Supreme Court In the case of Raj Pal Singh Versus Commissioner of Income-Tax

Case Covered:

Raj Pal Singh

Versus

Commissioner of Income-Tax

Facts of the Case:

 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 the 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 the 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 the 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 the award. 

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? 

Observations of the Court:

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.”

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.

In the first place, it is ex facie evidence 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 the 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. 

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 favor 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 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.

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, the 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. 

Fourthly, the ITAT itself on being satisfied with 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 has dealt with the matter in the reference 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.

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. 

The decision of the Court:

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 the 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 the accrual basis.

 In the result, this appeal fails and is, therefore, dismissed. No costs.

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