TaxTMI 
TaxTMI 
1984 (7) TMI 89
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....ons does not bar the appellate authorities from applying the applicable provisions of law, we are examining the issue as below. 2. The assessee owned certain lands at Vadaj in the municipal limits of Ahmedabad. They were acquired by the Government during the previous year for the assessment year 1974-75. In the original return filed for 1974-75, the assessee did not show any capital gains on this transaction, though she had received already an amount of Rs. 2,46,663 from the Land Acquisition Officer (LAO). Consequently, the original assessment completed on 27-2-1975 under section 143(1) of the Act resulted in N.A., the income being Rs. 1,234 only. Whatever may be the reasons for the failure to file the correct return, the ITO did notice ....
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....ITO rejected the claim firstly, on the ground that section 54E does not apply to capital gains assessable for the assessment year 1974-75 as the provision came into effect from 1-4-1978 (the assessment year 1978-79) and, secondly, on the ground that the investment made did not fulfil the conditions of section 54E even if section 54E is applicable to the facts of the case. This view of the ITO is confirmed by the Commissioner (Appeals) and the assessee has now come up in appeal before us. 3. Before coming to the arguments of Shri K.C. Patel, we may take note of the legislative background. We would like to make it clear that we have considered this aspect only for the purpose of understanding the background and not for interpreting the rel....
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.... provisions relating to exemption under section 54E) will take effect retrospectively from 1-4-1974 and will apply accordingly in relation to the assessment year 1974-75 and subsequent years. The provisions relating to exemption under section 54E will take effect from 1-4-1978, i.e., the date on which the said section comes into force. " Para 23.7 of the CBDT Circular No. 240 [F. No. 131(2)/78-TPL], dated 17-5-1978 is more specific as below : " ...The new sub-section (10B) relating to recomputation of capital gain in cases falling under section 54E will take effect from 1st April, 1978, and will accordingly apply in relation to the assessment year 1978-79 and subsequent years." 7. Coming now to the facts and arguments of the case, ....
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....tional capital gains to the date of divestment of title to the property. This fiction has to be taken to its logical end. The incidents of additional compensation should, therefore, be the same as those of the original compensation. If the ITO was aware of the figure of correct compensation at the time of the passing of the order on 19-7-1979, the full value of consideration, including the additional compensation, would have been included in the assessment. In para 23.1 of the CBDT Circular No. 240, this aspect has come out (this is mentioned not for interpreting the provision but for understanding the background) as below : " .... Where the transfer of the capital asset is by way of compulsory acquisition under any law, the capital gain....
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....ve been made effective from 1-4-1974 as in the case of section 155(7A). 11. Again section 155(10B), made effective from 1-4-1978, refers to section 54E(3), which as mentioned above came in force from 1-4-1978. A plain reading itself would show that no further retrospective operation was contemplated. Even if there is doubt, a harmonious interpretation of the two clauses would leave no doubt that the benefit of section 54E cannot be available to any capital gain accruing prior to the assessment year 1978-79, on the only ground that the additional compensation was received some time during the previous year for the assessment year 1978-79 or later. Additional compensation, thus, acquires all the incidents and characteristics of the origina....
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....ences. One might refer to the following extract from Maxwell on the Interpretation of Statutes, 12th edition : " ...'It is always proper,' Lord Reid has said 'to construe an ambiguous word or phrase in the light of the mischief which the provision is obviously designed to prevent, and in light of the reasonableness of the consequences which follow from giving it a particular construction.' 'If the language,' he said elsewhere, 'is capable of more than one interpretation, we ought to discard the more natural meaning if it leads to an unreasonable result, and adopt that interpretation which leads to a reasonably practicable result'. In the words of Romer L.J., 'the court... when faced with two possible constructions of legislative language....