Urgency acquisition and capital gains turn on possession date, with transfer completing when Government takes possession

In urgency acquisitions under section 17(1) of the Land Acquisition Act, possession before award causes the land to vest absolutely in the Government, and the transfer is complete when possession is taken. The later making of the award does not postpone the transfer date for capital gains purposes. On the stated facts, possession was taken during the relevant accounting year, so the capital gain arose in that year and was assessable in assessment year 1974-75. The challenge to the validity of the acquisition was not substantiated, and the Tribunal had no jurisdiction to rule on the validity of the acquisition proceedings themselves.

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Issues: Whether, on compulsory acquisition of land under the urgency provisions of the Land Acquisition Act, title vested in the Government on taking possession so that the transfer took place in that year, and whether the resulting capital gains were chargeable to tax in the assessment year concerned.

Analysis: Under section 16 of the Land Acquisition Act, vesting follows an award, but section 17(1) creates a special regime in cases of urgency where possession may be taken before an award and the land then vests absolutely in the Government free from encumbrances. The land in question was taken possession of on February 7, 1973, during the relevant accounting year, and the later making of the award did not postpone the transfer date under the urgency provision. The assessee did not substantiate the challenge that the acquisition was invalid for want of waste or arable land, and the Tribunal had no jurisdiction to pronounce upon the validity of the acquisition proceedings themselves. On these facts, the transfer was complete on taking possession and the capital gain arose in the relevant previous year.

Conclusion: The transfer was held to have occurred on the date of taking possession, and the capital gains were assessable in the assessment year 1974-75; the conclusions were against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered substantially in favour of the Revenue on the material questions, with one question left unanswered as not arising from the Tribunal's order.

Ratio Decidendi: Where possession of land is taken under section 17(1) of the Land Acquisition Act, 1894 in a case of urgency, the land vests in the Government on such possession and the transfer is complete for capital gains purposes in that year, even if the award is made later.

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