Arjit Pasayat, C.J. Heard.
2. At the instance of the revenue, following question has been referred under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') by the Tribunal, Cochin Bench (hereinafter referred to as 'the Tribunal'), for opinion of this court :
2. At the instance of the revenue, following question has been referred under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') by the Tribunal, Cochin Bench (hereinafter referred to as 'the Tribunal'), for opinion of this court :
"Whether, on the facts and in the circumstances of the case and also in the light of the decision of the Supreme Court in G.M. Omer Khan v. CIT (1992) 196 ITR 269 (SC), when does transfer take place under the Income Tax Act for the purpose of capital gains and the Tribunal is right in the view it took ?"
3. A brief reference to the factual aspects is necessary for adjudication of the question. In terms of the notification published on 19-7-1981, under the provisions of the Kerala Land Acquisition Act, 1961 (hereinafter referred to as 'the K.L.A. Act'), 12.24 cents of land in Alwaye municipality belonging to the assessee was acquired by the Government of Kerala for Alwaye Water Works. Assessee was awarded compensation of Rs. 1,08,836 in respect of the land acquired. The assessing officer initiated proceedings under section 147(a) of the Act for assessment of capital gains, and assessment was made fixing the total income at Rs. 34,090 for the assessment year 1982-83.
3. A brief reference to the factual aspects is necessary for adjudication of the question. In terms of the notification published on 19-7-1981, under the provisions of the Kerala Land Acquisition Act, 1961 (hereinafter referred to as 'the K.L.A. Act'), 12.24 cents of land in Alwaye municipality belonging to the assessee was acquired by the Government of Kerala for Alwaye Water Works. Assessee was awarded compensation of Rs. 1,08,836 in respect of the land acquired. The assessing officer initiated proceedings under section 147(a) of the Act for assessment of capital gains, and assessment was made fixing the total income at Rs. 34,090 for the assessment year 1982-83.
4. In appeal, the Dy. Commissioner (Appeals) cancelled the assessment of capital gains on the ground that the assessment of the capital gains for the assessment year 1982-83 was not legally correct, in view of the fact that the Notification was only a preliminary one and the title to the property vested with the government only when possession of the property was taken by the government. Revenue preferred second appeal before the Tribunal. Revenue's case was centered round the decision of the apex Court in G.M. Omer Khan v. CIT (1992) 196 ITR 269 (SC). Tribunal concurred with the finding of the Dy. Commissioner (Appeals) and dismissed the appeal. At the instance of revenue, reference as stated above, has been made.
4. In appeal, the Dy. Commissioner (Appeals) cancelled the assessment of capital gains on the ground that the assessment of the capital gains for the assessment year 1982-83 was not legally correct, in view of the fact that the Notification was only a preliminary one and the title to the property vested with the government only when possession of the property was taken by the government. Revenue preferred second appeal before the Tribunal. Revenue's case was centered round the decision of the apex Court in G.M. Omer Khan v. CIT (1992) 196 ITR 269 (SC). Tribunal concurred with the finding of the Dy. Commissioner (Appeals) and dismissed the appeal. At the instance of revenue, reference as stated above, has been made.
5. Revenue's stand in support of the application is that since notification was published on 19-7-1981, the said date should be taken as the date of actual acquisition for taking possession of the land in question, and it should be construed that the land vested in the government from the date of notification i.e., 19-7-1981.
5. Revenue's stand in support of the application is that since notification was published on 19-7-1981, the said date should be taken as the date of actual acquisition for taking possession of the land in question, and it should be construed that the land vested in the government from the date of notification i.e., 19-7-1981.
6. Stand of the assessee on the other hand is that under section 16 of the Land Acquisition Act, 1894 (herinafter referred to as 'the Central Act') possession of the land does not vest in the government on the date of publication of the notification, but it vests in the government only after taking actual possession by declaring to do so. He has also pointed out the provisions of section 17 of the Central Act. Under sections 18 and 19 of the Kerala Land Acquisition Act, power to take possession and special powers in cases where land is needed urgently have been dealt with. Section 18 of the Kerala Land Acquisition Act provides that when the Collector has made an award under section 11 or section 16, he may take possession of the land which shall thereupon vest absolutely in the Government free from all encumbrances. Section 19 of the Kerala Land Acquisition Act deals with cases where land is needed urgently. Sections 18 and 19 of the Kerala Land Acquisition Act read as follows :
6. Stand of the assessee on the other hand is that under section 16 of the Land Acquisition Act, 1894 (herinafter referred to as 'the Central Act') possession of the land does not vest in the government on the date of publication of the notification, but it vests in the government only after taking actual possession by declaring to do so. He has also pointed out the provisions of section 17 of the Central Act. Under sections 18 and 19 of the Kerala Land Acquisition Act, power to take possession and special powers in cases where land is needed urgently have been dealt with. Section 18 of the Kerala Land Acquisition Act provides that when the Collector has made an award under section 11 or section 16, he may take possession of the land which shall thereupon vest absolutely in the Government free from all encumbrances. Section 19 of the Kerala Land Acquisition Act deals with cases where land is needed urgently. Sections 18 and 19 of the Kerala Land Acquisition Act read as follows :
"18. Power to take possession. -When the Collector has made an award under section 11 or section 16, he may take possession of the land, which shall thereupon vest absolutely in the government, free from all encumbrances.
19. Special powers in cases where land is needed urgently.-(1) In cases of urgency, whenever the government or the District Collector, for reasons to be recorded in writing, so direct or directs, the Collector may, on the expiration of fifteen days from the publication of the notice mentioned in sub-section (1) of section 9, take possession of any land needed for a public purpose though no award has been made. Such land shall thereupon vest absolutely in the government, free from all encumbrances :
Provided that the Collector shall riot take possession of any building or part of a building under this sub-section without giving to the occupier thereof at least three days' notice of his intention so to do, or such longer notice as may be reasonably sufficient to enable such occupier to remove his movable property from such building without necessary inconvenience.
Provided that the Collector shall riot take possession of any building or part of a building under this sub-section without giving to the occupier thereof at least three days' notice of his intention so to do, or such longer notice as may be reasonably sufficient to enable such occupier to remove his movable property from such building without necessary inconvenience.
(2) In every case under sub-section (1), the Collector shall, at the time of taking possession, offer to the persons interested compensation for the standing crop and trees, if any on such land and for any other damage sustained by them caused by such sudden dispossession and not excepted in section 26; and, in case such offer is accepted the value of such crops and trees and the amount of such other damage shall be allowed for in awarding compensation for the land under the provisions herein contained.
(3) In every case under sub-section (1), the Collector may, on a request in writing by all the parties interested and on furnishing sufficient security, after such summary enquiry as he may think fit to institute and after satisfying himself that the parties are lawfully entitled to receive the compensation, pay a sum not exceeding fifty per cent of the probable compensation that may be finally awarded in respect of such acquisition, provided that no payment shall be made where there. is a dispute as regards the person entitled to the compensation. The advance compensation paid under this sub-section shall be adjusted towards the final compensation payable under the award.
(4) In the case of any land to which, in the opinion of the government or the District Collector, the provisions of sub-section (1) are applicable, the government or the District Collector, as the case may be, may direct that the provisions of section 5 shall not apply, and, if they or he so direct or directs, a declaration may be made under section 6 in respect of the land at any time after the publication of the notification under sub-section (1) or section 3."
Section 16 of the Central Act is in pari materia with section 18 of the Kerala Land Acquisition Act. In G.M. Omer Khan's case (supra), the land was acquired under the Requisitioning and Acquisition of Immovable Property Act, 1952 (herinafter referred to as 'the Acquisition Act'). Section 7(2) of the Acquisition Act provides that the date of publication of the notification for acquisition was the date when the property vested absolutely in the government free from all encumbrances and that was the date of transfer for the purpose of gains. Said provision reads as follows :
"7. Power to acquire requisitioned property.
(1) xxxx xxxxxx xxxxx (2) When a notice as aforesaid is published in the Official Gazette, the requisitioned property shall, on and from the beginning of the day on which the notice is so published, vest absolutely in the Central Government free from all encumbrances and the period of requisition of such property shall end."
The statutory provisions involved in the case at hand are different from those in G.M. Omer Khan's v. CIT case (supra). Therefore, the Tribunal was justified in its conclusion that the liability for capital gains did not arise on the date of notification. It is, therefore, clear that the property vests in the government after the possession is taken.
The answer to the question referred to is in the affirmative, in favour of the assessee and against the revenue.
The Income Tax Reference is disposed of as above.