REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2416 OF 2010 RAJ PAL SINGH ..APPELLANT Vs. COMMISSIONER OF INCOME-TAX, RESPONDENT HARYANA, ROHTAK JUDGMENT Dinesh Maheshwari, J. PRELIMINARY AND BRIEF OUTLINE 1. This appeal takes exception to judgment and order dated 23.04.2008 passed by High Court of Punjab and Haryana at Chandigarh1 in Income Tax Reference No. 53-A of 1991 whereby High Court, while answering reference under then existing Section 256(1) of Income-tax Act, 19612, disapproved order dated 29.06.1990 passed by Income Tax Appellate Tribunal, Chandigarh Bench 3 in ITA No. 739/Chandi/89 for assessment year 1971-1972; and held that capital gains arising out of land acquisition compensation were chargeable to income-tax under Section 45 of Act of 1961 for previous year Signature Not Verified Digitally signed by DEEPAK SINGH Date: 2020.08.25 15:28:36 IST Reason: 1 For short, High Court . 2 For short, Act of 1961 or Act . 3 For short, ITAT . 1 referable to date of award of compensation i.e., 29.09.1970 and not date of notification for acquisition. 2. In present case, question concerning date of accrual of capital gains arose in backdrop that though proceedings for acquisition in question were taken up by way of notification dated 15.05.1968 and award of compensation was made on 29.09.1970 but, as matter of fact, at time of issuance of initial notification for acquisition, subject land was already in possession of beneficiary under lease, though period of lease had expired on 31.08.1967. In light of these facts, ITAT did not approve of charging tax over capital gains with reference to date of award while observing that date of notification (i.e., 15.05.1968) would be treated as date of taking over physical possession and transaction (leading to capital gains) would be considered as having taken place on that date and not on date of award (i.e., 29.09.1970). High Court, however, did not agree with this line of reasoning and held that amount of compensation was determined only on passing of award dated 29.09.1970 and, therefore, if any capital gain was chargeable to tax, it would be chargeable for previous year referable to date of award. 3. Thus, root question is as to whether, on facts and in circumstances of present case, High Court was right in taking date of award as date of accrual of capital gains for purpose of Section 45 of Act of 1961? 2 4. Keeping question aforesaid in view, we may briefly summarise relevant factual and background aspects of this case while indicating at outset that matter relating to assessment in question, before reaching High Court in reference proceedings, had undergone two rounds of proceedings up to stage of appeal before ITAT. ASSESSEE; SUBJECT LAND; AND ACQUISITION 5. assessment in question is for assessment year 1971-1972 in relation to assessee Amrik Singh HUF4. appellant Raj Pal Singh is son of late Shri Amrik Singh and is Karta of assessee HUF. As noticed, dispute essentially concerns chargeability of tax for capital gains arising out of award of compensation towards acquisition of land belonging to assessee-appellant. 6. It is noticed from material placed on record and observations in orders passed in this matter that subject land, admeasuring 41 kanals and 14 marlas and comprising Khasra Nos. 361 to 369 and 372 to 375 at village Patti Jattan, Tehsil and District Ambala 5, became evacuee property after its original owner migrated to Pakistan; and same was, as such, allotted to said Shri Amrik Singh, who had migrated to India, in lieu of his property left in Pakistan. However, substantial part of subject land, except that comprising Khasra Nos. 361 and 364 admeasuring 5 kanals and 7 marlas, had been given by original owner on lease for 20 years to Government College, being S.A. Jain College, Ambala City 6; 4 Hindu Undivided Family. 5 For short, subject land or land in question . 6 For short, College . 3 and lease was to expire on 31.08.1967. Later on, College moved Government of Haryana for compulsory acquisition of subject land. While acting on this proposition, notification under Section 4 of Land Acquisition Act, 18947 was issued by Government of Haryana on 15.05.1968, seeking to acquire subject land for public purpose, namely, playground for College. This was followed by declaration dated 13.08.1969 under Section 6 of Act of 1894. Ultimately, after submission of claim for compensation, Land Acquisition Collector, Ambala proceeded to make award on 29.09.1970. 7. relevant features concerning possession of land in question and computation of amount of compensation are duly recorded in award dated 29.09.1970 and for their relevance, material parts of award need to be taken note of. 7.1. As regards possession of land in question, learned Collector observed as under:- Possession of land: land in question was on lease with Jain College, managing Society upto 31st August 1967. Thereafter acquisition proceedings were started and society was in possession of same since then. Therefore land owners are entitled to interest from date of notification u/s 4 which was issued on 15th May, 1968. interest at rate of 6% per annum will be paid to land owners in addition to compensation and Solatium from 15th May,1968, to date. 7.2. As regards entitlement to compensation, learned Collector examined cross-claims made by land owners and Managing 7 For short, Act of 1894 . 4 Society of College; and found it justified to award compensation to land owners while observing as under:- Mode of Payment: land owners have claimed that compensation be paid to them whereas S.A. Jain College, trust and Management Society has applied that Society be paid 2/3 rd of compensation being 99 years lease of land or otherwise as tenant under East Punjab Urban Rent Restriction Act. society has neither produced any documentary record nor any to establish claim. As per application of Principal S.A. Jain College, Ambala City, this fact as confirmed that land in question was on lease with College upto 31.8.67 only and college wanted to acquire same so that its possession remains with college. In addition to it, Shri Amar Chand President S.A. Jain College, Management Committee stated on oath before Revenue Assistant Ambala on 21.3.68 that Management committee was prepared to pay price of land fixed by Collector to land owners. From copy of jamabandi attached with this file, khasra Nos. 361 and 364 measuring 5 kanals and 7 marlas were not on lease with college. But Management is claiming compensation for this land also. In these circumstances, college management cannot be awarded any amount from compensation of this land being tenant. I therefore, allow compensation to land owners according to their share entered in jamabandi . (sic) First round of assessment proceedings By Income Tax Officer, B Ward, Ambala 8. For assessment year 1971-1972, assessee declared its income at Rs. 1,408/- inclusive of Rs. 408/- from house property and Rs. 1,000/- being amount of interest earned. While not accepting income so declared, Assessing Officer8, in his assessment order dated 12.02.1982, enhanced income from house property to Rs. 1,200/- and also enhanced interest income to Rs. 11,596/- with reference to interest received under award in question. However, AO observed 8 Hereinafter referred to as AO or ITO . 5 that capital gains were not relevant for year under consideration for reason that land in question had been acquired in earlier years. relevant part of assessment order dated 12.02.1982 reads as under:- ..The assessee has shown intt. at Rs. 1000/- only. assessee s lands were required by Haryana Govt. vide notification date 16.05.68, 11.06.69 and 13.08.69. Since lands were acquired in earlier years and capital gains are not relevant for year under consideration. However, assessee received compensation late vide award dated 29.07.70 by land Acquisition Controller, assessee received interest of Rs.10596/- which assessee has not shown in return. As such intt. Income is taken at 11596 including 1000/- so-moto shown by assessee . (sic) Before Appellate Commissioner 9. Being aggrieved by order so passed by Assessing Officer, assessee preferred appeal before Appellate Assistant Commissioner of Income Tax, Ambala9 in B/Amb/82-83 on grounds, inter alia, that AO was not justified in enhancing annual letting value of house property and was also not justified in including interest amount of Rs.11,596/- received from Land Acquisition Collector on compensation paid for acquisition of land for reason that said interest amount was required to be treated as part of compensation. 9.1. Though ground of appeal concerning house property was accepted and addition made by AO in that regard was deleted but, on examination of award dated 29.09.1970, CIT(A) found that assessee was paid Rs.62,550/- as compensation and Rs.9,532/- as solatium and yet, capital gains on this account were not taxed by 9 For short, CIT(A) . 6 Assessing Officer. Accordingly, show cause notice dated 18.11.1983 was issued to assessee as to why capital gains relating to acquisition of this land be not charged to tax in assessment year under consideration. assessee filed written reply dated 26.12.1983 to this notice and stated, inter alia, that in urgency acquisition under Section 17 of Act, transfer takes place immediately after notification and owner ceases to be in possession of land in question. 9.2. CIT(A), in his order dated 17.05.1984, rejected submissions made on behalf of assessee and held that capital gains on acquisition of land amounting to Rs. 23,146/- were required to be added to income of previous year relevant to assessment year under consideration. CIT(A) ordered such addition while observing and holding as under:- 9 . ITO has not given any reason in assessment order why capital gain on acquisition of land is not taxable. Moreover, powers conferred on me under Income-Tax Act does not preclude me from considering this issue at appellate stage. 10. There is no doubt that notifications were published much earlier that date of award and possession of land was also taken earlier that date of award but it does not mean that capital gain is to be taxed in earlier years on that basis. When land is taken possession of by Government, no compensation has, in fact been determined but it has become only payable. right of owner is, therefore, inchoate right .. deeming provisions can have no relevance unless income is receivable can have it is receivable, then determination of question whether it is actually received or is deemed to have been received depends upon method of accounting. If actual amount of compensation has not been fixed by Land Acquisition Collector, no income could be said to have occurred to appellant Income Tax is not levied on mere right to receive compensation, there must be something tangible, something in nature of 7 debt, something in nature of obligation to pay ascertained amount. Till such time, no income can be said to have accrued. On date when collector awarded compensation, it is only that amount which had accrued whether in fact paid or not. Accordingly, in present case, even though possession of land was taken in 1968, no amount can be said to accrued on date of possession because compensation at that point of time was not determined at all. This amount of compensation was determined only after award dated 29.9.70. Therefore, if any income on account of capital gain is chargeable to tax, it will be chargeable on date of award. It is held accordingly that capital gain arising out of acquisition of land is chargeable to tax in previous year, relevant to assessment year under consideration because date of award i.e. 29.9.70 is within relevant previous year. (emphasis in bold supplied) Before Income Tax Appellate Tribunal, Chandigarh Bench 10. Against order so passed by CIT(A), assessee-appellant preferred appeal before Income Tax Appellate Tribunal, Chandigarh Bench, being ITA No.634/Chandi/84 and argued, inter alia, that it had been matter of urgent acquisition under Section 17 of Act of 1894 and possession of land in question was taken on 15.05.1968 when notification under Section 4 of said Act of 1894 was issued and hence, CIT(A) exceeded his jurisdiction in taxing capital gains for year under reference on basis of date of award made by Land Acquisition Collector under Section 11 of Act of 1894. It was also argued that interest amount could not have been treated separately and was required to be considered as part of compensation amount. 11. appeal so filed, relating to assessment year 1971-1972, was considered and decided by ITAT by its order dated 19.12.1985. Interestingly, on same date, i.e., on 19.12.1985, ITAT also 8 considered and decided another appeal of appellant pertaining to assessment year 1975-1976, being ITA No.635/Chandi/84, wherein too, similar question of capital gains arising out of another award of compensation for acquisition of another parcel of land was involved. Since said decision pertaining to assessment year 1975-1976 has formed part of submissions in present appeal, we may usefully take note of its relevant features before proceeding further. 11.1. It appears that in said appeal pertaining to assessment year 1975-1976, question of capital gains arose in backdrop of facts that another parcel of land of appellant, in village Rangrnan, Tehsil and District Ambala admeasuring 15 kanals and 10 marlas, was acquired for purpose of construction of warehouse of Ambala City. notification under Section 4 of Act of 1894 for that acquisition was issued on 26.06.1971; possession of said land was taken on 04.09.1972; and award of compensation was made on 27.06.1974. In given set of facts and circumstances, ITAT accepted contention that case fell under urgency provision contained in Section 17 of Act of 1894 where assessee was divested of title to property, that vested in Government with effect from 04.09.1972, date of taking possession. Thus, ITAT held that capital gains arising from said acquisition were not assessable for accounting period relevant for assessment year 1975-1976. material part of findings of ITAT in said order dated 9 19.12.1985, in ITA No.635/Chandi/84 pertaining to assessment year 1975-1976, reads as under:- 9 case, therefore, falls under urgency provision contained in section 17 of Land Acquisition Act, 1894. transfer within meaning of section 2(47) took place on date possession of land was taken by Government. Section 2(47)(i) provides that transfer in relation to capital asset includes extinguishment of any rights therein. Section 17 of Act provides that after taking possession of land in urgent cases, such land shall thereupon vest absolutely in Government free from all encumbrances. assessee was, therefore, divested of title to lands and lands thereafter vested in Government w.e.f. 4-9-72 i.e. date of possession of lands. In this view of matter, we are of opinion that capital gains arising from acquisition of lands in question were not assessable for accounting period relevant to assessment year 75-76. income from capital gains included in total income by ITO and confirmed by AAC and also further enhanced by Rs. 28,379/- therefore, cannot be sustained. same is deleted. 12. Reverting to assessment year 1971-1972, it is noticed that in appeal relating to this case, ITAT referred to its aforesaid order of even date pertaining to assessment year 1975-1976 but found that in present case, actual date of taking possession by Government was not forthcoming and hence, proceeded to restore matter to file of AO to find out date when Government took over possession, while observing that if possession was taken before award and before 01.04.1970, capital gains were not to be included in income for assessment year 1971-1972 but, if possession was taken during period 01.04.1970 to 31.03.1971, capital gains would be assessable for this assessment year 1971-1972. material part of order dated 19.12.1985 in ITA No.634/Chandi/84 pertaining to present case reads as under:- 10 5. We have carefully considered rival submission. first Notification for acquisition of lands in 15.5.68 as mentioned in order of ITO. date of award u/s 11 of Land Acquisition Act is 29.9.70 which is also mentioned in order of ITO. actual date of possession of lands by Government is neither mentioned in order of ITO nor of AAC though learned counsel for assessee at time of hearing stated that it was on 15.5.68. AAC has also stated in para 10 of his order that notifications were published much earlier than date of award and possession of land was also taken earlier than date of award but that did not mean that capital gains was to be taxed in earlier years on that basis. He has, however, not specified actual date of possession of lands by Government. date given by learned counsel for assessee also cannot be accepted firstly because no evidence in relation there to has been furnished before us. Secondly date of notification is 16.5.68 and it was not elaborated as to how possession of land could be taken even prior to date of notification. One thing, however, is certain that possession of lands was taken before award was made u/s 11 of Land Acquisition Act. 6. Similar issue came up for consideration before us in case of assessee itself for assessment year 1975-76 and vide our orders of even date in I.T.A. No. 635/Chandi we have held that it was case which fell u/s 17 of Act and, therefore, capital gains were assessable on basis that transfer took place on date of possession of lands by Government. Since actual date of possession of land is not available, we are of opinion that matter should be restored to file of ITO who should find out actual date of possession of lands by Government. In case possession of lands was taken by Government prior to date of award and before Ist April,1970, capital gains will not be included in income for assessment year 71-72. If possession of lands was also taken during period 1-4-70 to 31-3-71, capital gains will be assessable for assessment year 71-72. After finding actual date of possession by Govt. ITO, he shall recompute income on above basis. Supplementary facts concerning enhancement of compensation 13. Before entering into orders passed in second round of proceedings after remand by ITAT, apposite it would be to take note of set of supplementary facts relating to enhancement of amount of compensation. It is noticed that as against aforesaid award dated 11 29.09.1970, appellant took up proceedings in LA Case Nos. 37 and 38 of 1971 before Additional District Judge, Ambala who, by order dated 30.12.1984, allowed marginal enhancement of amount of compensation and corresponding solatium and interest. Not satisfied yet, appellant preferred appeal, being Regular First Appeal No. 390 of 1975 before Punjab and Haryana High Court, seeking further enhancement. High Court allowed this appeal by its judgment dated 25.10.1985 and awarded compensation by applying rate of Rs. 8/- per sq. yd. against Rs. 3.50 and Rs. 2.50 per sq. yd., as allowed by Additional District Judge and Land Acquisition Collector respectively. High Court also allowed 30% solatium and corresponding interest10. Second Round of Proceedings for assessment By Income Tax Officer, C Ward, Ambala. 14. Having noticed relevant facts concerning acquisition of land in question, award of compensation for such acquisition and enhancement of amount of compensation as also first round of proceedings for assessment for assessment year 1971-1972, we may now take note of orders passed in second round of proceedings for this assessment after matter was remanded by ITAT. 15. In compliance of directions of ITAT in aforesaid order dated 19.12.1985 in ITA No.634/Chandi/84, AO took up matter in GIR No. 920A and, on 17.07.1987, served specific question to assessee- 10 As per material on record, High Court allowed interest @12% p.a. on market value of land from date of notification under Section 4 of Act of 1894 until date of taking possession; 9% p.a. after date of possession for one year; and 15% p.a. thereafter. 12 appellant about date on which possession of acquired land was taken by Government of Haryana. In his reply dated 22.07.1987, appellant stated such date of possession as 15.05.1968, being date of notification under Section 4 of Act of 1894. Though no evidence in this regard was adduced but, appellant relied upon decision of Kerala High Court in case of Peter John v. Commissioner of Income-Tax: (1986) 157 ITR 711 to submit that capital gains, if any, arise at point of time when land vests in Government and such date in present case was 15.05.1968. Further, by way of communications dated 28.09.1987 and 11.01.1988, AO asked assessee-appellant to give exact date-wise calculation of interest in terms of aforesaid judgment of High Court dated 25.10.1985 but not much of assistance came up from appellant in that regard. 15.1. As appellant was unable to bring forth requisite information with evidence, AO also made enquiries from revenue authorities, particularly regarding date of taking over possession. In response, AO received information that land in question was on lease with College; and that as per procedure adopted, date of taking possession by Government was in consonance with date when award was announced. 15.2. AO took note of all facts and features of this case in his re- assessment order dated 25.01.1988 and observed that since in instant case, award was announced on 29.09.1970, said date viz 13 29.09.1970 is deemed to be date of taking possession by Government . In this view of matter, AO held that taxability of capital gains arose in previous year relevant to assessment year under consideration . 15.3. It was also suggested by appellant before AO that acquisition was of urgent nature, as was case in relation to other acquisition relevant for assessment year 1975-1976. AO found such suggestion incorrect because of different purposes of acquisition; and specific date of taking over possession (04.09.1972) having been mentioned in said case pertaining to assessment year 1975-1976. AO also noticed that appellant failed to place on record date of publication of notice under Section 9 of Act of 1894 and observed that there was no reference to urgency acquisition in present case nor any such mention was found in award dated 29.09.1970. In given circumstances, AO held that acquisition in question was not matter of urgency under Section 17 of Act of 1894 and this acquisition had only been under normal powers . 15.4. With findings aforesaid, AO proceeded to assess tax liability of appellant, on long-term capital gains arising on account of acquisition, on basis of amount of compensation allowed in award dated 29.09.1970 as also enhanced amount of compensation accruing finally as result of aforesaid order dated 30.12.1984 passed by Additional District Judge and judgment dated 25.10.1985 passed 14 by High Court. As regards interest income, AO carried out protective assessment on accrual basis @ 12% per annum for previous year relevant to assessment year in question i.e., for period 01.04.1970 to 31.03.1971 while providing that such calculation would be subject to amendment, if necessary. Before Commissioner of Income Tax (Appeals), Karnal 16. aforesaid order of re-assessment dated 25.01.1988 was challenged by appellant before CIT(A) in Appeal No. 87/87-88. This appeal was considered and dismissed by CIT(A) by way of his elaborate order dated 31.03.1989. 16.1. It was argued in first place before CIT(A) that ITAT, by its order dated 19.12.1985, had only restored issue as regards date of possession to file of AO and therefore, AO was not justified in proceeding as if making de-novo assessment; and was not justified in bringing enhanced amount of compensation to tax for which, he should have passed separate order under Section 155(7A) of Act of 1961. In regard to this contention, CIT(A) noted that indisputably, for computation of capital gains, ITO had power to take into consideration enhanced compensation received by appellant for compulsory acquisition of land; and when ITO could have drawn up separate order under Section 155(7A), he was well within powers to combine such order with his order for carrying out directions of ITAT. contention on frame of order was, therefore, rejected. 15 16.2. CIT(A), thereafter, extensively dealt with facts of case on issue as to whether ITO had correctly held that possession of appellant s compulsorily acquired land was taken over by Government during previous year relevant to assessment year in question. CIT(A) held that it had not been case of compulsory acquisition under Section 17 of Act 1894; and that awarding of interest from 15.05.1968 was of no effect on date of accrual of capital gains, particularly when such interest could have been awarded under Section 28 of Act of 1894. CIT(A) further observed that College remained in unauthorized possession of land in question after expiry of lease on 31.08.1967 but, it was only on date of award i.e., 29.09.1970, that possession legally passed on to College so as to vest it with ownership through Government. relevant observations and findings of CIT(A) in order dated 31.03.1989 could be usefully reproduced as under:- 9 It is admitted fact that special procedure prescribed u/s 17 of Land Acquisition Act for exercising of emergency powers of Govt. for taking possession of lands to be compulsorily acquired, earlier than date of award u/s 11 of Land Acquisition Act, was not followed in this case. Neither there is any direction of Govt. to Collector to take over possession earlier then date of award u/s 11 of Land Acquisition Act and nor possession was so taken by collector after 15 days of publication of notice u/s 9(1) of Land Acquisition Act. These two conditions are absolutely necessary if possession was to be taken u/s 17 of Land Acquisition Act. possession of lands already with S.A. Jain College Ambala was obviously regularized in instant case u/s 16 of Land Acquisition Act which is general 16 Section for taking possession of lands acquired under Land Acquisition Act. possession of compulsorily acquired land u/s 16 of Land Acquisition Act can be taken by Govt. only after date of award u/s 11 of Land Acquisition Act which in instant case was 29.9.70. Therefore, it is only on 29.9.70 that possession legally passed to S.A. Jain College, Ambala so as to vest ownership in property in S.A. Jain College City through Govt. If possession of lands had been taken u/s 17 of Land Acquisition Act, then interest would have been awarded to appellant only from date after 15 days of publication of notice u/s 9(1) of Land Acquisition Act, whereas in instant case, interest has been awarded from date of notification u/s 4 of Land Acquisition Act i.e. 15.5.68. This goes to show that interest was awarded to appellant from date prior to date of award u/s 11 of Land Acquisition Act which is dated 29.9.70 not because possession had been taken u/s 17 of Land Acquisition Act but because of various Court, rulings be holding, as mentioned above, that on equitable interpretation of Sec. 28 of Land Acquisition Act, interest should be awarded from date of possession even in cases where possession had been taken before date of award u/s 11 of Land Acquisition Act, even though possession was unauthorized or taken with or without consent of landlord. 10. In view of above discussion, it is obvious that possession of lands in instant case legally passed to S.A. Jain College, Ambala City through Govt. on date of award u/s 11 of Land Acquisition Act and it is only on this date that ownership in lands got vested in Govt . As discussed above, fact that S.A. Jain College, Ambala was already in unauthorized possession of lands and that interest has been awarded to appellant from part of period during which S.A. Jain College, Ambala were in unauthorized possession of lands, would not effect above mentioned legal position i.e. that possession and ownership in lands got transferred from landlord to Government on 29.9.70 i.e. date of award u/s 11 of Land Acquisition Act. Therefore, capital gain on compulsory acquisition of these lands is to be taxed in this year and has been rightly so taxed. order of learned I.T.O. on this point also is upheld. 11 ..Since I have already held that learned ITO was justified in including enhanced compensation in total consideration received by appellant for acquisition of his lands, for computation of capital gains, I hold that appellant has no case in respect of interest amount of Rs.27255/- 17 as mentioned in ground of Appeal No.5 of original grounds of appeal. No arguments having been advanced in respect of appeal No. 4,6,7 of original grounds of appeal, these grounds of appeal are, therefore, rejected as, on face of it, there is nothing wrong in order of learned ITO in this respect. In result, appeal is dismissed. (emphasis in bold supplied) Before Income Tax Appellate Tribunal, Chandigarh Bench 17. Being aggrieved by order so passed by CIT(A), appellant preferred appeal before ITAT, being ITA No. 739(Chandi)89, raising essentially three issues for consideration namely, (i) about date of taking over physical possession of land in question by Government; (ii) about ITO s power to frame re-assessment instead of re- computing income in terms of ITAT s order of remand; and (iii) against inclusion of enhanced compensation and interest, etc., in re-assessment by ITO. This appeal was considered and allowed by ITAT by way of its order dated 29.06.1990. 17.1. ITAT took up first issue concerning date of taking over physical possession of land in question and, with reference to relevant background aspects as noticed hereinabove, observed that though it had earlier directed ITO to ascertain actual date of possession but matter presented complex scenario, where clear finding about this date was difficult to emerge. ITAT observed thus:- 12. direction of Bench earlier was for determination of actual date of possession. Ld. ITO in his own way came to conclusion that date of award was date of possession whereas assessee s case depended on date of notification. Both dates appear to be misconceived as actual physical possession of land was already with college, under 18 lease, since 1.1.47. Thus as consequence of acquisition proceedings only some of symbolic or constructive possession was to be taken as physical possession was already there. In terms of order under challenge and so also assessment order and position of law also, ownership exchanges hands from date of award which in present case is 29.9.70, but before recording firm finding in this respect, we have to keep in mind earlier finding of Bench dated 19.12.85 wherein it was observed that actual date of possession be ascertained and capital gains assessed in year in which possession was taken. determination of this aspect is slightly difficult in view of complex factual position existing on record. We cannot take 29.9.70 as on date of doubt (sic) award was given but possession was already with college. We also cannot take 15.5.68 because no doubt notification was there but before that date college was in possession of land under lease. Thus clear finding is difficult to emerge. 17.2. Having said that, ITAT referred to observations regarding possession of land , as occurring in award dated 29.09.197011 and observed that as per those observations in award, possession of land in question was supposed to have been taken on 15.05.1968. ITAT further observed that to sort out controversy, such stipulation in award was required to be depended upon; and date of actual physical possession was inferable from intention of parties and language of such stipulation in award. On this reasoning, ITAT held that since actual physical possession exchanged hands on 15.05.1968, transaction should be considered as having taken place on that date and not on date of award i.e., 29.09.1970; and hence, capital gains were not to be taxed for year under consideration. Having reached this conclusion, ITAT held that very basis of assessing capital gains having been knocked out, other issues were rendered redundant. 11 Reproduced in paragraph 7.1 hereinbefore. 19 ITAT, accordingly, allowed appeal with following observations and findings:- 14. According to stipulation in award, possession of land is supposed to have taken place on 15.5.68 as from that date, assessee was entitled in interest at 6% per annum on amount of compensation. This is infact date i.e. 15.5.68, from which date assessee was supposed to have parted with ownership of land in lieu of compensation. assessee was to have compensation and land was supposed to have parted company. Thus to sort out controversy we are required to heavily depend upon this stipulation in award. date of actual physical possession is inferable from intention of parties and language of stipulation. date of dispossession is inferable to be 15.5.68. issue is now required to be decided, in light of earlier observation of Bench that since physical possession(ownership) exchanged hands on 15.5.68, transaction should be considered as having taken place on date and not on date of award on 29.9.70. For coming to this conclusion we are dependent upon intention of parties and mention in award that interest became payable to assessee from that date only and not from any other date. In light of above discussion, we are inclined to hold that capital gains could not be assessed for year under consideration as transaction did take place on 15.5.68. revenue authorities were thus not justified to include capital gains for year under consideration and Ld (CIT(A) was not justified to confirm such action. We vacate finding of this aspect. Revenue authorities are at liberty to look into matter in respect of capital gains taking date of possession as 15.5.1968. Dispossession or actual date of taking physical possession is to be understood in context of facts to present case as change of ownership as possession was already with college under lease. 15. Since we have held that capital gains are not to be taxed for year under consideration, other issues connected with this aspect and raised by assessee not to be gone into as very basis has knocked down. (emphasis in bold supplied) 18. Taking exception against order so passed in appeal, revenue made application before ITAT seeking reference to High Court under Section 256(1) of Act of 1961. ITAT, in its order 20 dated 15.07.1991, took note of all relevant facts; and, after finding it to be fit case for making reference, drew up statement of case and referred matter to High Court for determination of following question:- Whether on facts and in circumstances of case, Tribunal was right in Law in holding that capital gains are not assessable in year under consideration as transaction did take place on date of notification i.e. 15.05.1968 and not on date of award on 29.09.1970? reference proceedings in High Court 19. High Court of Punjab and Haryana considered and answered question aforesaid by its impugned judgment and order dated 23.04.2008 in Income Tax Reference No.53-A of 1991. 19.1. It was argued on behalf of revenue before High Court that any profits or gains arising from transfer of capital asset effected in previous year shall be deemed to be income of previous year in which transfer took place and thus, would fall within ambit of Section 45(1) of Act of 1961; and as such, date of award 29.09.1970 ought to be considered for purpose of calculating capital gains and not date of notification i.e., 15.05.1968. As against these submissions, it was submitted on behalf of assessee-appellant that referred question was required to be decided in light of observations made by ITAT in its order dated 19.12.1985; and that it had been matter of urgency acquisition where possession of land was taken on date of notification i.e., 15.05.1968 and hence, in view of provisions 21 contained in Section 17 of Act of 1894, transfer took place on that date (15.05.1968) and not on date of award (29.09.1970). 19.2. After taking into consideration rival submissions, facts of this case and scheme of Act of 1894, particularly Sections 16 and 17 thereof, High Court answered reference in favour of revenue while holding that Collector had not taken possession of land under Section 17 of Act of 1894 and that said provision was not invoked by State Government. High Court further held that for purpose of assessment of capital gains, date of award (i.e., 29.09.1970) was required to be taken as date of taking over possession because, on that date, land in question vested in Government under Section 16 of Act of 1894. 19.3. High Court further examined ambit and scope of Section 45 of Act of 1961 and on its conjoint reading with Section 16 of Act of 1894, came to conclusion that transfer of capital asset (the land in question) and its vesting in Government took place on 29.09.1970, date of award. High Court further held that under Income-tax Act, 1961, income was chargeable to tax only when it had accrued or was deemed to have accrued in year of assessment; and in present case, if any income on account of capital gains was chargeable to tax, it would be chargeable on date when Collector determined compensation because, income accrued to appellant only upon such determination. High Court, therefore, held that capital gains 22 arising out of acquisition of land were chargeable to tax in previous year relevant to assessment year under consideration because date of award i.e., 29.09.1970 fell within relevant previous year. 19.4. Accordingly, High Court disapproved ITAT s order dated 29.06.1990 and answered reference in favour of revenue while holding, inter alia, as under:- 13 ..It is clear from Section 45(1) of Income Tax Act that capital gains are chargeable to income-tax arising from transfer of capital assets effected in previous year in which transfer took place. On conjoint reading of Section 16 of Land Acquisition Act and Section 45(1) of Act, it is clear that transfer of capital asset (land of assessee) has to be taken as 29.09.1970 i.e. date of award on which date land vested in State. 14. Under Income Tax Act, income is chargeable to tax only when it accrues or is deemed to accrue or arise in year of assessment. deeming provision can have no relevance unless income is receivable and if it is receivable, then determination of question whether it is actually received or is deemed to have been receive depends upon method of accounting. If actual amount of compensation has not been fixed by Land Acquisition Collector, no income could be said to have accrued to appellant. It cannot be contended that mere claim by assessee after taking of possession by Govt. at particular rate is compensation. It is amount actually awarded by Collector accrues on date on which award is passed. Income tax is not levied on mere right to receive compensation. There must be something tangible, something in nature of debt, something in nature of obligation to pay ascertained amount. Till such time no income can be said to have accrued. On date when Collector awarded compensation, it is only that amount which had accrued. This amount of compensation was determined only on passing of award date 29.09.70. Therefore, if any income on account of capital gain is chargeable to tax, it will be chargeable on date of award. It is held accordingly that capital gain arising out of acquisition of land is chargeable to tax in previous year relevant to assessment year under consideration because date of award i.e. 29.09.70 is within relevant previous year. (emphasis in bold supplied) 23 20. Being aggrieved by judgment and order dated 23.4.2008 so passed by High Court, holding that capital gains arising out of acquisition in question were chargeable to tax in assessment year 1971- 1972, assessee-appellant has preferred this appeal by special leave. Rival Submissions Appellant 21. Assailing view taken by High Court, learned counsel for appellant has essentially crusaded on two-fold arguments: One, that on facts and in circumstances of present case, where land in question was already in possession of beneficiary College, assessee-appellant was divested of its title and right to this property with issuance of notification under Section 4 of Act of 1894 when State took up acquisition in urgency; and transfer for purposes of Section 2(47) of Act of 1961 was complete on date of that notification itself i.e., on 15.05.1968 and hence, capital gains arising out of such acquisition and interest accrued could not have been charged to tax with reference to date of award i.e., 29.09.1970. Secondly, it is not open for revenue to question decision of ITAT in present case pertaining to assessment year 1971-1972 because, fact situation of present case is similar to that of other case of appellant in relation to assessment year 1975-1976, where same issue was decided by ITAT in favour of appellant and revenue accepted said decision by not challenging same any further. 24 21.1. Elaborating on first limb of arguments, learned counsel for appellant has contended that indisputably, land in question was already in possession of beneficiary College when State Government took up proceedings for its acquisition by issuing notification under Section 4 of Act of 1894 on 15.05.1968; and appellant was immediately divested of rights in land in question, as amply established by recital about possession of land in award dated 29.09.1970, where appellant was allowed interest over amount of compensation and solatium from 15.05.1968. Therefore, according to learned counsel, transfer, for purposes of Section 2(47) of Act of 1961, was complete on date of notification i.e., on 15.05.1968 and capital gains, if any, could have only been charged for previous year referable to that date of notification and not with reference to date of award. 21.1.1. Taking this line of argument further, learned counsel has referred to Full Bench decision of Kerala High Court in case of Peter John (supra) to submit that in land acquisition proceedings, owner of property is entitled to compensation on day on which he is dispossessed; and that such right does not await quantification of compensation by Land Acquisition Officer or Court. On application of these principles to case at hand, according to learned counsel, date of award i.e., 29.09.1970 for quantification of compensation has no relevance for purpose of assessing capital gains; and only relevant date is 25 15.05.1968, when appellant was legally dispossessed of land in question and its rights therein stood extinguished. 21.1.2. Learned counsel for appellant has further contended, with reference to decision of this Court in case of Rama Bai v. Commissioner of Income-Tax, Andhra Pradesh: (1990) 181 ITR 400, that interest income in cases of land acquisition accrues from year to year and is taxable in respective year of its accrual; and, in present case, since possession was taken on 15.05.1968, capital gains and interest accrued were taxable only in assessment year 1969-1970 and not in assessment year 1971-1972. 21.2. In second limb of submissions, learned counsel for appellant has referred to order dated 19.12.1985, as passed by ITAT in ITA No. 635/CHD/84 for assessment year 1975-1976 (Annexure P-5) and has submitted that in similar facts and circumstances, pertaining to acquisition of another land of appellant, ITAT specifically decided that capital gains were not relatable to date of award but were relatable to date of dispossession; and revenue indeed accepted said decision by not challenging it any further. While strongly relying upon decision of this Court in Berger Paints India Ltd. v. Commissioner of Income-Tax: (2004) 266 ITR 99, learned counsel has contended that where order passed in favour of very same assessee and against revenue in similar matter has attained finality, revenue cannot seek re-opening of issue in relation to other case without just 26 cause. Thus, according to learned counsel, view as taken in relation to similar case for assessment year 1975-1976 squarely covers present case and revenue cannot take different stand in relation to assessment year 1971-1972. 21.3. Learned counsel for appellant has also contended that interest income and solatium accrued on 15.05.1968 as per award itself and hence, income to be taxed pertains to financial year 1968-1969, relevant to assessment year 1969-1970 and same cannot be taxed in assessment year 1971-1972. Therefore, according to learned counsel, ITAT had rightly taken view against taxability of income pertaining to acquisition in question in assessment year 1971-1972 and High Court has committed manifest error in upturning view of ITAT. Respondent 22. Per contra, learned counsel for revenue has supported order passed by High Court, essentially with submissions that in present case, transfer of capital asset i.e., land of assessee, took place only on date of award falling within previous year relevant for assessment year 1971-1972. 22.1. Learned counsel for revenue has referred to definitions of capital asset and transfer in Act of 1961 and has contended that though possession of subject land was with College in year 1968 and continued as such but, no gain on account of transfer of land 27 accrued to assessee on date of notification i.e., 15.05.1968 because, at relevant point of time, compensation had not been determined; and same was determined only in award dated 29.09.1970. Therefore, according to learned counsel, capital gains chargeable to income-tax accrued only on date of award and, in this position, date of notification i.e., 15.05.1968 is not relevant for purpose of taxing capital gains. 22.2. Learned counsel for revenue has further elaborated on submissions that acquisition in question had not been under urgency provisions contained in Section 17 of Act of 1894 because thereunder, Government was to issue directions to Collector to take possession after expiry of fifteen days from date of publication of notice under Section 9(1) but, no such direction was issued by Government in present case. According to learned counsel, only applicable provision for taking possession in present case had been Section 16 of Act of 1894 whereunder, possession could be taken by Collector after making award under Section 11 and only thereupon land under acquisition vests in Government, free from all encumbrances. learned counsel would maintain that on facts of present case, possession legally passed on to College through Government only on 29.09.1970 i.e., date of award; and this date of award shall alone be relevant for chargeability of tax against capital gains of assessee with transfer of capital asset. In support of his contentions, 28 learned counsel has referred to and relied upon various decisions including those in Joginder Singh and Ors. v. State of Punjab and Anr.: AIR 1985 SC 382 and Bombay Burmah Trading Corporation Ltd. v. Commissioner of Income-Tax: (1988) 169 ITR 148. 22.3. Learned counsel for revenue has also submitted that reliance by appellant on case of Berger Paints (supra) is entirely misplaced because said case relates to business expenditure under Section 34B of Act of 1961 and has no relevance to present case. Points for determination 23. We have heard learned counsel for parties at length and have scanned through material on record. Having regard to submissions made and contents of judgment/orders under consideration, following principal points arise for determination in this appeal: - 1. As to whether, on facts and in circumstances of present case, transfer of capital asset (land in question), resulting in capital gains for purposes of Section 45 of Act of 1961, was complete on 15.05.1968, date of notification for acquisition under Section 4 of Act of 1894; and hence, capital gains arising out of such acquisition and interest accrued could not have been charged to tax with reference to date of award i.e., 29.09.1970? 29 2. As to whether fact situation of present case is similar to that of other case of appellant in relation to assessment year 1975-1976 where same issue relating to date of accrual of capital gains was decided by ITAT in favour of appellant with reference to date of taking possession by Government; and having not challenged same, it is not open for revenue to question similar decision of ITAT in present case pertaining to assessment year 1971-1972? 24. For appropriate dealing with controversy at hand, we may take note of relevant statutory provisions in Income-tax Act, 1961, as applicable to assessment year 1971-1972, as also in Land Acquisition Act, 1894, as existing at relevant time. Statutory Provisions 25. In Income-tax Act, 1961, heads of income for purpose of computation of total income are defined in Section 14 that carries, inter alia, heading E. Capital gains . Part-E of Chapter IV carries provisions relating to Capital gains arising from transfer of capital asset. For purpose of present appeal, provision relating to chargeability of capital gains to tax as contained in Section 45 and definition of expression transfer as occurring in clause (47) of Section 2 of Act of 1961 are relevant and these provisions, as applicable to assessment year 1971- 1972 had been as follows.12:- 12 In re-assessment order dated 25.01.1988, AO had included amount of enhanced compensation for computing quantum of capital gains and this inclusion was questioned before CIT(A) but, it was held that as regards enhanced compensation, AO could have passed 30 Section 45. Capital gains.-Any profits or gains arising from transfer of capital asset effected in previous year shall, save as otherwise provided in sections 53, 54 and 54B be chargeable to income-tax under head Capital gains , and shall be deemed to be income of previous year in which transfer took place. Section 2(47) transfer , in relation to capital asset, includes sale, exchange or relinquishment of asset or extinguishment of any rights therein or compulsory acquisition thereof under any law; 26. For overview of processes envisaged by Land Acquisition Act, 1894 to bring about lawful acquisition of land, we may put glance over principal parts of relevant provisions therein, as existing at relevant point of time. 26.1. process of acquisition, as contained in Part II of Act of 1894 could be reasonably taken into comprehension by reference to Sections 4, 5A, 6, 9, 11 and 16 therein, respectively occurring under headings Preliminary Investigation , Objections , Declaration of Intended Acquisition , Enquiry into Measurements, Value and Claims, and Award by order by virtue of his powers under sub-section (7A) of Section 155 of Act of 1961. Though, this aspect is not directly involved in present appeal but, for sake of reference, we may indicate that Section 155 of Act deals with power of amendments of assessment; and sub-section (7A) thereto was inserted by Finance Act, 1978 with retrospective effect from 01.04.1974 and was omitted by Act No. 4 of 1988 with effect from 01.04.1992. This sub-section (7A) of Section 155, as existing at relevant time of passing order by AO, had been as under:- (7A) Where in assessment for any year, capital gain arising from transfer of capital asset, being transfer by way of compulsory acquisition under any law, or transfer consideration for which was determined or approved by Central Government or Reserve Bank of India, is computed under section 48 and compensation for such acquisition or consideration for such transfer is enhanced or further enhanced by any court, tribunal or other authority, computation or, as case may be, computations made earlier shall be deemed to have been wrongly made and Assessing Officer shall, notwithstanding anything contained in this Act, recompute in accordance with section 48 capital gain arising from such transfer by taking compensation or consideration as enhanced or further enhanced, as case may be, to be full value of consideration received or accruing as result of such transfer and shall make necessary amendment; and provisions of section 154 shall, so far as may be, apply thereto, period of four years specified in sub-section (7) of that section being reckoned from end of previous year in which additional compensation or consideration was received by assessee. 31 Collector and Taking Possession . These provisions or relevant parts thereof, as applicable to acquisition in question, had been as under:- 4. Publication of preliminary notification and powers of officers thereupon.- (1) Whenever it appears to appropriate Government that land in any locality is needed or is likely to be needed for any public purpose notification to that effect shall be published in Official Gazette, and Collector shall cause public notice of substance of such notification to be given at convenient places in said locality. (2) Thereupon it shall be lawful for any officer, either, generally or specially authorised by such Government in this behalf, and for his servants and workmen, - to enter upon and survey and take levels of any land in such locality; to dig or bore into sub-soil; to do all other acts necessary to ascertain whether land is adapted for such purpose; to set out boundaries of land proposed to be taken and intended line of work (if any) proposed to be made thereon; to mark such levels, boundaries and line by placing marks and cutting trenches; and, where otherwise survey cannot be completed and levels taken and boundaries and line marked, to cut down and clear away any part of any standing crop, fence or jungle: Provided that no person shall enter into any building or upon any enclosed court or garden attached to dwelling house (unless with consent of occupier thereof) without previously giving such occupier at least seven days' notice in writing of his intention to do so. 5A. Hearing of Objections.- (1) Any person interested in any land which has been notified under section 4, sub-section (1), as being needed or likely to be needed for public purpose or for company may, within thirty days after issue of notification, object to acquisition of land or of any land in locality, as case may be. (2) Every objection under sub-section (1) shall be made to Collector in writing, and Collector shall give objector opportunity of being heard either in person or by pleader and shall, after hearing all such objections and after making such further inquiry, if any, as he thinks necessary, either make report in respect of land which has been notified under Section 4, sub- section (1), or make different reports in respect of different parcels of such land to appropriate Government, containing his recommendations on objections, together with record of proceedings held by him, for decision of that Government. 32 decision of appropriate Government on objections shall be final. (3) For purposes of this section, person shall be deemed to be interested in land who would be entitled to claim interest in compensation if land were acquired under this Act. 6. Declaration that land is required for public purpose.- (1) Subject to provisions of Part VII of this Act, when appropriate Government is satisfied after considering report, if any, made under section 5A, sub-section (2), that any particular land is needed for public purpose, or for company, declaration shall be made to that effect under signature of Secretary to such Government or of some officer duly authorised to certify its orders and different declarations may be made from time to time in respect of different parcels of any land covered by same notification under Section 4, sub-section (1), irrespective of whether one report or different reports has or have been made (wherever required) under section 5-A, sub-section (2). *** *** *** (3) said declaration shall be conclusive evidence that land is needed for public purpose or for company, as case may be; and, after making such declaration appropriate Government, may acquire land in manner hereinafter appearing. 9. Notice to persons interested.- (1) Collector shall then cause public notice to be given at convenient places on or near land to be taken, stating that Government intends to take possession of land, and that claims to compensation for all interests in such land may be made to him. (2) Such notice shall state particulars of land so needed, and shall require all persons interested in land to appear personally or by agent before Collector at time and place therein mentioned (such time not being earlier than fifteen days after date of publication of notice), and to state nature of their respective interests in land and amount and particulars of their claims to compensation for such interests, and their objections (if any) to measurements made under Section 8. Collector may in any case require such statement to be made in writing and signed by party or his agent. (3) Collector shall also serve notice to same effect on occupier (if any) of such land and on all such persons known or believed to be interested therein, or to be entitled to act for persons so interested, as reside or have agents authorised to receive service on their behalf, within revenue district in which land is situate. *** *** *** 11. Enquiry and award by Collector.- On day so fixed, or any other day to which enquiry has been adjourned, 33 Collector shall proceed to enquire into objections (if any), which any person interested has stated pursuant to notice given under Section 9 to measurements made under Section 8, and into value of land and at date of publication of notification under Section 4, sub-section (1), and into respective interests of persons claiming compensation, and shall make award under his hand of-- (i) true area of land; (ii) compensation which in his opinion should be allowed for land; and (iii) apportionment of said compensation among all persons known or believed to be interested in land, of whom, or of whose claims, he has information, whether or not they have respectively appeared before him. 16. Power to take possession.- When Collector has made award under Section 11, he may take possession of land, which shall thereupon vest absolutely in Government, free from all encumbrances. 26.2. different process was, however, envisaged by Section 17 of Act of 1894 for taking possession in cases of urgency even before making of award but upon directions of appropriate Government. relevant part of that provision had been as under:- 17. Special powers in cases of urgency.- (1) In cases of urgency, whenever appropriate Government so directs, Collector, though no such award has been made, may, on expiration of fifteen days from publication of notice mentioned in Section 9, sub-section (1), take possession of any waste or arable land needed for public purposes or for company. Such land shall thereupon vest absolutely in Government free from all encumbrances. *** *** *** 13 13 We have not extracted other sub-sections of Section 17 of Act of 1894, for being not relevant in present case but, for completing reference to broad features of process contemplated by Section 17, we may also indicate that sub-section (4) thereof, as existing at relevant time had been as under: (4) In case of any land to which in opinion of appropriate Government, provisions of sub-section (1) or sub-section (2) are applicable, appropriate Government may direct that provisions of Section 5A shall not apply, and, if it does so direct, declaration may be made under Section 6 in respect of land at any time after publication of notification under Section 4, sub-section (1). 34 26.3. One peripheral aspect relating to treatment of interest on enhanced compensation has also occurred in present case for which, CIT(A) in his order dated 31.03.1989, has referred to Section 28 of Act of 1894. This provision, as existing at relevant time, had been as under:- 28. Collector may be directed to pay interest on excess compensation.- If sum which, in opinion of Court, Collector ought to have awarded as compensation is in excess of sum which Collector did award as compensation, award of Court may direct that Collector shall pay interest on such excess at rate of six per centum per annum from date on which he took possession of land to date of payment of such excess into Court. 14 27. Having regard to relevant provisions of Act of 1961 whereby and whereunder, capital gains essentially relate to transfer of capital asset by assessee; and background aspects of present case, where capital asset of assessee-appellant (land in question) was in possession of beneficiary College even after expiry of lease on 31.08.1967, it shall also be apposite to take note of few provisions of Transfer of Property Act, 188215 concerning general connotation of transfer of property as also those relating to transaction of lease of immovable property. 27.1. In Section 5, occurring in Chapter II of Act of 1882, phrase transfer of property is defined as under:- 14 Note: We may again observe that extractions in paragraph 25 are of provisions of Act of 1961 as applicable for assessment year 1971-1972. Similarly, extractions in paragraphs 26.1, 26.2 and 26.3 are of provisions of Act of 1894 as applicable in year 1968 when notification under Section 4 pertaining to subject land was issued. 15 For short, Act of 1882 35 5. Transfer of property defined.- In following sections transfer of property means act by which living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons; and to transfer property is to perform such act. In this section living person includes company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for time being in force relating to transfer of property to or by companies, associations or bodies of individuals. 27.2. rights and liabilities of lessor and lessee of immovable property are delineated in Section 108 of Act of 1882 and its clause (q) postulates implied obligation of lessee to put lessor into possession of property on determination of lease in following words:- 108. Rights and liabilities of lessor and lessee. In absence of contract or local usage to contrary, lessor and lessee of immovable property, as against one another, respectively, possess rights and are subject to liabilities mentioned in rules next following, or such of them as are applicable to property leased:- *** *** *** (q) on determination of lease, lessee is bound to put lessor into possession of property. 27.2.1. Determination of lease by efflux of time is envisaged in clause (a) of Section 111 of Act of 1882 as follows: 111. Determination of lease.- lease of immovable property determines- (a) by efflux of time limited thereby; *** *** *** 27.2.2. One of features of transaction of lease, in case where lessee remains in possession after determination thereof and lessor assents to his possession, is dealt with by Section 116 of Act of 1882 that reads as under:- 36 116. Effect of holding over.- If lessee or under-lessee of property remains in possession thereof after determination of lease granted to lessee, and lessor or his legal representative accepts rent from lessee or under-lessee, or otherwise assents to his continuing in possession, lease is, in absence of agreement to contrary, renewed from year to year, or from month to month, according to purpose for which property is leased, as specified in section 106. Point No. 1. 28. As noticed, first point for determination revolves around basic questions as to when did transfer of land in question, by way of compulsory acquisition, take place and when did capital gains accrue to assessee-appellant? assessee maintains that this transfer, leading to capital gains, took place on very date of preliminary notification (15.05.1968) because, possession of land in question was already with beneficiary College. revenue, however, asserts that such transfer reached its completion, resulting in capital gains, only on date of award (29.09.1970). 29. For effectual determination of questions involved, we may take into comprehension basic features of head of income described as capital gains . 29.1. As noticed, capital gains are those profits or gains which arise out of transfer of capital asset. expression capital asset is defined in Section 2(14) of Act of 1961. In present case, much dilation on this definition is not required because subject land had indisputably been capital asset of assessee-appellant. We may, however, observe that such definition of capital asset is of wide amplitude, taking in its fold 37 property of any kind held by assessee, except what has been expressively excluded therein, like stock-in-trade, consumables stores, personal effects, etc. 29.2. expression transfer in relation to capital asset has been defined in Section 2(47) of Act of 1961. said definition has also been of substantially wide amplitude so as to include sale, exchange or relinquishment of capital asset; or extinguishment of any rights therein; or compulsory acquisition thereof. It is also noteworthy that as per fundamentals in Act of 1882, transfer of property means act by which living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons. 29.3. Thus, contents of then existing Section 45 of Act of 1961 read with relevant definitions would make it clear that such profits or gains are chargeable to income-tax as capital gains that arise out of transfer of capital asset by any of recognized modes, including sale, exchange, relinquishment and even compulsory acquisition; and, by fiction, it has been provided that such profits or gains shall be deemed to be income of previous year in which transfer took place. Differently put, capital gains of assessee, arising from transfer of capital asset, are chargeable to tax as income of previous year in which transfer had taken place. 38 30. Applying aforesaid concepts of transfer and transfer of property to facts of present case, it could be readily found that when subject land has been compulsorily acquired, its transfer from assessee-appellant to Government is directly covered by Section 2(47) of Act of 1961. 30.1. Thus, basic elements for chargeability of gains, arising from compulsory acquisition of subject land, to income-tax under head capital gains , do exist in present case. However, gains so arising would be deemed to be income of previous year in which transfer took place. 31. Entering into enquiry as to when had transfer, of subject land from assessee-appellant to Government, taken place, we need to take into account principles governing completion of transfer of land from owner to Government in matters of compulsory acquisition. Ordinarily, in such matters of compulsory acquisition, there is structured process prescribed by law, which is required to be complied with for lawful acquisition and which has legal effect of transfer of ownership of property in question to acquiring body, usually appropriate Government. controversy in present matter has its genesis in compulsory acquisition of land of assessee-appellant under Act of 1894 and hence, pertinent it would be to look at processes contemplated by said enactment. 39 31.1. brief overview of scheme of Act of 1894, as existing at relevant point of time, makes it clear that publication of preliminary notification under Section 4 by itself did not vest property in Government; it only informed about intention of Government to acquire land for public purpose. After this notification, in ordinary course, under Section 5A, Land Acquisition Collector was required to examine objection, if any, to proposed acquisition; and after examining his report, if so made, Government was to issue declaration under Section 6, signifying its satisfaction that land was indeed required for public purpose. These steps were to be followed by notice under Section 9, stating that Government intended to take possession of land and inviting claims for compensation. Thereafter, Collector was to make his award under Section 11. As noticed hereinbefore, as per Section 16 of Act of 1894, Land Acquisition Collector, after making award, could have taken possession of land under acquisition and thereupon, land vested in Government free from all encumbrances. 31.2. deviation from process above-noted and somewhat different process was permissible in Section 17 of Act of 1894 whereunder, in cases of urgency and if Government had so directed, Collector could have taken possession of any waste or arable land after fifteen days from publication of notice mentioned in Section 9(1), even though award had not been made; and thereupon, land was to vest in Government free from all encumbrances. 40 31.3. In case of Special Land Acquisition Officer, Bombay and Ors. v. Godrej and Boyce: (1988) 1 SCC 50, while dealing with power of Government to withdraw from acquisition under Section 48 of Act of 1894, this Court exposited on gamut of ordinary process of taking possession of land under acquisition and legal requirements as also implications thereof, in following words:- 5 Under scheme of Act, neither notification under Section 4 nor declaration under Section 6 nor notice under Section 9 is sufficient to divest original owner of, or other person interested in, land of his rights therein. Section 16 makes it clear beyond doubt that title to land vests in government only when possession is taken by government. Till that point of time, land continues to be with original owner and he is also free (except where there is specific legislation to contrary) to deal with land just as he likes, although it may be that on account of pendency of proceedings for acquisition intending purchasers may be chary of coming near land. So long as possession is not taken over, mere fact of notification under Section 4 or declaration under Section 6 having been made does not divest owner of his rights in respect of land or relieve him of duty to take care of land and protect it against encroachments. Again, such notification does not either confer on State Government any right to interfere with ownership or other rights in land or impose on it any duty to remove encroachments therefrom or in any other way safeguard interests of original owner of land. It is in view of this position, that owner's interests remain unaffected until possession is taken, that Section 48 gives liberty to State Government to withdraw from acquisition at any stage before possession is taken . (emphasis in bold supplied) 31.4. In case of Fruit & Vegetable Merchants Union v. Delhi Improvement Trust: AIR 1957 SC 344, this Court expounded on variegated features of term vesting as follows:- As will presently appear, term vesting has variety of meaning which has to be gathered from context in which It has been used. It may mean full ownership, or only possession for 41 particular purpose, or clothing authority with power to deal with property as agent of another person or authority . That word "vest" is word of variable import is shown by provisions of Indian statutes also. For example, S. 56 of Provincial Insolvency Act (5 of 1920) empowers Court at time of making of order of adjudication or thereafter to appoint receiver for property of insolvent and further provides that "such property shall thereupon vest in such receiver." property vests in receiver for purpose of administering estate of insolvent for payment of his debts after realising his assets. property of insolvent vests in receiver not for all purposes but only for purpose of Insolvency Act and receiver has no interest of his own in property. On other hand, Ss. 16 and 17 of Land Acquisition Act (Act 1 of 1894), provide that property so acquired, upon happening of certain events, shall "vest absolutely in Government free from all encumbrances". In cases contemplated by Ss. 16 and 17 property acquired becomes property of Government without any conditions or limitations either as to title or possessions. legislature has made it clear that vesting of property is not for any limited purpose or limited duration. It would thus appear that word "vest" has not got fixed connotation, meaning in all cases that property is owned by person or authority in whom it vests. It may vest in title, or it may vest in possession, or it may vest in limited sense, as indicated in context in which it may have been used in particular piece of legislation .. (emphasis in bold supplied) 31.5. expositions aforesaid leave nothing for debate that in matter of compulsory acquisition of land under Act of 1894 for public purpose, property was to vest absolutely in Government (thereby divesting owner of all his rights therein) only after taking of possession in either of methods i.e., after making of award, as provided in Section 16; or earlier than making of award, as provided in Section 17. In other words, owner was divested of property and same vested in Government in absolute terms only if, and after, possession was taken by either of processes envisaged in Sections 16 and 17. However, so long as possession was not taken, mere fact of issuance of notification under 42 Section 4 of Act of 1894 or declaration under Section 6 thereof, did not divest owner of his right in respect of property in question. 32. Having thus taken note of general principles governing capital gains and transfer of capital asset in compulsory acquisition , we may now examine as to when capital gains accrue on transfer of capital asset in compulsory acquisition. 32.1. features above-noticed, relating to completion of transfer by way of compulsory acquisition under Act of 1894 upon taking of possession by Government; and such event of taking possession being relevant happening for purpose of Section 45 of Act of 1961, were duly applied by Courts in various decisions related with taxing of capital gains. As example, we may usefully refer to decision of Karnataka High Court in case of Buddaiah v. Commissioner of Income-Tax, Karnataka-2: (1985) 155 ITR 277 wherein, High Court referred to aforesaid decision of this Court in Fruit & Vegetable Merchants Union and held that since title of land passes to Government on possession being taken by Deputy Commissioner under Section 16 of Act of 1894, such date of taking possession becomes relevant for purposes of Section 45 of Act of 1961. High Court said (at p. 281 of ITR),- assessee s contention, therefore, is contrary to provisions of s. 16 of Land Acquisition Act. Since title of owner of lands acquired under Land Acquisition Act passes to Government on possession being taken by Deputy Commissioner under s. 16 of Act, date of taking possession becomes relevant for purposes of s. 45 of I.T. Act, so far as transfer of title is concerned. 43 TT (emphasis in bold supplied) 33. However, propositions aforesaid do not directly apply to case where, for any reason, possession of land had already been taken by Government or delivered by owner before completion of process envisaged by Section 16 or Section 17 of Act of 1894. In such case, question, obviously, would be as to when has capital gain accrued? And this is core of present matter. 33.1. Taking up core question, as to when capital gains would accrue in case of compulsory acquisition of land where possession had already been taken before reaching of relevant stage for taking over possession in structured process contemplated by statute, we may usefully refer to decision of Andhra Pradesh High Court in case of S. Appala Narasamma v. Commissioner of Income-Tax: (1987) 168 ITR 17. Therein, land of assessee was acquired for Town Planning Trust but, during course of land acquisition proceedings, possession of land was delivered voluntarily by assessee to Town Planning Trust on 25.03.1970. award of compensation was made on 22.03.1971. In assessment proceedings, question arose, as to in which year did capital gain arise? Thus, similar question was involved therein, i.e., as to whether land must be deemed to have vested in State on date when possession was taken with consent of landlord or on date of award? Tribunal took view that land vested in Government on date of making of award and this 44 conclusion was affirmed by High Court. While dealing with principles relating to vesting of title and examining fact situation where possession was taken before making of award, High Court held that vesting of title to land was matter of law and not matter of inference; and in given situation, moment award was made, possession from that moment onwards should be related to award; and on that date, land vested in Government. High Court said (at pp. 20 and 21 of ITR),- Vesting of title to land is matter of law, not matter of inference. This is case of transfer of property by operation of law and relevant statute clearly provides situations in which land vests, viz., section 16, section 17(1) and section 17(2). According to these provisions, taking of possession per se does not bring about vesting; taking of possession must be consequent upon passing of award (section 16) or order contemplated by section 17(1), or in situation contemplated by section 17(2). Act does not provide for taking of possession before passing of award, except in situations contemplated by section 17 (1) and (2). question is what is reasonable view to take in such situation? Should we relate back award to date of taking possession or should we relate possession already taken to date of award? We think it more reasonable, and consistent with provisions of Act, to adopt latter view. Since possession taken before award continues to be with Government, we must say that moment award is passed, possession from that moment onwards should be related to award. It is on that date that land vests in Government. (emphasis in bold supplied) 33.1.1. While affirming that in given set of facts, liability to tax for capital gains arose on date of award, High Court referred to various decisions on relating back, of possession previously taken, to date envisaged by Act of 1894; and took guidance, inter alia, from following enunciation by this Court in case of Lt. Governor of Himachal Pradesh v. Avinash Sharma: (1971) 1 SCR 413:- 45 "In present case notification under s. 17 (1) and (4) was issued by State Government and possession which had previously been taken must, from date of expiry of fifteen days from publication of notice under s. 9(1), be deemed to be possession of Government. We are unable to agree that where Government has obtained possession illegally or under some unlawful transaction and notification under s. 17(1) is issued land does not vest in Government free from all encumbrances. We are of view that when notification under s. 17(1) is issued, on expiration of fifteen days from publication of notice mentioned in s. 9(1), possession previously obtained will be deemed to be possession of Government under s. 17(1) of Act and land will vest in Government free from all encumbrances." (emphasis in bold supplied) 33.2. said decision in S. Appala Narasamma was followed by same High Court in case of Commissioner of Income-Tax v. Pandari Laxmaiah: (1997) 223 ITR 671 where, possession of subject land was taken on 03.08.1977 whereas preliminary notification for acquisition was published on 01.09.1977 while notice under Section 9(1) was issued on 20.05.1980 and award was passed on 25.03.1981. High Court held that relevant date for vesting of land in Government would be date of making award. 34. Before dilating on principles aforesaid, we may refer to decisions cited by learned counsel for parties but, while pointing out at once that said decisions are not of direct application to present case for, they essentially relate to right to receive compensation and not about date of vesting of land, with which we are concerned in present matter. 46 34.1. Learned counsel for appellant has laid emphasis on decision of Full Bench of Kerala High Court in case of Peter John (supra). In that case, High Court essentially dealt with questions as to when, in matters of acquisition of land, right to receive compensation arises and as to when interest accrues, as would be evident from question of law referred, which had been as under (at p.713 of ITR) :- " Whether, on facts and in circumstances of case, as per ratio of Supreme Court decisions in Shamlal Narula v. CIT [1964] 53 ITR 151 (SC) and Ramanathan Chettiar v. CIT [1967] 63 ITR 458 (SC), land acquisition interest of Rs. 80,253 included by Income Tax Officer under section 5(1)(b) of Income-tax Act, 1961, in total income for 1968-69 assessment, accrued de die in diem from date of taking possession of lands during years 1961 and 1962 up to March 31, 1968, inclusive and, therefore, only Rs. 12,626 which accrued de die in diem during concerned previous year of 366 calendar dates from April 1, 1967, to March 31, 1968, inclusive should have been included in total income for 1968-69 assessment and balance interest of Rs. 67,627 should be similarly included on accrual basis under section 5(1)(b) of I.T. Act, 1961, in income for six assessment years from 1962-63 to 1967-68 inclusive, as had already been done by Income Tax Officer by his orders dated June 6, 1972, for 1967-68 and 1969-70 assessments? " 34.1.1. In relation to question as to when does compensation accrue or when it is deemed to accrue, High Court referred to enunciation by this Court in case of Joginder Singh (supra) and held that such right arises immediately on dispossession and does not await quantification of compensation. High Court said (at p.716 of ITR), When does compensation accrue or when is it deemed to accrue? It is well settled that owner of property is entitled to compensation from date on which he is dispossessed of property on acquisition. This is because what Land Acquisition Officer does is to offer to purchase property for market value and when in process he takes possession of property at whatever stage it might be, owner of property is deprived of income and enjoyment of property from that 47 time. Whether offer in regard to quantum of compensation is accepted by land owner straightaway or finally settled by court is different question touching on quantum of compensation, not of right to receive compensation. We are here on question as to from which date land owner is entitled to receive it. There could be absolutely no doubt that both statutorily and in equity, land owner has right to receive compensation on day on which he is dispossessed of property. That right arises immediately on dispossession and does not await quantification of compensation by Land Acquisition Officer or by court .. 34.1.2. Further, in relation to question as to when does right to receive interest accrue or when it is deemed to accrue, High Court again referred to enunciation in Joginder Singh (supra) and held that it would not be at point of time other than date when right to receive compensation accrues. High Court again said (at pp.717-718 and 722 of ITR), Now, question is, when does right to receive interest accrue or is deemed to accrue; could it be at point of time other than date on which right to receive compensation accrues? It could not be, as we have already noticed that right to receive compensation accrues on dispossession of land owner from property on acquisition. He has right in praesenti to receive compensation, though it might actually be quantified or paid at later stage. If entire compensation or true compensation as Supreme Court would have it in Joginder Singh's case, AIR 1985 SC 382: [1985] 1 SCWR 110, to which land owner was entitled, on correct evaluation on basis of standards and guidance under sections 23 and 24, was paid moment he was dispossessed of property, no question of right to interest would survive. It is only where compensation payable is not paid on date when it was actually due, in order to compensate loss arising out of deprival of use of amount, that interest is paid till date of actual payment. That right to receive interest arises on date of dispossession on which date land owner is entitled to receive compensation, admits of no doubt . *** *** *** In light of foregoing discussions, our conclusion is that interest on compensation awarded with respect to land acquired under Land Acquisition Act runs from day to day, 48 accruing from date on which Government took possession of land, that being date on which land owner's right to receive entire compensation arises, though determined and paid later . 34.1.3. principles aforesaid, that right to receive compensation comes into being moment Government takes possession of property acquired; and right to receive interest also accrues at point of time when right to receive compensation accrues and runs day to day, do not correspondingly result in completion of transfer of property under acquisition and accrual of such gain that may classify as capital gain . As noticed, in matters of compulsory acquisition, accrual of capital gain depends upon completion of transfer of property from owner to Government and not upon accrual of right to receive compensation. Therefore, reference to decision in Peter John (supra) is entirely inapt in present case. 34.2. In case of Rama Bai (supra), this Court dealt with batch of appeals and references essentially involving question regarding point of time at which interest payable under Sections 28 and 34 of Act of 1894 accrues or arises, where such interest is paid on enhanced compensation awarded on reference under Section 18 or on further appeal to High Court and/or Supreme Court. This Court found that issue stood concluded by decision in Commissioner of Income- Tax v. Govindrajulu Chetty (T.N.K.): [1987] 165 ITR 231; and it was held that interest cannot be taken to have accrued on date of order granting enhanced compensation but has to be taken as having accrued 49 year after year from date of delivery of possession. This Court said as under:- we are of opinion that appeals before us (Civil Appeal No. 810 of 1974 and Civil Appeal No. 3027 of 1988) have to be allowed and references made under section 257 (Tax reference Cases Nos. 3 of 1976 and 1 to 3 of 1978) have to be answered by saying that question of accrual of interest will have to be determined in accordance with above decision of this court. effect of decision, we may clarify, is that interest cannot be taken to have accrued on date of order of court granting enhanced compensation but has to be taken as having accrued year after year from date of delivery of possession of lands till date of such order. 34.2.1. Obviously, decision in Rama Bai (supra), does not relate to questions at hand as regards completion of transfer so as to result in capital gains. In fact, principles aforesaid are relevant only to second part of re-assessment order dated 25.01.1988, whereby, as regards interest income, AO carried out protective assessment on accrual basis at rate of 12% per annum for previous year relevant to assessment year in question i.e., for period 01.04.1970 to 31.03.1971. 34.3. Again, decision of this Court cited by learned counsel for revenue in case of Joginder Singh (supra), which was followed by Kerala High Court in Peter John (supra), relates to right to receive compensation and right to receive interest. In that case, question was about date from which interest had to be granted and arose in circumstances that though High Court enhanced amount of compensation for acquisition and awarded 6% per annum as rate of interest on amount of compensation determined by Land Acquisition Officer and District Judge but, restricted such rate of interest on 50 amount of compensation enhanced by it at 4% per annum from date of possession and 6% per annum from date of its judgement. In that context, this Court held that High Court erred in restricting rate of interest on enhanced amount of compensation because owner of land was entitled to be paid true value of land on date of taking over of possession; and merely because amount was determined later did not mean that right to amount came into existence at later date. This Court also observed that when High Court held that rate of interest at 6% per annum was applicable from date of possession in relation to component of compensation determined by District Judge, there was no reason why same rate should not be applied from date of taking over possession in relation to component of enhancement effected by High Court. For reasons already discussed, this judgement also does not directly relate with question of completion of transfer for accrual of capital gain. 34.4. case of Bombay Burmah Trading Corpn. Ltd. (supra), is also inapplicable to present case because therein, questions basically related to amount of damages received by assessee due to loss suffered during World War II. observations therein, again, do not have bearing on question as to when transfer of land, in matter of compulsory acquisition, be treated as complete so as to result in capital gains. 51 35. Therefore, aforesaid decisions cited by learned counsel for parties, even if of guidance on question relating to right to receive compensation, do not directly assist us in determination of core question involved in this matter because, income-tax on capital gains is not levied on mere right to receive compensation. For chargeability of income-tax, income ought to have either arrived or accrued. In matter of acquisition of land under Act of 1894, taking over of possession before arrival of relevant stage for such taking over may give rise to potential right in owner of property to make claim for compensation but, looking to scheme of enactment, it cannot be said that transfer resulting in capital gains is complete with taking over of possession, even if such taking over had happened earlier than point of time of vesting contemplated in relevant provisions. 35.1. decision of this Court in case of Avinash Sharma (supra), however, supports view that in case of urgency acquisition, even if possession of land under acquisition is taken earlier, it should be related to process contemplated by Section 17 (1) of Act of 1894, and deemed to be effective from date on which period prescribed by Section 17 (1) would expire that is, fifteen days from publication of notice under Section 9(1) of Act of 1894. In S. Appala Narasamma and Pandari Laxmaiah (supra), Andhra Pradesh High Court applied these principles to cases pertaining to ordinary process of acquisition and held that if possession had been taken earlier, it would relate to award; 52 and date of award would be relevant date for vesting of land in Government. 35.2. In overall conspectus of matter, we are clearly of view that statements of law in aforesaid decisions of Andhra Pradesh High Court, based on enunciations by this Court in case of Avinash Sharma (supra), are rather unquestionable and need to be given imprimatur for application to controversy like present one. 36. For what has been discussed hereinabove, in our view, in matters relating to compulsory acquisition of land under Act of 1894, completion of transfer with vesting of land in Government essentially correlates with taking over of possession of land under acquisition by Government. However, where possession is taken over before arriving of relevant stage for such taking over, capital gains shall be deemed to have accrued upon arrival of relevant stage and not before. To be more specific, in such cases, capital gains shall be deemed to have accrued: (a) upon making of award, in case of ordinary acquisition referable to Section 16; and (b) after expiration of fifteen days from publication of notice mentioned in Section 9 (1), in case of urgency acquisition under Section 17. 37. As per facts-sheet noticed hereinbefore, in present case, land in question was subjected to acquisition under Act of 1894 by adopting ordinary process leading to award under Section 11. Therefore, ordinarily, capital gains would have accrued upon taking over of 53 possession after making of award. Consequently, capital gains to assessee-appellant for acquisition in question could not have accrued before date of award i.e., 29.09.1970. 38. However, on strength of submissions that land in question had already been in possession of beneficiary of acquisition, it has been suggested on behalf of assessee-appellant that land vested in Government immediately upon issuance of notification under Section 4 of Act of 1894 i.e., 15.05.1968 and capital gain accrued on that date. This suggestion and contentions founded thereupon remain totally meritless for variety of factors as indicated infra. 38.1. Even if we keep all other aspects aside and assume that land in question was, or came, in possession of Government before passing of award, position of law stated in point (a) of paragraph 36 hereinabove would apply; and capital gains shall be deemed to have accrued upon arrival of relevant stage of taking possession i.e., making of award and hence, capital gains cannot be taken to have accrued before date of award i.e., 29.09.1970. 38.2. In order to wriggle out of above-mentioned plain operation of law, it has been desperately suggested on behalf of appellant that it had been case of urgency acquisition and hence, process contemplated by Section 17 of Act of 1894 would apply. This suggestion is also baseless and suffers from several infirmities. 54 38.2.1. In first place, it is evident on face of record that it had not been matter of urgency acquisition and nowhere it appears that process contemplated by Section 17 of Act of 1894 was resorted to. Even contents of award dated 29.09.1970 make it clear that learned Land Acquisition Collector only awarded interest from date of initial notification for reason that land was in possession of College but, it was nowhere stated that he had received any directions from Government to take possession of land before making of award while acting under Section 17. 38.2.2. Secondly, if at all proceedings were taken under Section 17 of Act of 1894, land could have vested in Government only after expiration of fifteen days from date of publication of notice under Section 9(1); and, in any case, could not have vested in Government on date of publication of initial notification under Section 4 of Act of 1894. Significantly, assessee-appellant did not divulge date of publication of notice under Section 9(1) of Act of 1894 despite queries of Assessing Officer. suggestion about application of process contemplated by Section 17 of Act of 1894 remains totally unfounded. 39. In view of above, only question that remains is as to what is effect of possession of College over part of subject land at time of issuance of initial notification for acquisition. 55 39.1. Going back to facts-sheet, it is not in dispute that large part of subject land was given on lease to College 16 and said lease expired on 31.08.1967 but, land continued in possession of College. legal effect of these facts could be gathered from relevant provisions of Transfer of Property Act, 1882 and enunciations by Courts. 39.2. As noticed, where time period of any lease of immovable property is limited, it determines by efflux of such time, as per Section 111(a) of Act of 1882. Further, in terms of Section 108(q) of Act of 1882, on determination of lease, lessee is bound to put lessor into possession of leased property. In case where lessee does not deliver possession to lessor after determination of lease but lessor accepts rent or otherwise assents to his continuing in possession, in absence of agreement to contrary, status of such lessee is that of tenant holding over, in terms of Section 116 of Act of 1882. But, in absence of acceptance of rent or otherwise assent by lessor, status of lessee is that of tenant at sufferance. 39.3. aforesaid aspects relating to status of parties after expiry of period of lease remain well settled and do not require much elaboration. However, for ready reference, we may point out that in case of Nand Ram (D) through LRs. and Ors. v. Jagdish Prasad (D) through 16 As noticed from contents of award, land comprising Khasra Nos. 361 and 364 admeasuring 5 kanals and 7 marlas was not on lease with College 56 LRs.: 2020 (5) SCALE 723, this Court has re-expounded relevant principles in sufficient details, albeit in different context. relevant background of said case had been that land of plaintiff was taken on lease by defendant where it was agreed that plaintiff-lessor will not seek ejectment of defendant-lessee except in case where rent for one year remained in arrears. entire leased land was acquired under Act of 1894. Land Acquisition Collector determined amount of compensation but then, dispute arose with regard to apportionment between plaintiff and defendant for which, matter went in reference. Reference Court held that lessee having not paid rent for more than twelve months, lease had come to end and, therefore, he had no right to claim any share in compensation. Later on, part of land was de-notified from acquisition and that part remained in possession of defendant-lessee. Thereafter, plaintiff-lessor took up action claiming possession of land by filing suit against defendant- lessee. suit was decreed by Trial Court and decree was affirmed by First Appellate Court. However, High Court allowed second appeal holding that finding recorded in award about lease coming to end operated as res judicata and suit was filed beyond period of limitation. In further appeal, this Court did not approve decision of High Court and, in course of allowing appeal, exposited on principles relating to status of parties after expiry of 57 lease but retention of possession by lessee, inter alia, in following passage:- 29. Defendant was inducted as lessee for period of 20 years. lease period expired on 23rd September, 1974. Even if lessee had not paid rent, status of lessee would not change during continuation of period of lease. lessor had right to seek possession in terms of Clause 9 of lease deed. mere fact that lessor had not chosen to exercise that right will not foreclose rights of lessor as owner of property leased. After expiry of lease period, and in absence of payment of rent by lessee, status of lessee will be that of tenant at sufferance and not tenant holding over. Section 116 of TP Act confers status of tenant holding over on yearly or monthly basis keeping in view purpose of lease, only if lessor accepts payment of lease money. If lessor does not accept lease money, status of lessee would be that of tenant at sufferance. This Court in judgments reported as Bhawanji Lakhamshi and Ors. v. Himatlal Jamnadas Dani and Ors. (1972) 1 SCC 388, Badrilal v. Municipal Corp. of Indore : (1973) 2 SCC 388 and R.V. Bhupal Prasad v. State of A.P. and Ors.: (1995) 5 SCC 698 and also judgment in Sevoke Properties Ltd. v. West Bengal State Electricity Distribution Co. Ltd. examined scope of Section 116 of TP Act and held that lease would be renewed as tenant holding over only if lessor accepts pay-ment of rent after expiry of lease period. This Court in Bhawanji Lakhamshi held as under: 9. act of holding over after expiration of term does not create tenancy of any kind. If tenant remains in possession after determination of lease, common law rule is that he is tenant on sufferance. distinction should be drawn between tenant continuing in possession after determination of term with consent of landlord and tenant doing so without his consent. former is tenant at sufferance in English Law and latter tenant holding over or tenant at will. In view of concluding words of Section 116 of Transfer of Property Act, lessee holding over is in better position than tenant at will. assent of landlord to continuance of possession after determination of tenancy will create new tenancy. What section contemplates is that on one side there should be offer of taking new lease evidenced by lessee or sub-lessee remaining in possession of property after his term was over and on other side there must be definite consent to continuance of possession by 58 landlord expressed by acceptance of rent or otherwise. (emphasis in bold supplied) 39.3.1. Further, in Nand Ram (supra), this Court also quoted with approval principles stated by Delhi High Court in case of MEC India Pvt. Ltd. v. Lt. Col. Inder Maira & Ors.: 80 (1999) Delhi Law Times 679. relevant part of such quotation from decision of Delhi High Court may also be usefully noticed for present purpose as under:- 43. Thus, tenant at sufferance is one who wrongfully continues in possession after extinction of lawful title and that tenancy at sufferance is merely legal fiction or device to avoid continuance in possession from operating as trespass. tenant remaining in possession of property after determination of lease does not become trespasser, but continues as tenant at sufferance till possession is restored to landlord. possession of erstwhile tenant is juridical and he is protected from dispossession otherwise than in due course of law. Although, he is tenant, but being one at sufferance as aforesaid, no rent can be paid since, if rent is accepted by landlord he will be deemed to have consented and tenancy from month-to-month will come into existence. Instead of rent, tenant at sufferance and by his mere continuance in possession is deemed to acknowledge both landlord's title and his (tenant's) liability to pay mesne profits for use and occupation of property. 39.4. said principles, when applied to present case, leave nothing to doubt that in relation to that part of land in question which was given on lease, possession of College, after determination of lease on 31.08.1967, was only that of tenant at sufferance because it has not been shown if lessor i.e., appellant accepted rent or otherwise assented to continuation of lease. possession of College over part of land in question being only that of tenant at sufferance, had corresponding acknowledgment of title of appellant and of liability of College to pay mesne profits for use and occupation. same status of parties 59 qua land under lease existed on date of notification for acquisition i.e., 15.05.1968 and continued even until date of award i.e., 29.09.1970. In other words, even until date of award, appellant-assessee continued to carry its status as owner of land in question and that status was not lost only because part of land remained in possession of College. In this view of matter, suggestion that land vested in Government on date of initial notification remains totally baseless and could only be rejected. 39.5. Apart from above, significant factor for which entire case of assessee-appellant is knocked to ground is that neither on date of notification i.e., 15.05.1968 nor until date of award, Government took over possession of land in question. As noticed, possession had been of erstwhile lessee, College. Even if said College was going to be ultimate beneficiary of acquisition, it cannot be said that immediately upon issuance of notification under Section 4 of Act of 1894, its possession became possession of Government. Its possession, as noticed, remained that of tenant at sufferance and not beyond. 39.6. Viewed from any angle, it is clear that accrual of capital gains in present case had not taken place on 15.05.1968. If at all possession of College was to result in vesting of land in Government, such vesting happened only on date of award i.e., 29.09.1970 and not before. In other words, transfer of land from assessee-appellant to 60 Government reached its completion not before 29.09.1970 and hence, earliest date for accrual of capital gains because of this acquisition was date of award i.e., 29.09.1970. Therefore, assessment of capital gains as income of appellant for previous year relevant to assessment year 1971-1972 does not suffer from any infirmity or error. 40. incidental aspect of submissions on behalf of appellant that interest and solatium accrued on 15.05.1968 as per award and that being income pertaining to financial year 1968-1969 could not have been taxed in assessment year 1971-1972, also deserves to be rejected for reasons foregoing and for additionally reason that in his order dated 25.01.1988, AO has consciously made protective assessment on accrual basis on interest component referable to previous year 1970-1971, relevant for assessment year 1971-72. 40.1. We may also usefully observe that awarding of interest from 15.05.1968 in award had only been just and equitable application of provisions of law, including Section 28 of Act of 1894 but that did not result in vesting of land in Government on that date of notification. 41. For what has been discussed hereinabove, answer to Point No. 1 is clearly in negative i.e., against assessee-appellant and in favour of revenue that on facts and in circumstances of present case, transfer of capital asset (land in question), for purposes of Section 45 of Act of 1961, was complete only on 29.09.1970, date of award and not on 15.05.1968, date of notification for acquisition under 61 Section 4 of Act of 1894; and hence, capital gains arising out of such acquisition have rightly been charged to tax with reference to date of award i.e., 29.09.1970. Point No. 2 42. Though we have found that vesting of land in question for purpose of accrual of capital gains in this case was complete only on date of award that falls within previous year relevant for assessment year 1971-72, question still remains, in view of submissions made on behalf of appellant, about effect of decision of ITAT in relation to other case of assessee-appellant for assessment year 1975- 1976 where issue concerning date of accrual of capital gains was decided against revenue with reference to date of taking possession. Admittedly, said decision for assessment year 1975- 1976 was not appealed against and had attained finality. Hence, it has been argued on behalf of appellant that it is not open for revenue to question similar decision of ITAT in present case pertaining to assessment year 1971-1972. 43. We may gainfully recapitulate that in case pertaining to assessment year 1975-1976, question of capital gains arose in backdrop of facts that another parcel of land of appellant was acquired for purpose of construction of warehouse of Ambala City. 62 notification under Section 4 of Act of 1894 was issued on 26.06.1971 and award of compensation was made on 27.06.1974 but, possession of said land was taken by Government on 04.09.1972 i.e., before making of award. In given set of facts and circumstances, in ITA No.635/Chandi/84, ITAT accepted contention that case fell under urgency provision contained in Section 17 of Act of 1894 where assessee was divested of title to property, that vested in Government with effect from 04.09.1972, date of taking over possession. Hence, ITAT held that capital gains arising from said acquisition were not assessable for accounting period relevant for assessment year 1975-1976. 43.1. Learned counsel for appellant has strenuously argued that revenue is not entitled to take different stand in present case pertaining to assessment year 1971 1972, after having accepted said decision pertaining to assessment year 1975 1976 where it was held that capital gains accrued on date of taking over possession of land under acquisition by Government. learned counsel has relied upon following observations in Berger Paints India Ltd. (supra):- In view of judgments of this court in Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219; CIT v. Narendra Doshi [2002] 254 ITR 606 and CIT v. Shivsagar Estate [2002] 257 ITR 59, principle established is that if Revenue has not challenged correctness of law laid down by High Court and has accepted it in case of one assessee, then it is not open to Revenue to challenge its correctness in case of other assessees, without just cause. 63 44. question is whether above-noted observations apply to present case? In our view, answer to this question is clearly in negative for more than one reason. 44.1. In first place, it is ex facie evident that matter involved in said case pertaining to assessment year 1975-1976 was taken to be acquisition under urgency provision contained in Section 17 of Act of 1894 whereas, acquisition proceedings in present case had not been of urgency acquisition but had been of ordinary process where possession could have been taken only under Section 16 after making of award. As noticed, very structure of ordinary process leading to possession under Section 16 of Act of 1894 has been different than that of urgency process under Section 17; and said decision pertaining to proceedings under Section 17 of Act of 1894 cannot be directly applied to present case. 44.2. Secondly, fact that said case relating to assessment year 1975-1976 was not akin to present case was indicated by ITAT itself. As noticed, both cases, i.e., present one relating to assessment year 1971-1972 (in ITA No. 634/Chandi/84) and that relating to assessment year 1975-1976 (in ITA No. 635/Chandi/84) were decided by ITAT on same date i.e., 19.12.1985. While answer in relation to assessment year 1975-1976 was given by ITAT in favour of assessee-appellant to effect that possession having been taken on specified date i.e., 04.09.1972, capital gains were not assessable for 64 assessment year 1975-1976 but, while deciding appeal relating to present case for assessment year 1971-1972, ITAT found that date of taking over possession was not available and hence, matter was restored to file of ITO to find out actual date of possession.17 44.3. Thirdly, even if we assume that stand of revenue in present case is not in conformity with decision of ITAT in relation to assessment year 1975-1976, it cannot be said that revenue has no just cause to take such stand. As noticed, while rendering decision in relation to assessment year 1975-1976, ITAT did not notice principles available in various decisions including that of this Court in Avinash Sharma (supra) that even in case of urgency acquisition under Section 17 of Act of 1894, land was to vest in Government not on date of taking over possession but, only on expiration of fifteen days from publication of notice mentioned in Section 9(1). Looking to facts of present case and law applicable, in our view, revenue had every reason to question correctness of later decision of ITAT dated 29.06.1990 in second round of proceedings pertaining to assessment year 1971-1972. 44.4. Fourthly, ITAT itself on being satisfied about question of law involved in this case, made reference by its order dated 15.07.1991 to High Court. High Court having dealt with matter in reference 17 Of course, one observation was made by ITAT in order dated 19.12.1985 relating to present case that possession of land in question was taken before making of award. However, this observation turns out to be incorrect on facts as also in law, for reasons mentioned hereinbefore in Point No. 1. 65 proceedings and having answered reference in conformity with applicable principles, assessee cannot be heard to question stand of revenue with reference to other order for assessment year 1975-1976. In any case, it cannot be said that decision in relation to assessment year 1975-1976 had been of any such nature which would preclude revenue from raising issues which are germane to present case. 45. Hence, answer to Point No. 2 is also clearly in negative i.e., against assessee-appellant and in favour of revenue that fact situation of present case relating to assessment year 1971-1972 is not similar to that of other case of appellant relating to assessment year 1975-1976 and revenue is not precluded from taking stand that transfer of capital asset in present case was complete only on date of award i.e., on 29.09.1970. Conclusion 46. For what has been discussed hereinabove, we have not iota of doubt that in second round of proceeding, AO had rightly assessed tax liability of appellant, on long-term capital gains arising on account of acquisition, on basis of amount of compensation allowed in award dated 29.09.1970 as also enhanced amount of compensation accrued finally to appellant; and as regards interest income, had rightly made protective assessment on accrual basis. 66 47. In result, this appeal fails and is, therefore, dismissed. No costs. .. .J. (A.M.KHANWILKAR) .. .J. (HEMANT GUPTA) .. . .J. (DINESH MAHESHWARI) New Delhi, Dated: 25th August, 2020. 67 Raj Pal Singh v. Commissioner of Income-tax, Rohtak