moment onwards should be related to the award; and on that date, the land
    vested in the Government. The High Court said (at pp. 20 and 21 of ITR),-
    “Vesting of title to the land is a matter of law, not a matter of
    inference. This is a case of transfer of property by operation of
    law and the relevant statute clearly provides the situations in which
    the land vests, viz., section 16, section 17(1) and section 17(2).
    According to these provisions, the taking of possession per se
    does not bring about vesting; the taking of possession must be
    consequent upon passing of an award (section 16) or an order
    contemplated by section 17(1), or in a situation contemplated by
    section 17(2). The Act does not provide for taking of possession
    before the passing of the award, except in situations contemplated
    by section 17 (1) and (2). The question is what is the reasonable
    view to take in such a situation? Should we relate back the award
    to the date of taking possession or should we relate the
    possession already taken to the date of the award? We think it
    more reasonable, and consistent with the provisions of the Act, to
    adopt the latter view. Since possession taken before the award
    continues to be with the Government, we must say that the
    moment the award is passed, possession from that moment
    onwards should be related to the award. It is on that date that
    the land vests in the Government.”
    (emphasis in bold supplied)
    33.1.1. While affirming that in the given set of facts, the liability to tax for
    capital gains arose on the date of award, the High Court referred to various
    decisions on relating back, of the possession previously taken, to the date
    envisaged by the Act of 1894; and took guidance, inter alia, from the
    following enunciation by this Court in the case of Lt. Governor of
    Himachal Pradesh v. Avinash Sharma: (1971) 1 SCR 413:-
    45
    “In the present case a notification under s. 17 (1) and (4) was
    issued by the State Government and possession which had
    previously been taken must, from the date of expiry of fifteen days
    from the publication of the notice under s. 9(1), be deemed to be
    the possession of the Government. We are unable to agree that
    where the Government has obtained possession illegally or under
    some unlawful transaction and a notification under s. 17(1) is
    issued the land does not vest in the Government free from all
    encumbrances. We are of the view that when a notification
    under s. 17(1) is issued, on the expiration of fifteen days from
    the publication of the notice mentioned in s. 9(1), the
    possession previously obtained will be deemed to be the
    possession of the Government under s. 17(1) of the Act and
    the land will vest in the Government free from all
    encumbrances.”
    (emphasis in bold supplied)
    33.2. The said decision in S. Appala Narasamma was followed by the
    same High Court in the case of Commissioner of Income-Tax v. Pandari
    Laxmaiah: (1997) 223 ITR 671 where, possession of the subject land was
    taken on 03.08.1977 whereas the preliminary notification for acquisition
    was published on 01.09.1977 while notice under Section 9(1) was issued
    on 20.05.1980 and award was passed on 25.03.1981. The High Court held
    that the relevant date for vesting of the land in the Government would be
    the date of making the award.
  8. Before dilating on the principles aforesaid, we may refer to the
    decisions cited by the learned counsel for the parties but, while pointing out
    at once that the said decisions are not of direct application to the present
    case for, they essentially relate to the right to receive compensation and not
    about the date of vesting of the land, with which we are concerned in the
    present matter.
    46
    34.1. Learned counsel for the appellant has laid emphasis on the decision
    of the Full Bench of Kerala High Court in the case of Peter John (supra). In
    that case, the High Court essentially dealt with the questions as to when, in
    the matters of acquisition of land, the right to receive compensation arises
    and as to when interest accrues, as would be evident from the question of
    law referred, which had been as under (at p.713 of ITR) :-
    ” Whether, on the facts and in the circumstances of the case, as
    per the ratio of the Supreme Court decisions in Shamlal Narula v.
    CIT [1964] 53 ITR 151 (SC) and Ramanathan Chettiar v. CIT
    [1967] 63 ITR 458 (SC), the land acquisition interest of Rs. 80,253
    included by the Income Tax Officer under section 5(1)(b) of the
    Income-tax Act, 1961, in the total income for 1968-69 assessment,
    accrued de die in diem from the date of taking possession of the
    lands during the years 1961 and 1962 up to March 31, 1968,
    inclusive and, therefore, only Rs. 12,626 which accrued de die in
    diem during the concerned previous year of 366 calendar dates
    from April 1, 1967, to March 31, 1968, inclusive should have been
    included in the total income for 1968-69 assessment and the
    balance interest of Rs. 67,627 should be similarly included on
    accrual basis under section 5(1)(b) of the I.T. Act, 1961, in the
    income for the six assessment years from 1962-63 to 1967-68
    inclusive, as had already been done by the Income Tax Officer by
    his orders dated June 6, 1972, for the 1967-68 and 1969-70
    assessments? “
    34.1.1. In relation to the question as to when does the compensation accrue
    or when it is deemed to accrue, the High Court referred to the enunciation
    by this Court in the case of Joginder Singh (supra) and held that such right
    arises immediately on dispossession and does not await quantification of
    compensation. The High Court said (at p.716 of ITR), –
    “When does the compensation accrue or when is it deemed to
    accrue? It is well settled that the owner of the property is entitled
    to compensation from the date on which he is dispossessed of the
    property on acquisition. This is because what the Land Acquisition
    Officer does is to offer to purchase the property for the market
    value and when in the process he takes possession of the
    property at whatever stage it might be, the owner of the property is
    deprived of the income and enjoyment of the property from that
    47
    time. Whether the offer in regard to the quantum of compensation
    is accepted by the land owner straightaway or finally settled by the
    court is a different question touching on the quantum of
    compensation, not of the right to receive compensation. We are
    here on the question as to from which date the land owner is
    entitled to receive it. There could be absolutely no doubt that both
    statutorily and in equity, the land owner has a right to receive
    compensation on the day on which he is dispossessed of the
    property. That right arises immediately on dispossession and does
    not await quantification of the compensation by the Land
    Acquisition Officer or by the court…..”
    34.1.2. Further, in relation to the question as to when does the right to
    receive interest accrue or when it is deemed to accrue, the High Court again
    referred to the enunciation in Joginder Singh (supra) and held that it would
    not be at a point of time other than the date when the right to receive
    compensation accrues. The High Court again said (at pp.717-718 and 722 of
    ITR), –
    “Now, the question is, when does the right to receive interest
    accrue or is deemed to accrue; could it be at a point of time other
    than the date on which the right to receive compensation accrues?
    It could not be, as we have already noticed that the right to receive
    compensation accrues on dispossession of the land owner from
    the property on acquisition. He has a right in praesenti to receive
    compensation, though it might actually be quantified or paid at a
    later stage. If the entire compensation or true compensation as the
    Supreme Court would have it in Joginder Singh’s case, AIR 1985
    SC 382: [1985] 1 SCWR 110, to which the land owner was
    entitled, on a correct evaluation on the basis of the standards and
    guidance under sections 23 and 24, was paid the moment he was
    dispossessed of the property, no question of right to interest would
    survive. It is only where the compensation payable is not paid on
    the date when it was actually due, in order to compensate the loss
    arising out of the deprival of the use of the amount, that interest is
    paid till the date of actual payment. That the right to receive
    interest arises on the date of dispossession on which date the land
    owner is entitled to receive compensation, admits of no doubt….

In the light of the foregoing discussions, our conclusion is that
interest on compensation awarded with respect to the land
acquired under the Land Acquisition Act runs from day to day,
48
accruing from the date on which the Government took possession
of the land, that being the date on which the land owner’s right to
receive the entire compensation arises, though determined and
paid later….”
34.1.3. The principles aforesaid, that the right to receive compensation
comes into being the moment Government takes possession of the
property acquired; and the right to receive interest also accrues at the point
of time when the right to receive compensation accrues and runs day to
day, do not correspondingly result in completion of transfer of the property
under acquisition and accrual of such a gain that may classify as “capital
gain”. As noticed, 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 of right to receive
compensation. Therefore, reference to the decision in Peter John (supra)
is entirely inapt in the present case.
34.2. In the case of Rama Bai (supra), this Court dealt with a batch of
appeals and references essentially involving the question regarding the
point of time at which the interest payable under Sections 28 and 34 of the
Act of 1894 accrues or arises, where such interest is paid on enhanced
compensation awarded on a reference under Section 18 or on further
appeal to the High Court and/or the Supreme Court. This Court found that
the issue stood concluded by the decision in Commissioner of IncomeTax v. Govindrajulu Chetty (T.N.K.): [1987] 165 ITR 231; and it was held
that the interest cannot be taken to have accrued on the date of the order
granting enhanced compensation but has to be taken as having accrued
49
year after year from the date of delivery of possession. This Court said as
under:-
“……we are of the opinion that the appeals before us (Civil
Appeal No. 810 of 1974 and Civil Appeal No. 3027 of 1988) have
to be allowed and the references made under section 257 (Tax
reference Cases Nos. 3 of 1976 and 1 to 3 of 1978) have to be
answered by saying that the question of accrual of interest will
have to be determined in accordance with the above decision of
this court. The effect of the decision, we may clarify, is that the
interest cannot be taken to have accrued on the date of the order
of the court granting enhanced compensation but has to be taken
as having accrued year after year from the date of delivery of
possession of the lands till the date of such order.”
34.2.1. Obviously, the decision in Rama Bai (supra), does not relate to the
questions at hand as regards completion of transfer so as to result in capital
gains. In fact, the principles aforesaid are relevant only to the second part of
the re-assessment order dated 25.01.1988, whereby, as regards interest
income, the AO carried out protective assessment on accrual basis at the
rate of 12% per annum for the previous year relevant to the assessment
year in question i.e., for the period 01.04.1970 to 31.03.1971.
34.3. Again, the decision of this Court cited by learned counsel for the
revenue in the case of Joginder Singh (supra), which was followed by the
Kerala High Court in Peter John (supra), relates to the right to receive
compensation and the right to receive interest. In that case, the question
was about the date from which interest had to be granted and arose in the
circumstances that though the High Court enhanced the amount of
compensation for acquisition and awarded 6% per annum as the rate of
interest on the amount of compensation determined by the Land Acquisition
Officer and the District Judge but, restricted such rate of interest on the
50
amount of compensation enhanced by it at 4% per annum from the date of
possession and 6% per annum from the date of its judgement. In that
context, this Court held that the High Court erred in restricting the rate of
interest on the enhanced amount of compensation because owner of the
land was entitled to be paid the true value of land on the date of taking over
of possession; and merely because the amount was determined later did
not mean that the right to amount came into existence at a later date. This
Court also observed that when the High Court held that the rate of interest
at 6% per annum was applicable from the date of possession in relation to
the component of compensation determined by the District Judge, there
was no reason why the same rate should not be applied from the date of
taking over possession in relation to the component of enhancement
effected by the High Court. For the reasons already discussed, this
judgement also does not directly relate with the question of completion of
transfer for accrual of capital gain.
34.4. The case of Bombay Burmah Trading Corpn. Ltd. (supra), is
also inapplicable to the present case because therein, the questions
basically related to the amount of damages received by the assessee due to
the loss suffered during World War II. The observations therein, again, do
not have bearing on the question as to when the transfer of land, in the
matter of compulsory acquisition, be treated as complete so as to result in
capital gains.
51

  1. Therefore, the aforesaid decisions cited by the learned counsel for
    parties, even if of guidance on the question relating to the right to receive
    compensation, do not directly assist us in determination of the core
    question involved in this matter because, income-tax on capital gains is not
    levied on the mere right to receive compensation. For chargeability of
    income-tax, the income ought to have either arrived or accrued. In the
    matter of acquisition of land under the Act of 1894, taking over of
    possession before arrival of relevant stage for such taking over may give
    rise to a potential right in the owner of the property to make a claim for
    compensation but, looking to the scheme of enactment, it cannot be said
    that transfer resulting in capital gains is complete with taking over of
    possession, even if such taking over had happened earlier than the point of
    time of vesting contemplated in the relevant provisions.
    35.1. The decision of this Court in the case of Avinash Sharma (supra),
    however, supports the view that in the case of urgency acquisition, even if
    possession of the land under acquisition is taken earlier, it should be
    related to the process contemplated by Section 17 (1) of the Act of 1894,
    and deemed to be effective from the date on which the period prescribed by
    Section 17 (1) would expire that is, fifteen days from the publication of the
    notice under Section 9(1) of the Act of 1894. In S. Appala Narasamma and
    Pandari Laxmaiah (supra), the Andhra Pradesh High Court applied these
    principles to the cases pertaining to ordinary process of acquisition and
    held that if possession had been taken earlier, it would relate to the award;
    52
    and the date of award would be the relevant date for vesting of the land in
    the Government.
    35.2. In an overall conspectus of the matter, we are clearly of the view that
    the statements of law in the aforesaid decisions of Andhra Pradesh High
    Court, based on the enunciations by this Court in the case of Avinash
    Sharma (supra), are rather unquestionable and need to be given imprimatur
    for application to the controversy like the present one.
  2. For what has been discussed hereinabove, in our view, in the
    matters relating to compulsory acquisition of land under the Act of 1894,
    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, in such cases, capital gains shall be deemed to have accrued: (a)
    upon making of the award, in the case of ordinary acquisition referable to
    Section 16; and (b) after expiration of fifteen days from the publication of the
    notice mentioned in Section 9 (1), in the case of urgency acquisition under
    Section 17.
  3. As per the facts-sheet noticed hereinbefore, in the present case, the
    land in question was subjected to acquisition under the Act of 1894 by
    adopting the ordinary process leading to award under Section 11.
    Therefore, ordinarily, capital gains would have accrued upon taking over of
    53
    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.
  4. However, on the strength of the submissions that the land in
    question had already been in possession of the beneficiary of acquisition, it
    has been suggested on behalf of the assessee-appellant that the land
    vested in the Government immediately upon issuance of notification under
    Section 4 of the Act of 1894 i.e., 15.05.1968 and capital gain accrued on
    that date. This suggestion and the contentions founded thereupon remain
    totally meritless for a variety of factors as indicated infra.
    38.1. Even if we keep all other aspects aside and assume that the land in
    question was, or came, in possession of the Government before passing of
    the award, the position of law stated in point (a) of paragraph 36
    hereinabove would apply; and capital gains shall be deemed to have
    accrued upon arrival of the relevant stage of taking possession i.e., making
    of award and hence, capital gains cannot be taken to have accrued before
    the date of award i.e., 29.09.1970.
    38.2. In order to wriggle out of the above-mentioned plain operation of
    law, it has been desperately suggested on behalf of the appellant that it had
    been a case of urgency acquisition and hence, the process contemplated
    by Section 17 of the Act of 1894 would apply. This suggestion is also
    baseless and suffers from several infirmities.
    54
    38.2.1. In the first place, it is evident on the face of the record that it had
    not been a matter of urgency acquisition and nowhere it appears that the
    process contemplated by Section 17 of the Act of 1894 was resorted to.
    Even the contents of the award dated 29.09.1970 make it clear that the
    learned Land Acquisition Collector only awarded interest from the date of
    initial notification for the reason that the land was in possession of the
    College but, it was nowhere stated that he had received any directions from
    the Government to take possession of the land before making of the award
    while acting under Section 17.
    38.2.2. Secondly, if at all the proceedings were taken under Section 17 of
    the Act of 1894, the land could have vested in the Government only after
    expiration of fifteen days from the date of publication of notice under
    Section 9(1); and, in any case, could not have vested in the Government on
    the date of publication of initial notification under Section 4 of the Act of
  5. Significantly, the assessee-appellant did not divulge the date of
    publication of notice under Section 9(1) of the Act of 1894 despite the
    queries of the Assessing Officer. The suggestion about application of the
    process contemplated by Section 17 of the Act of 1894 remains totally
    unfounded.
  6. In view of the above, the only question that remains is as to what is
    the effect of possession of College over a part of the subject land at the
    time of issuance of initial notification for acquisition.
    55
    39.1. Going back to the facts-sheet, it is not in dispute that a large part of
    the subject land was given on lease to the College16 and the said lease
    expired on 31.08.1967 but, the land continued in possession of the College.
    The legal effect of these facts could be gathered from the relevant
    provisions of the Transfer of Property Act, 1882 and the enunciations by the
    Courts.
    39.2. As noticed, where the time period of any lease of immovable
    property is limited, it determines by efflux of such time, as per Section
    111(a) of the Act of 1882. Further, in terms of Section 108(q) of the Act of
    1882, on determination of lease, the lessee is bound to put the lessor into
    possession of the leased property. In case where lessee does not deliver
    possession to the lessor after determination of the lease but the lessor
    accepts rent or otherwise assents to his continuing in possession, in the
    absence of an agreement to the contrary, the status of such lessee is that of
    tenant holding over, in terms of Section 116 of the Act of 1882. But, in the
    absence of acceptance of rent or otherwise assent by the lessor, the status
    of lessee is that of tenant at sufferance.
    39.3. The aforesaid aspects relating to the status of parties after expiry
    of the period of lease remain well settled and do not require much
    elaboration. However, for ready reference, we may point out that in the case
    of Nand Ram (D) through LRs. and Ors. v. Jagdish Prasad (D) through
    16 As noticed from the contents of the award, the land comprising Khasra Nos. 361 and 364
    admeasuring 5 kanals and 7 marlas was not on lease with the College
    56
    LRs.: 2020 (5) SCALE 723, this Court has re-expounded the relevant
    principles in sufficient details, albeit in a different context. The relevant
    background of the said case had been that the land of plaintiff was taken on
    lease by the defendant where it was agreed that the plaintiff-lessor will not
    seek ejectment of defendant-lessee except in the case where the rent for
    one year remained in arrears. The entire leased land was acquired under
    the Act of 1894. The Land Acquisition Collector determined the amount of
    compensation but then, dispute arose with regard to apportionment
    between the plaintiff and the defendant for which, the matter went in
    reference. The Reference Court held that lessee having not paid rent for
    more than twelve months, the lease had come to end and, therefore, he
    had no right to claim any share in the compensation. Later on, a part of the
    land was de-notified from acquisition and that part remained in possession
    of the defendant-lessee. Thereafter, the plaintiff-lessor took up action
    claiming possession of the land by filing a suit against the defendantlessee. The suit was decreed by the Trial Court and the decree was
    affirmed by the First Appellate Court. However, the High Court allowed the
    second appeal holding that the finding recorded in the award about the
    lease coming to an end operated as res judicata and the suit was filed
    beyond the period of limitation. In further appeal, this Court did not approve
    the decision of High Court and, in the course of allowing the appeal,
    exposited on the principles relating to the status of parties after expiry of the
    57
    lease but retention of possession by the lessee, inter alia, in the following
    passage:-
    “29. The Defendant was inducted as a lessee for a period of 20
    years. The lease period expired on 23rd September, 1974. Even if
    the lessee had not paid rent, the status of the lessee would not
    change during the continuation of the period of lease. The lessor
    had a right to seek possession in terms of Clause 9 of the lease
    deed. The mere fact that the lessor had not chosen to exercise
    that right will not foreclose the rights of the lessor as owner of the
    property leased. After the expiry of lease period, and in the
    absence of payment of rent by the lessee, the status of the
    lessee will be that of tenant at sufferance and not a tenant
    holding over. Section 116 of the TP Act confers the status of a
    tenant holding over on a yearly or monthly basis keeping in view
    the purpose of the lease, only if the lessor accepts the payment of
    lease money. If the lessor does not accept the lease money, the
    status of the lessee would be that of tenant at sufferance. This
    Court in the judgments reported as Bhawanji Lakhamshi and Ors.
    v. Himatlal Jamnadas Dani and Ors. (1972) 1 SCC 388, Badrilal v.
    Municipal Corp. of Indore : (1973) 2 SCC 388 and R.V. Bhupal
    Prasad v. State of A.P. and Ors.: (1995) 5 SCC 698 and also a
    judgment in Sevoke Properties Ltd. v. West Bengal State
    Electricity Distribution Co. Ltd. examined the scope of Section 116
    of the TP Act and held that the lease would be renewed as a
    tenant holding over only if the lessor accepts the pay-ment of rent
    after the expiry of lease period. This Court in Bhawanji Lakhamshi
    held as under:
    “9. The act of holding over after the expiration of the
    term does not create a tenancy of any kind. If a tenant
    remains in possession after the determination of the
    lease, the common law rule is that he is a tenant on
    sufferance. A distinction should be drawn between a
    tenant continuing in possession after the determination
    of the term with the consent of the landlord and a tenant
    doing so without his consent. The former is a tenant at
    sufferance in English Law and the latter a tenant
    holding over or a tenant at will. In view of the concluding
    words of Section 116 of the Transfer of Property Act, a
    lessee holding over is in a better position than a tenant
    at will. The assent of the landlord to the continuance of
    possession after the determination of the tenancy will
    create a new tenancy. What the section contemplates is
    that on one side there should be an offer of taking a
    new lease evidenced by the lessee or sub-lessee
    remaining in possession of the property after his term
    was over and on the other side there must be a definite
    consent to the continuance of possession by the
    58
    landlord expressed by acceptance of rent or otherwise.
    ……”
    (emphasis in bold supplied)
    39.3.1. Further, in Nand Ram (supra), this Court also quoted with
    approval the principles stated by Delhi High Court in the case of MEC India
    Pvt. Ltd. v. Lt. Col. Inder Maira & Ors.: 80 (1999) Delhi Law Times 679. A
    relevant part of such quotation from the decision of Delhi High Court may
    also be usefully noticed for the present purpose as under:-
    “43. Thus, a tenant at sufferance is one who wrongfully continues
    in possession after the extinction of a lawful title and that a
    tenancy at sufferance is merely a legal fiction or device to avoid
    continuance in possession from operating as a trespass. A tenant
    remaining in possession of the property after determination of the
    lease does not become a trespasser, but continues as a tenant at
    sufferance till possession is restored to the landlord. The
    possession of an erstwhile tenant is juridical and he is a protected
    from dispossession otherwise than in due course of law. Although,
    he is a tenant, but being one at sufferance as aforesaid, no rent
    can be paid since, if rent is accepted by the landlord he will be
    deemed to have consented and a tenancy from month-to-month
    will come into existence. Instead of rent, the tenant at sufferance
    and by his mere continuance in possession is deemed to
    acknowledge both the landlord’s title and his (tenant’s) liability to
    pay mesne profits for the use and occupation of the property.”
    39.4. The said principles, when applied to the present case, leave nothing
    to doubt that in relation to that part of the land in question which was given
    on lease, possession of the College, after determination of the lease on
    31.08.1967, was only that of a tenant at sufferance because it has not been
    shown if the lessor i.e., the appellant accepted rent or otherwise assented to
    the continuation of lease. The possession of College over the part of land in
    question being only that of tenant at sufferance, had the corresponding
    acknowledgment of the title of the appellant and of the liability of the College
    to pay mesne profits for use and occupation. The same status of the parties
    59
    qua the land under lease existed on the date of notification for acquisition
    i.e., 15.05.1968 and continued even until the date of award i.e., 29.09.1970.
    In other words, even until the date of award, the appellant-assessee
    continued to carry its status as owner of the land in question and that status
    was not lost only because a part of the land remained in possession of the
    College. In this view of the matter, the suggestion that the land vested in the
    Government on the date of initial notification remains totally baseless and
    could only be rejected.
    39.5. Apart from the above, the significant factor for which the entire
    case of the assessee-appellant is knocked to the ground is that neither on
    the date of notification i.e., 15.05.1968 nor until the date of award, the
    Government took over possession of the land in question. As noticed, the
    possession had been of the erstwhile lessee, the College. Even if the said
    College was going to be the ultimate beneficiary of the acquisition, it cannot
    be said that immediately upon issuance of notification under Section 4 of the
    Act of 1894, its possession became the possession of the Government. Its
    possession, as noticed, remained that of tenant at sufferance and not
    beyond.
    39.6. Viewed from any angle, it is clear that accrual of capital gains in the
    present case had not taken place on 15.05.1968. If at all possession of the
    College was to result in vesting of the land in the Government, such vesting
    happened only on the date of award i.e., 29.09.1970 and not before. In
    other words, the transfer of land from the assessee-appellant to the
    60
    Government reached its completion not before 29.09.1970 and hence, the
    earliest date for accrual of capital gains because of this acquisition was the
    date of award i.e., 29.09.1970. Therefore, 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.
  7. An incidental aspect of the submissions on behalf of the appellant
    that interest and solatium accrued on 15.05.1968 as per the award and that
    being the income pertaining to the financial year 1968-1969 could not have
    been taxed in the assessment year 1971-1972, also deserves to be
    rejected for the reasons foregoing and for additionally the reason that in his
    order dated 25.01.1988, the AO has consciously made protective
    assessment on accrual basis on the interest component referable to the
    previous year 1970-1971, relevant for the assessment year 1971-72.
    40.1. We may also usefully observe that awarding of interest from
    15.05.1968 in the award had only been just and equitable application of the
    provisions of law, including Section 28 of the Act of 1894 but that did not
    result in vesting of the land in Government on that date of notification.
  8. For what has been discussed hereinabove, the answer to Point No.
    1 is clearly in the negative i.e., against the assessee-appellant and in favour
    of the revenue that on the facts and in the circumstances of the present
    case, transfer of the capital asset (land in question), for the purposes of
    Section 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 for acquisition under
    61
    Section 4 of the Act of 1894; and hence, capital gains arising out of such
    acquisition have rightly been charged to tax with reference to the date of
    award i.e., 29.09.1970.
    Point No. 2
  9. Though we have found that vesting of land in question for the
    purpose of accrual of capital gains in this case was complete only on the
    date of award that falls within the previous year relevant for the assessment
    year 1971-72, the question still remains, in view of the submissions made
    on behalf of the appellant, about the effect of the decision of ITAT in relation
    to the other case of the assessee-appellant for the assessment year 1975-
    1976 where the issue concerning date of accrual of capital gains was
    decided against the revenue with reference to the date of taking
    possession. Admittedly, the said decision for the assessment year 1975-
    1976 was not appealed against and had attained finality. Hence, it has been
    argued on behalf of the appellant that it is not open for the revenue to
    question the similar decision of ITAT in the present case pertaining to the
    assessment year 1971-1972.
  10. We may gainfully recapitulate that in the case pertaining to the
    assessment year 1975-1976, the question of capital gains arose in the
    backdrop of the facts that another parcel of land of the appellant was
    acquired for the purpose of construction of warehouse of Ambala City. The
    62
    notification under Section 4 of the Act of 1894 was issued on 26.06.1971
    and the award of compensation was made on 27.06.1974 but, possession
    of the said land was taken by the Government on 04.09.1972 i.e., before
    making of the award. In the given set of facts and circumstances, in ITA
    No.635/Chandi/84, the ITAT accepted the contention that the case fell
    under the urgency provision contained in Section 17 of the Act of 1894
    where the assessee was divested of the title to the property, that vested in
    the Government with effect from 04.09.1972, the date of taking over
    possession. Hence, the ITAT held that the capital gains arising from the
    said acquisition were not assessable for the accounting period relevant for
    the assessment year 1975-1976.
    43.1. Learned counsel for the appellant has strenuously argued that the
    revenue is not entitled to take a different stand in the present case
    pertaining to the assessment year 1971–1972, after having accepted the
    said decision pertaining to the assessment year 1975–1976 where it was
    held that capital gains accrued on the date of taking over possession of the
    land under acquisition by the Government. The learned counsel has relied
    upon the following observations in Berger Paints India Ltd. (supra):-
    “In view of the judgments of this court in Union of India v.
    Kaumudini Narayan Dalal [2001] 249 ITR 219; CIT v. Narendra
    Doshi [2002] 254 ITR 606 and CIT v. Shivsagar Estate [2002] 257
    ITR 59, the principle established is that if the Revenue has not
    challenged the correctness of the law laid down by the High Court
    and has accepted it in the case of one assessee, then it is not
    open to the Revenue to challenge its correctness in the case of
    other assessees, without just cause.”
    63
  11. The question is whether the above-noted observations apply to the
    present case? In our view, the answer to this question is clearly in the
    negative for more than one reason.
    44.1. In the first place, it is ex facie evident that the matter involved in the
    said case pertaining to the assessment year 1975-1976 was taken to be an
    acquisition under the urgency provision contained in Section 17 of the Act
    of 1894 whereas, the acquisition proceedings in the present case had not
    been of urgency acquisition but had been of ordinary process where
    possession could have been taken only under Section 16 after making of
    the award. As noticed, the very structure of the ordinary process leading to
    possession under Section 16 of the Act of 1894 has been different than that
    of the urgency process under Section 17; and the said decision pertaining
    to the proceedings under Section 17 of the Act of 1894 cannot be directly
    applied to the present case.
    44.2. Secondly, the fact that the said case relating to the assessment year
    1975-1976 was not akin to the present case was indicated by the ITAT
    itself. As noticed, both the cases, i.e., the present one relating to the
    assessment year 1971-1972 (in ITA No. 634/Chandi/84) and that relating to
    the assessment year 1975-1976 (in ITA No. 635/Chandi/84) were decided
    by ITAT on the same date i.e., 19.12.1985. While the answer in relation to
    the assessment year 1975-1976 was given by the ITAT in favour of
    assessee-appellant to the effect that possession having been taken on the
    specified date i.e., 04.09.1972, capital gains were not assessable for the
    64
    assessment year 1975-1976 but, while deciding the appeal relating to the
    present case for the assessment year 1971-1972, the ITAT found that the
    date of taking over possession was not available and hence, the matter was
    restored to the file of the ITO to find out the actual date of possession.17
    44.3. Thirdly, even if we assume that the stand of revenue in the present
    case is not in conformity with the decision of ITAT in relation to the
    assessment year 1975-1976, it cannot be said that revenue has no just
    cause to take such a stand. As noticed, while rendering the decision in
    relation to the assessment year 1975-1976, the ITAT did not notice the
    principles available in various decisions including that of this Court in
    Avinash Sharma (supra) that even in the case of urgency acquisition under
    Section 17 of the Act of 1894, land was to vest in Government not on the
    date of taking over possession but, only on the expiration of fifteen days
    from the publication of the notice mentioned in Section 9(1). Looking to the
    facts of the present case and the law applicable, in our view, the revenue
    had every reason to question the correctness of the later decision of ITAT
    dated 29.06.1990 in the second round of proceedings pertaining to the
    assessment year 1971-1972.
    44.4. Fourthly, the ITAT itself on being satisfied about the question of law
    involved in this case, made a reference by its order dated 15.07.1991 to the
    High Court. The High Court having dealt with the matter in the reference
    17 Of course, one observation was made by the ITAT in the order dated 19.12.1985 relating to the
    present case that possession of the land in question was taken before making of the award.
    However, this observation turns out to be incorrect on facts as also in law, for the reasons
    mentioned hereinbefore in Point No. 1.
    65
    proceedings and having answered the reference in conformity with the
    applicable principles, the assessee cannot be heard to question the stand
    of the revenue with reference to the other order for the assessment year
    1975-1976. In any case, it cannot be said that the decision in relation to the
    assessment year 1975-1976 had been of any such nature which would
    preclude the revenue from raising the issues which are germane to the
    present case.
  12. Hence, the answer to Point No. 2 is also clearly in the negative i.e.,
    against the assessee-appellant and in favour of the revenue that the fact
    situation of the present case relating to the assessment year 1971-1972 is
    not similar to that of the other case of the appellant relating to the
    assessment year 1975-1976 and the revenue is not precluded from taking
    the stand that the transfer of capital asset in the present case was complete
    only on the date of award i.e., on 29.09.1970.
    Conclusion
  13. For what has been discussed hereinabove, we have not an iota of
    doubt that in the second round of proceeding, the AO had rightly assessed
    the tax liability of the appellant, on long-term capital gains arising on
    account of acquisition, on the basis of the amount of compensation allowed
    in the award dated 29.09.1970 as also the enhanced amount of
    compensation accrued finally to the appellant; and as regards interest
    income, had rightly made protective assessment on accrual basis.
    66
  14. In the result, this appeal fails and is, therefore, dismissed. No costs.
    ………………..………….J.
    (A.M.KHANWILKAR)
    ………………..………….J.
    (HEMANT GUPTA)
    ……..……………….…….J.
    (DINESH MAHESHWARI)
    New Delhi,
    Dated: 25th August, 2020.
    67