Previous year under income tax law determines capital gains timing; gain from land acquisition fell outside assessment year 1965-66.

Capital gain from acquisition of the assessee's land was not assessable in assessment year 1965-66 because the charge had to be tested by reference to the assessee's chosen previous year under section 3 of the Income-tax Act, 1961. Section 3(3) allowed a different previous year for a separate source of income, but no such different year was claimed for capital gains. As the land vested in the Government only after the end of the calendar year ending 31 December 1964, the gain fell outside the relevant previous year and could not be taxed in that assessment year.

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Issues: Whether the capital gain, if any, arising from acquisition of the assessee's land was assessable in assessment year 1965-66.

Analysis: The relevant question turned on the meaning of "previous year" under section 3 of the Income-tax Act, 1961, and the effect of section 3(3), which permits an assessee to have a different previous year for a separate source of income. The assessee had opted for a calendar year ending on 31 December 1964, and there was no claim that capital gains should follow a different year ending on 31 March 1965. Since the land vested in the Government only after the end of the assessee's chosen previous year, the capital gain could not be brought to tax in assessment year 1965-66.

Conclusion: The capital gain was not assessable in assessment year 1965-66, and the answer to the referred question was in the affirmative, in favour of the assessee.

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