Dwarka Prasad, J. - (1.) THE Commissioner of Income-tax, Jaipur, by this reference application-under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), has prayed that the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as " the Tribunal "), may be directed to state the case and refer the following two questions arising out of its order dated January 17, 1979, to this court for its opinion: " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that only that part of the interest which related to the assessment year 1972-73 should be brought to tax in the assessment year 1972-73 and not the entire amount, viz., Rs. 21,916 ?
(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the additional amount of compensation received during the period relevant to the assessment year 1972-73 was assessable in the assessment year 1964-65?" 2. The circumstances in which the aforesaid reference application arises are as under : The assessee, M/s Sardar Sajit Singh and Sons, had a plot of land at Delhi, which was purchased in the year 1948 for a sum of Rs. 25,000. This plot of land was acquired by the Government by notification dated November 13, 1959. It appears that the possession of the land in question was also taken by the Government at the same time. The Land Acquisition Collector in the year 1963 adjudged the amount of compensation payable to the assessee at Rs. 38,242 by an award passed under Section 11 of the Land Acquisition Act. The aforesaid amount of compensation was paid to the assessee during the assessment year 1964-65 and capital gains amounting to Rs. 13,242 were assessed by the Income-tax Officer while making the assessment of the income of the assessee in the assessment year 1964-65, taking the purchase price of the plot of land at Rs. 25,000. The assessee felt dissatisfied with the amount of compensation awarded by the Land Acquisition Collector and under Section 18 of the Land Acquisition Act required the Collector that the matter relating to the amount of compensation be referred to the civil court for determination. The District Judge passed an award under Section 26 of the Land Acquisition Act enhancing the amount of compensation awarded to the assessee to a sum of Rs. 1,24,435 including a sum of Rs. 21,916 as interest. The award passed by the District Judge thus made an addition of a sum of Rs. 1,02,519 inclusive of interest to the amount of compensation awarded by the Land Acquisition Collector. The District Judge passed his award and the amount of compensation awarded by him was received by the assessee during the period relevant to the assessment year 1972-73. During the assessment proceedings for the year 1972-73, the question arose before the Income-tax Officer as to whether the amount of enhanced compensation paid to the assessee on account of the award passed by the District Judge and which constituted capital gains within the meaning of Section 45 of the Act should be assessed to tax during the assessment year 1972-73 or the said enhanced compensation could only have been assessed in the assessment year 1964-65 when the amount of compensation received by the assessee on the basis of the award passed by the Land Acquisition Collector was subjected to assessment proceedings. The further question which arose for,consideration was as to whether the entire amount of interest of Rs. 21, 916 received by the assessee could be assessed to tax during the assessment year 1972-73. The Income-tax Officer, by his order dated March 20, 1975, held that as the enhanced compensation was quantified in the year 1972-73, it was only receivable by the assessee as capital gains during the assessment year 1972-73 and not during the assessment year 1964-65. As regards interest, the Income-tax Officer held that the entire accumulated interest was also assessable as the income of the assessee from other sources during the assessment year 1972-73. On appeal, the Appellate Assistant Commissioner of Income-tax, Central Range, Jaipur, by his order dated June 4, 1977, held that the Income-tax Officer was justified in bringing to tax the enhanced amount of compensation received during the accounting year relevant to the assessment year 1972-73, in that year. As regards interest, the Appellate Assistant Commissioner disagreed with the Income-tax Officer and held that the entire accumulated interest could not have been brought to tax only in one year, as according to him, the interest accrued each year and was payable to the assessee on accrual basis, year after year, and not on accumulated receipt basis. As such, the Appellate Assistant Commissioner directed the Income-tax Officer to bring to tax only that part of the interest which was payable in respect of the accounting period referable to the assessment year 1972-73. The assessee as well as the Income-tax Officer filed appeals against the order passed by the Appellate Assistant Commissioner before the Tribunal. After consideration of the facts of the case, the Tribunal came to the conclusion that as transfer of the plot of land which was compulsorily acquired by the Government under the provisions of the Land Acquisition Act took place in the previous year relevant to the assessment year 1964-65, the capital gains arising from such transfer of the plot of land could be assessed only in the assessment year 1964-65 and not in the assessment year 1972-73. It was pointed out that capital gain arose only when there was a legal transfer or sale by the assessee. According to the view taken by the Tribunal, although the Government had acquired the plot of land in question by a Notification dated November 13, 1959, and had also taken possession of the said plot of land at that time, yet the assessee would be considered to have been merely dispossessed by the Government and no legal transfer of property had taken place at that point of time. Thus the view of the Tribunal was that the legal title in respect of the plot of land in question was transferred to the Government only when the award of the Collector was passed in the year 1963 and as such capital gains arising out of the transfer of the plot of land accrued to the assessee during the period relevant to the assessment year 1964-65. Thus, the Tribunal held that the additional amount of compensation paid to the assessee in accordance with the award passed by the District Judge could not be assessed to tax as capital gains in the assessment year 1972-73. On the question of interest, the Tribunal held that the accumulated interest could not be assessed in full in the assessment year 1972-73, but it should be spread over the years between the date of acquisition and the date of actual payment of interest. Thus, the Tribunal arrived at the conclusion that in the assessment year 1972-73, only that part of interest could be assessed to tax which was received by the assessee relating to the relevant previous year. The Tribunal consequently allowed the appeal filed by the assessee and dismissed the appeal filed by the Revenue by its order dated January 17, 1979.
(3.) THE Commissioner of Income-tax, Jaipur, filed an application before the Tribunal under Section 256(1) of the Act seeking a reference to this court in respect of the two questions referred to above. However, the' Tribunal refused to make a reference by its order dated December 12, 1979, on the question of additional amount of capital gains. THE Tribunal thought that the issue stood concluded by the judgment of their Lordships of the Supreme Court in CIT v. Bhurangya Coal Co. [1958] 34 ITR 802. On the question of interest, the Tribunal held that the matter was concluded by the decision of their Lordships of the Supreme Court in CIT v. A. Gajapathy Naidu [1964] 53 ITR 114. Hence, this application under Section 256(2) of the Act has been made before this court on behalf of the Revenue. Learned counsel for the parties referred to the decisions of various High Courts on both the questions in respect of which reference is sought and we are of the view that there is a divergence of judicial opinion in the country on both the questions. In respect of the question of assessment of capital gains resulting from enhanced compensation made payable or paid to the assessee on account of the award passed by the District Judge on a reference made under Section 18 of the Land Acquisition Act or on appeal by the High Court or the Supreme Court, although it has undoubtedly been held that the right to compensation in case of compulsory acquisition of land under the provisions of the Land Acquisition Act accrues to the assessee on the date of the transfer, yet in case of enhancement of compensation as a result of proceedings in a court on a reference made under Section 18 of the Land Acquisition Act, it has been held-by some High Courts that the right to enhanced compensation accrued only when the award was passed by the civil court. In Bhurangya Coal Company's case [1958] 34 ITR 802, their Lordships of the Supreme Court held that the title to immovable properties covered by the sale deed passed to the transferee on the date it was executed and the title to the movable properties passed to the transferee on the date on which possession thereof was handed over, but the question of payment of compensation or enhanced compensation as a result of proceedings taken on a reference under Section 18 of the Land Acquisition Act did not come up for consideration before their Lordships of the Supreme Court in that case and it cannot, therefore, be held that the matter stood concluded by the decision of their Lordships in Bhttratngya Coal Company's case [1958] 34 ITR 802 (SC). ;