Law:

Section:

Section 145, read with section 45, of the Income-tax A ct, 1961 - Method of accounting - Charge on accrual, receipt or other basis - Whether ordinarily possession of land acquired under land acquisition act does not vest in government until compensation is awarded to assessee by an award and, therefore, relevant date for considering taxability of capital gains arising from such acquisition is year of award and not the year in which possession is claimed to have been handed over to government - Held, yes Facts Some of the agricultural lands of the assessee were acquired by the Government in 1962 for which compensation was awarded by an award made during the accounting year relevant to the assessment year 1964-65. Later, the assessee was awarded another amount by way of enhanced compensation in the accounting year relevant to the assessment year 1966-67. For the assessment year 1964-65, the 1TO determined capital gains accruing to the assessee from the transfer of land by taking into account both the original compensation and the enhanced compensation. On appeal, the AAC held that the respective amounts of compensation were to be included in the assessee's income for the respective assessment years in which the awards were made. Before the Tribunal, the assessee contended that the capital gains could be charged in respect of the compensation awarded to it only in the year 1961-62, when the Government took possession of the assessee's land. After consideration of the provisions of the Land Acquisition Act, the Tribunal held that under the scheme of the Act, ordinarily possession was taken after the award was made and not before that. In view of this position, the Tribunal rejected the assessee's contention. On reference: Held It was clear that until the award was made, which was on 6-5-1963, there would not be any passing of the property or legal vesting of the same in the Government. The fact that possession had been earlier handed over to the Government would have no relevance to the passing of the property or the vesting of it. Once that conclusion was reached, it was clear that capital gains would be attracted for the first time in the assessment year 1964-65…

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