Capital gains on acquired land arise on legal vesting after award, not on mere handing over of possession.

Under the Land Acquisition Act, 1894, capital gains on acquired land were treated as arising when the award was made and legal vesting followed, not merely when possession was physically handed over. The scheme of the Act contemplates possession ordinarily after the award under section 11, while section 17(1) is a limited urgency exception permitting earlier vesting. Earlier delivery of possession by itself does not transfer property or amount to legal vesting in the Government. On that basis, the taxable event was linked to the award and vesting, and the capital gains were chargeable in the relevant assessment years, with the answer against the assessee.

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Issues: Whether capital gains arising from acquired land became chargeable in the year of handing over of possession or only in the assessment year corresponding to the award and legal vesting under the Land Acquisition Act, 1894.

Analysis: Under the scheme of the Land Acquisition Act, 1894, possession ordinarily follows the award under section 11, while the urgency provision in section 17(1) is an exception under which vesting may occur earlier. The operative notifications under sections 4 and 6 remain relevant only so long as they are in force. Earlier handing over of possession, by itself, does not amount to passing of property or legal vesting in the Government. The taxable event for capital gains was therefore linked to the award and the consequent vesting, not to the earlier factual delivery of possession.

Conclusion: Capital gains were rightly brought to charge in the assessment year 1964-65 and the enhanced compensation in the assessment year 1966-67, and the answer was against the assessee.

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