Law:

Section:

Section 45 of the Income-tax Act, 1961 [Corresponding to section 12B of the Indian Income-tax Act, 1922] - Capital gains - Chargeable as - Assessment year 1961-62 - Whether compulsory acquisition of property by State amounts its to transfer within meaning of section 12B of 1922 Act, and profits and gains arising to assessee from such compulsory acquisition must be held to be capital gains under that section - Held, yes - Whether amount of solatium forms part of compensation received by expropriated owner for compulsory acquisition of property and same would have to be taken into account in computing capital gains arising to assessee from such compulsory acquisition - Held, yes Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1961-62 - Whether amount received by assessee on compulsory acquisition as compensation for loss of contracts and loss of profits must be held to be revenue receipt - Held, yes Words and phrases - Word 'transfer' as occurred in section 12B of the Indian Income-tax Act, 1922. FACTS The assessee was a registered firm and, prior to its compulsory acquisition by the State, the assessee owned an ice factory situated on leasehold land in area. The land together with the ice factory standing on it was compulsorily acquired by the State for expansion and remodelling of the Railway Station under the provisions of the Land Acquisition Act, 1894, and, consequent on such compulsory acquisition, the assessee had to shift the site of the ice factory to another locality. The award fixing the amount of compensation was made on 5-10-1960, during the previous year relevant to the assessment year 1961-62. The total compensation payable to the assessee was fixed which was very much more than the original cost of acquisition to the assessee. The assessee in its return for the assessment year 1961-62 did not dispute that the compulsory acquisition had resulted in capital gain. But the assessee sought to exclude, in computing the capital gain, amounts of solatium awarded under section 23 of the Land Acquisition Act, 1894, and representing compensation on account of…

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