Compulsory acquisition transfer for capital gains occurs on possession and vesting, not on the acquisition notification.

Compulsory acquisition of land is a transfer for capital gains purposes when possession is taken and the property vests in the Government, not when the acquisition notification is issued. Section 45 of the Income-tax Act taxes gains on transfer in the previous year, and section 2(47) includes compulsory acquisition within transfer. Applying the Land Acquisition Act, title passes only on possession and vesting under section 16, so the relevant date for tax is the date of possession. The possession dates here fell within the previous year relevant to assessment year 1974-75, so the capital gains were chargeable in that year.

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Issues: Whether capital gains arising from compulsory acquisition of the assessee's lands were chargeable in the assessment year 1974-75, having regard to the point of time when transfer took place under the Income-tax Act and the Land Acquisition Act.

Analysis: For capital gains under section 45 of the Income-tax Act, 1961, the taxable event is the transfer of a capital asset in the previous year, and section 2(47) expressly includes compulsory acquisition within the meaning of transfer. Under the Land Acquisition Act, 1894, although acquisition proceedings commence with the section 4 notification and culminate in the section 6 declaration and award under section 11, title passes only when possession is taken and the land vests absolutely in the Government under section 16. On that footing, the relevant date for capital gains is not the date of the final notification but the date on which possession is taken pursuant to the award.

Conclusion: The transfer took place on the dates when possession was taken, namely 21 April 1973 and 8 November 1973, both falling within the previous year relevant to assessment year 1974-75. The question was answered in the affirmative and against the assessee.

Ratio Decidendi: In cases of compulsory acquisition, transfer for capital gains purposes occurs when possession is taken and the property vests in the Government, not when the acquisition notification is issued.

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