Transfer includes compulsory acquisition for capital gains purposes under section 12B, extending tax to gains from acquisition by law.

Section 12B of the Indian Income-tax Act, 1922 was interpreted to give "transfer" its plain and natural meaning, distinct from "sale", "exchange" and "relinquishment". Compulsory acquisition of an electricity undertaking under the Madras Electricity Supply Undertakings (Acquisition) Act, 1954 was treated as a transfer by operation of law and not as a category excluded by ejusdem generis. The reasoning was reinforced by the earlier proviso excluding compulsory acquisition and the later 1961 Act amendment, both indicating legislative intent to tax gains arising from such acquisition. On that construction, surplus arising from the compulsory acquisition was liable to capital gains tax.

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Issues: Whether compulsory acquisition of the assessee's electricity undertaking under the Madras Electricity Supply Undertakings (Acquisition) Act, 1954 fell within the expression "transfer" in section 12B of the Indian Income-tax Act, 1922 so as to attract capital gains tax.

Analysis: Section 12B(1) used the words "sale", "exchange", "relinquishment" and "transfer" as distinct expressions. The expression "transfer" was held to be independent of the preceding words and not controlled by the doctrine of ejusdem generis. The Court reasoned that the word had to be given its plain and natural meaning, and that a compulsory acquisition effected by operation of law was still a transfer for the purposes of the section. The earlier proviso excluding compulsory acquisition and the later amendment in the 1961 Act were treated as supporting the conclusion that the legislative intent was to tax gains arising from compulsory acquisition.

Conclusion: Compulsory acquisition under the 1954 Act came within section 12B of the Indian Income-tax Act, 1922, and the surplus arising therefrom was liable to tax as capital gains.

Ratio Decidendi: For section 12B of the Indian Income-tax Act, 1922, "transfer" includes transfer by operation of law, including compulsory acquisition, and is not confined to voluntary or bilateral transactions.

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