Capital gains on acquired property arise only after compensation is quantified, not on mere vesting under acquisition law.

Capital gains from acquisition of property under the Assam Land (Requisition and Acquisition) Act, 1964 were not taxable before compensation was determined. Although the land vested in the Government on service or publication of the acquisition order under section 9, the amount payable to the owner still had to be claimed and assessed by the Collector under section 11. Because capital gains depend on a completed transfer with a determinable consideration, vesting alone did not create an assessable gain. Taxation could arise only after the compensation amount became due and was quantified.

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Issues: Whether capital gains arising from acquisition of property could be brought to tax before the compensation payable for the acquired property was determined under the acquisition law.

Analysis: The property was acquired under the Assam Land (Requisition and Acquisition) Act, 1964. Under the statutory scheme, the land vested in the Government when the acquisition order was served or published under section 9, but the amount payable to the owner had still to be claimed and determined by the Collector under section 11. Until such determination, the compensation could not be said to have become due. Since the charge of capital gains depends on a completed transfer giving rise to a determinable consideration, the mere acquisition and vesting of the property did not, by themselves, justify assessment of capital gains before the compensation was quantified.

Conclusion: Capital gains were not assessable at that stage and could be brought to tax only after the compensation amount was determined. The answer to the referred question was in favour of the assessee and against the Revenue.

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