- (1.) AN agricultural piece of land measuring 30 Kachcha Bighas owned by assessee Shri Janardan Das (since deceased) was acquired by the State Government by issuing notifications dated 14th of January, 1977 and 12th of May, 1977 under the land Acquisitipn Act. Its possession was taken on 26th of June, 1977. But the assessee received the compensation on 12th of July, 1977. The assessee purchased the agricultural land on 15th of May, 1977 which hap pened within'two years from the date of receipt of compensation. Therefore, it was submitted that in view of Section 54b of the Income Tax Act the assessee was not liable to pay capital gains. This was not accepted by the Income-tax Officer who took the view that the possession was taken over on 6th of June, 1971 and the land was purchased by the assessee out of the compensation amount beyond period of two years. The case of the assessee was that the possession was taken on 26th of June, 1977 and'the compensation was received on 12th of July, 1977, no capital gain was leviable because the agricultural land was pur chased on 15th of June, 1979. In appeal, the Commissioner of Income-tax (Ap peals) held that even when the possession was taken over on 6th of June, 1977, there was" no liability to pay capital gain in view of Section 54-B (2), as he then stood/the initial amount of compensation was received on 12th of July, 1977, therefore the capital gains could arise only on that date and not earlier to it. He further held that the tube-wells, trees etc. were parts of the agricultural land This order has been confirmed by the Tribunal in further appeal filed by the depart ment.
(2.) AT the instance of the department the following three questions of law relevant to the assessment year 1978-79 have been referred by the Tribunal as per direction of the High Court for its opinion: 1. Whether the finding of the Tribunal that the date of transfer should be taken as 26. 6. 1977 and not 6. 1977 is vitiated in law inasmuch as the Tribu nal has ignored the evidence which was relied on by the Commissioner of Income-tax? 2. Whether the Tribunal is correct in holding that capital gain does not arise unless the compensation is received and on that basis in computing the period of two years for purposes of exemption under Section 54b from the date of receipt of the compensation? Whether the Tribunal was correct in holding that the amount paid on account of tube-well and standing trees should be taken to have been paid for purchase of the agricultural land? 3. Heard Shri R. K. Upadhyaya, learned tanding Counsel for the department. None appeared on behalf of the assessee. So far as the question No. 1 is concerned the learned Standing Counsel could not point out any error in the order of the Tribunal holding that the date of transfer should be taken as 26th of June, 1977. He could not even refer to any document in support of the stand of the Department. The First Appellate Authority as well as the Tribunal have found that the date of transfer should be taken as 26. 6. 1977 and in the absence of any material to take a different view, we find that the findings recorded by the Tribunal is basically a finding of fact as it was not shown by the learned Standing Counsel that the said finding is vitiated in law in any manner.
(3.) THE learned Standing Counsel for the department submits on question No. 2 that the finding recorded by the Tribunal on it No. 2 is legally not sustainable. Reference was made to Section 45 of the Income- tax Act wherein any profit or gains arising from transfer of capital assets affected in previous years is charge able to income-tax, under the head 'capital gains'. He submits that as soon as relevant notification under Section 6 of the Land Acquisition Act has been issued, the property vests in the State Government and the transfer of the agricultural land, is complete. On the facts of the present case, the notification under Section 6 of the Land Acquisition Act being dated 6th of June, 1977, the taxable event for the purposes of capital gains took place on that date. Considered the submission of learned Standing Counsel for the depart ment. The assessee out of the amount of compensation received from acquisition of his agricultural land, purchased agricultural land on 15. 6. 1979. Question thus arises as to whether the purchase of agricultural land on 15th of June, 1979 was within the period of two years for the purposes of Section 54-B of the Income Tax Act so as the assessee may not be charged for capital gain on transfer of land used for agricultural purposes. Section 54-B (2) as it then stood reads as follows: (a) So much of the Capital gain computed under Section 48 by taking the compensation as so enhanced as the full value of the consideration re ceived or accruing as a result of such transfer, as is not excluded under sub section (1) from being charged to tax under Section 45, or (b) The capital gain attributable to the enhancement of the compensa tion, whichever is less (that which is less being hereinafter referred to as the unadjusted capital gain), shall if the assessee has within a period of two years after the date of receipt of the additional compensation purchased any land for being used for agricultural purposes (hereinafter referred to as the relevant asset be dealt with-in the following manner that is to say - (i) if the amount of the unadjusted capital gain is greater than the cost of the relevant asset, the difference between the amount of the unadjusted capi tal gain and the cost of the relevant asset shall be charged under Section 45 as the income of the previous year in which the transfer took place and for the purpose of computing in respect of the relevant asset any capital gain arising from its transfer with in a period of three years of its purchase, the cost shall be Nil, or (ii) if the amount of the unadjusted capital gain is equal to or less than the cost of the relevant asset, the unadjusted capital gain shall not be charged under Section 45 and for the purpose of computing in respect of the relevant asset any capital gain arising from its transfer within a period of three years of its purchase the cost shall be reduced by the amount of the unadjusted capital gain. ";