TaxTMI 
TaxTMI 
2003 (2) TMI 16
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....t was paid to the assessee on January 11, 1993. Relying on the provisions of section 45(5)(a) of the Income-tax Act, 1961, for short "the Act", the Assessing Officer took the view that the entire compensation received by the assessee should be subjected to capital gains tax in the assessment year 1992-93, since the assessee had received a sum of Rs. 27,08,000 on August 30, 1991, which fell within the accounting period relevant to the assessment year concerned. Accordingly, the entire sum of Rs.38,l1,604 along with the interest was assessed to capital gains for the assessment year 1992-93 itself! In this context, it is relevant to note that the assessee, in the return filed for the assessment year 1993-94, had offered the award amount of Rs. 38,11,604 for capital gains tax. However, the Assessing Officer has subjected the same to capital gains tax for the year 1994-95. The assessee, being aggrieved by the assessment order for 1992-93 in which the entire compensation amount was included, took up the matter in appeal before the Commissioner of Income-tax (Appeals)-II, Cochin, who by his order dated November 13, 1995, allowed the appeal upholding the claim made by the assessee. The app....
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.... Balachandran, learned counsel appearing of the assessee, on the other hand, submits that in so far as capital gains is concerned, the charging provision is section 45(1) of the Act, which clearly provides that the capital gains arising from the transfer of a capital asset shall be deemed to be the income of the previous year in which the transfer took place, and that in the case of compulsory acquisition, the crucial date of transfer is the date of award, and therefore, the liability to pay capital gains tax arises only on dispossession from the property pursuant to the award. So understood, counsel submits that in the instant case, since the award was passed only on December 18, 1992, the compensation received on such transfer can be subjected to capital gains tax under section 45 only in the assessment year 1993-94. Counsel also relied on the decisions of the Gujarat and Bombay High Courts in CIT v. Purshottambhai Maganbhai Hatheesing (HUF) [1985] 156 ITR 150 and in M.B. Karmarkar and D.L. Gokhale v. CIT [1984] 150 ITR 234, respectively, in that regard. Counsel pointed out that under section 45(1), the crucial date for assessing the compensation amount to capital gains is the da....
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....all be chargeable as income under the head 'Capital gains' of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received; and (b) the amount by which the compensation or consideration is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head 'Capital gains' of the previous year in which such amount is received by the assessee." Since senior counsel has also relied on the provisions of section 54H of the Income-tax Act, the said provision is also extracted. "54H. Extension of time for acquiring new asset or depositing or investing amount of capital gain.--Notwithstanding anything contained in sections 54, 54B, 54D and 54F, where the transfer of the original asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period for acquiring the new asset by the assessee referred to in those sections or, as the case may be, the period available to the assessee under those sections for depositing or investing the amount of capital gain....
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....r other authority. Unless both these conditions concur, there is no question of application of sub-section (5). If we understand the purport of sub-section (5) in the above manner, since there is no case for the Department that enhanced compensation was awarded by the court, Tribunal or other authority, there is no question of application of sub-section (5) of section 45 at all in the instant case. However, we will deal with the contention of senior counsel for the Department that clause (a) of sub-section (5) applies even to a case where no enhancement of compensation is awarded. Clause (a) of sub-section (5) states that the capital gain computed with reference to the compensation awarded in the first instance shall be chargeable as income under the head "Capital gains" of the previous year in which such compensation or part thereof, was first received. We have already noted the contention of senior counsel that since the advance payment is a part of the consideration for the compulsory acquisition, it forms part of the award, and therefore, by virtue of the provision clause (a) of section 45(5), the award amount must be assessed to capital gains tax in the year of receipt of th....
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....f compensation in respect of other lands in the same locality or elsewhere in accordance with the other provisions of this Act." Section 12 of the said Act reads as follows: "12. Award of Collector when to be final.--(1) Such award shall be filed in the Collector's office and shall, except as hereinafter provided, be final and conclusive evidence, as between the Collector and the persons interested, whether they have respectively appeared before the Collector or not, of the true area and value of the land, and the apportionment of the compensation among the persons interested. (2) The Collector shall give immediate notice of his award to such of the persons interested as are not present personally or by their representatives when the award is made." From a reading of the aforesaid provisions, it is clear that the transfer is effective only on the passing of the award and on surrendering the documents of title and on getting the award amount pursuant thereto. Thus, according to us, the compensation received by the assessee as per the award dated December 18,1992, is the crucial date for determining the assessment year with respect to which the compensation can be brought to capi....