Section 54E relief in compulsory acquisition turns on possession-based transfer date, not the award date.

In compulsory acquisition, the six-month period for investment under section 54E is computed from the date of transfer, and transfer occurs when possession is taken and vesting in the Government follows, not merely on the date of the award. Where there is no direct proof of the exact possession date and the circumstances do not support immediate vesting on the award date, the transfer is treated as occurring after service of the award. On that basis, investment made within six months was timely, the assessee qualified for section 54E relief, and the capital gains were not chargeable.

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Issues: Whether the assessee was entitled to exemption from capital gains under section 54E of the Income-tax Act, 1961 on the footing that the investment in specified assets was made within six months of the transfer of the acquired land.

Analysis: The six-month period for investment under section 54E had to be computed from the date of transfer. In a compulsory acquisition, the award by itself did not transfer title or extinguish the owner's interest in immovable property. Under section 16 of the Land Acquisition Act, 1894, vesting in the Government occurred only when possession of the land was taken after the award. There was no direct evidence of the exact date of possession, and the available circumstances showed that possession could not reasonably be taken on the date of the award itself. On that basis, the transfer must be taken to have occurred after service of the award, making the assessee's investment timely.

Conclusion: The assessee was entitled to the benefit of section 54E and the capital gains could not be charged.

Ratio Decidendi: In compulsory acquisition cases, the date of transfer for section 54E is the date on which possession is taken and vesting occurs, not the date of the award.

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