Compulsory acquisition compensation is taxed by award date; section 45(5) applies only to enhanced compensation.

In compulsory acquisition, capital gains chargeability arises with reference to the award date, because transfer is treated as complete on the award and dispossession. Section 45(5) is a special provision confined to enhanced or further enhanced compensation awarded by a court, tribunal, or other authority, and it does not apply where no enhancement exists. Clause (a) of section 45(5) covers compensation received in the first instance under the award, not pre-award advance payments. Accordingly, advance money received before the award is not taxed as award compensation in the earlier assessment year, and only the amount payable under the award is assessable in the year relevant to that transfer.

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Issues: Whether, in the case of compulsory acquisition of land, the compensation received was assessable to capital gains tax in the assessment year of the advance payment or in the assessment year of the award, and whether section 45(5)(a) of the Income-tax Act, 1961 applied where there was no enhanced compensation.

Analysis: Section 45(1) fastens chargeability on the previous year in which the transfer takes place, and in compulsory acquisition the transfer is complete on the award and the consequential dispossession. Section 45(5) is a special provision intended for cases where the compensation for such compulsory acquisition is enhanced or further enhanced by a court, tribunal, or other authority. In the absence of any enhanced compensation, the opening part of section 45(5) does not apply. Clause (a) of section 45(5) refers to compensation awarded in the first instance and received pursuant to the award, not to an advance amount received before the award. The relevant date for assessing the award compensation is therefore the date of the award, with the amount received under that award falling in the assessment year relating to that transfer.

Conclusion: Section 45(5)(a) did not justify taxing the advance payment as part of the award compensation in the earlier assessment year, and the balance amount arising under the award was not assessable in that earlier year.

Final Conclusion: The decision settles that, for compulsory acquisition, the award date governs capital gains chargeability on the compensation under the statutory scheme, while section 45(5) operates only where enhancement of compensation is involved.

Ratio Decidendi: In compulsory acquisition, capital gains are chargeable with reference to the award as the effective transfer date, and section 45(5)(a) applies only to compensation received pursuant to the award in the first instance, not to pre-award advance payments or cases lacking enhanced compensation.

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