RAJ PAL SINGH versus COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK

27. Having regard to the relevant provisions of the Act of 1961 whereby and whereunder, “capital gains” essentially relate to the transfer of capital asset by the assessee; and the background aspects of the present case, where the capital asset of the assessee-appellant (land in question) was in possession of the beneficiary College even after expiry of the lease on 31.08.1967, it shall also be apposite to take note of a few provisions of the Transfer of Property Act, 188215 concerning the general connotation of “transfer of property” as also those relating to the transaction of lease of immovable property. 27.1. In Section 5, occurring in Chapter II of the Act of 1882, the phrase “transfer of property” is defined as under:- “5. “Transfer of property” defined.- In the following sections “transfer of property” means an act by which a 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 a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.” 27.2. The rights and liabilities of lessor and lessee of immovable property are delineated in Section 108 of the Act of 1882 and its clause (q) postulates an implied obligation of the lessee to put the lessor into possession of the property on determination of the lease in the following words:- “108. Rights and liabilities of lessor and lessee. – In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:- (q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property.” 15 For short, ‘the Act of 1882’ RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] 27.2.1. Determination of lease by efflux of time is envisaged in clause (a) of Section 111 of the Act of 1882 as follows: “111. Determination of lease.- A lease of immovable property determines- (a) by efflux of the time limited thereby; ***” 27.2.2. One of the features of the transaction of lease, in the case where lessee remains in possession after determination thereof and the lessor assents to his possession, is dealt with by Section 116 of the Act of 1882 that reads as under:- “116. Effect of holding over.- If a lessee or under-lessee of property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or under-lessee, or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased, as specified in section 106.” Point No. 1.

28. As noticed, the first point for determination revolves around the basic questions as to when did the transfer of the land in question, by way of compulsory acquisition, take place and when did the capital gains accrue to the assessee-appellant? The assessee maintains that this transfer, leading to capital gains, took place on the very date of preliminary notification (15.05.1968) because, possession of the land in question was already with the beneficiary College. The revenue, however, asserts that such transfer reached its completion, resulting in capital gains, only on the date of award (29.09.1970).

29. For effectual determination of the questions involved, we may take into comprehension the basic features of the head of income described as “capital gains”. 29.1. As noticed, capital gains are those profits or gains which arise out of the transfer of capital asset. The expression “capital asset” is defined in Section 2(14) of the Act of 1961. In the present case, much dilation on this definition is not required because the subject land had indisputably been a “capital asset” of the assessee-appellant. We may, however, observe that such definition of ‘capital asset’ is of wide amplitude, taking in its fold the property of any kind held by an assessee, except what has been expressively excluded therein, like stock-in-trade, consumables stores, personal effects, etc. 29.2. The expression “transfer” in relation to a capital asset has been defined in Section 2(47) of the Act of 1961. The said definition has also been of substantially wide amplitude so as to include sale, exchange or relinquishment of a capital asset; or extinguishment of any rights therein; or compulsory acquisition thereof. It is also noteworthy that as per the fundamentals in the Act of 1882, “transfer of property” means an act by which a 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, the contents of the then existing Section 45 of the Act of 1961 read with the relevant definitions would make it clear that such profits or gains are chargeable to income-tax as “capital gains” that arise out of the transfer of a capital asset by any of the 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 the income of the previous year in which transfer took place. Differently put, capital gains of an assessee, arising from transfer of capital asset, are chargeable to tax as income of the previous year in which transfer had taken place.

30. Applying the aforesaid concepts of “transfer” and “transfer of property” to the facts of the present case, it could be readily found that when the subject land has been compulsorily acquired, its transfer from the assessee-appellant to the Government is directly covered by Section 2(47) of the Act of 1961. 30.1. Thus, the basic elements for chargeability of the gains, arising from compulsory acquisition of the subject land, to income-tax under the head “capital gains”, do exist in the present case. However, the gains so arising would be deemed to be the income of the previous year in which transfer took place.

31. Entering into the enquiry as to when had the transfer, of subject land from the assessee-appellant to the Government, taken place, we need to take into account the principles governing completion of transfer RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] of land from the owner to the Government in the matters of compulsory acquisition. Ordinarily, in such matters of compulsory acquisition, there is a structured process prescribed by law, which is required to be complied with for a lawful acquisition and which has the legal effect of transfer of ownership of the property in question to the acquiring body, usually the appropriate Government. The controversy in the present matter has its genesis in the compulsory acquisition of the land of assessee-appellant under the Act of 1894 and hence, pertinent it would be to look at the processes contemplated by the said enactment. 31.1. A brief overview of the scheme of the Act of 1894, as existing at the relevant point of time, makes it clear that publication of preliminary notification under Section 4 by itself did not vest the property in the Government; it only informed about the intention of the Government to acquire the land for a public purpose. After this notification, in the ordinary course, under Section 5A, the Land Acquisition Collector was required to examine the objection, if any, to the proposed acquisition; and after examining his report, if so made, the Government was to issue declaration under Section 6, signifying its satisfaction that the land was indeed required for public purpose. These steps were to be followed by notice under Section 9, stating that the Government intended to take possession of the land and inviting claims for compensation. Thereafter, the Collector was to make his award under Section 11. As noticed hereinbefore, as per Section 16 of the Act of 1894, the Land Acquisition Collector, after making the award, could have taken possession of the land under acquisition and thereupon, the land vested in the Government free from all encumbrances. 31.2. A deviation from the process above-noted and a somewhat different process was permissible in Section 17 of the Act of 1894 whereunder, in cases of urgency and if the Government had so directed, the Collector could have taken possession of any waste or arable land after fifteen days from the publication of the notice mentioned in Section 9(1), even though the award had not been made; and thereupon, the land was to vest in the Government free from all encumbrances. 31.3. In the case of Special Land Acquisition Officer, Bombay and Ors. v. Godrej and Boyce: (1988) 1 SCC 50, while dealing with the power of the Government to withdraw from the acquisition under Section 48 of the Act of 1894, this Court exposited on the gamut of the ordinary process of taking possession of the land under acquisition and legal requirements as also implications thereof, in the following words:- “5……Under the scheme of the Act, neither the notification under Section 4 nor the declaration under Section 6 nor the notice under Section 9 is sufficient to divest the original owner of, or other person interested in, the land of his rights therein. Section 16 makes it clear beyond doubt that the title to the land vests in the government only when possession is taken by the government. Till that point of time, the land continues to be with the original owner and he is also free (except where there is specific legislation to the contrary) to deal with the land just as he likes, although it may be that on account of the pendency of proceedings for acquisition intending purchasers may be chary of coming near the land. So long as possession is not taken over, the mere fact of a notification under Section 4 or declaration under Section 6 having been made does not divest the owner of his rights in respect of the land or relieve him of the duty to take care of the land and protect it against encroachments. Again, such a notification does not either confer on the State Government any right to interfere with the ownership or other rights in the land or impose on it any duty to remove encroachments therefrom or in any other way safeguard the interests of the original owner of the land. It is in view of this position, that the owner’s interests remain unaffected until possession is taken, that Section 48 gives a liberty to the State Government to withdraw from the acquisition at any stage before possession is taken…….” (emphasis in bold supplied) 31.4. In the case of Fruit & Vegetable Merchants Union v. Delhi Improvement Trust: AIR 1957 SC 344, this Court expounded on variegated features of the term “vesting” as follows:- “As will presently appear, the term “vesting” has a variety of meaning which has to be gathered from the context in which It has been used. It may mean full ownership, or only possession for a particular purpose, or clothing the authority with power to deal with the property as the agent of another person or authority……. That the word “vest” is a word of variable import is shown by provisions of Indian statutes also. For example, S. 56 of the RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] Provincial Insolvency Act (5 of 1920) empowers the Court at the time of the making of the order of adjudication or thereafter to appoint a receiver for the property of the insolvent and further provides that “such property shall thereupon vest in such receiver.” The property vests in the receiver for the purpose of administering the estate of the insolvent for the payment of his debts after realising his assets. The property of the insolvent vests in the receiver not for all purposes but only for the purpose of the Insolvency Act and the receiver has no interest of his own in the property. On the other hand, Ss. 16 and 17 of the Land Acquisition Act (Act 1 of 1894), provide that the property so acquired, upon the happening of certain events, shall “vest absolutely in the Government free from all encumbrances”. In the cases contemplated by Ss. 16 and 17 the property acquired becomes the property of Government without any conditions or limitations either as to title or possessions. The legislature has made it clear that the vesting of the property is not for any limited purpose or limited duration. It would thus appear that the word “vest” has not got a fixed connotation, meaning in all cases that the property is owned by the person or the authority in whom it vests. It may vest in title, or it may vest in possession, or it may vest in a limited sense, as indicated in the context in which it may have been used in a particular piece of legislation…..” (emphasis in bold supplied) 31.5. The expositions aforesaid leave nothing for debate that in the matter of compulsory acquisition of land under the Act of 1894 for public purpose, the property was to vest absolutely in the Government (thereby divesting the owner of all his rights therein) only after taking of possession in either of the 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, the owner was divested of the property and same vested in the Government in absolute terms only if, and after, the possession was taken by either of the processes envisaged in Sections 16 and 17. However, so long as possession was not taken, the mere fact of issuance of notification under Section 4 of the Act of 1894 or declaration under Section 6 thereof, did not divest the owner of his right in respect of the property in question.

32. Having thus taken note of the 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 a capital asset in compulsory acquisition. 32.1. The features above-noticed, relating to completion of transfer by way of compulsory acquisition under the Act of 1894 upon taking of possession by the Government; and such event of taking possession being the relevant happening for the purpose of Section 45 of the Act of 1961, were duly applied by the Courts in various decisions related with taxing of capital gains. As an example, we may usefully refer to a decision of Karnataka High Court in the case of Buddaiah v. Commissioner of Income-Tax, Karnataka-2: (1985) 155 ITR 277 wherein, the High Court referred to the aforesaid decision of this Court in Fruit & Vegetable Merchants Union and held that since title of land passes to the Government on possession being taken by the Deputy Commissioner under Section 16 of the Act of 1894, such date of taking possession becomes relevant for the purposes of Section 45 of the Act of 1961. The High Court said (at p. 281 of ITR),- “The assessee’s contention, therefore, is contrary to the provisions of s. 16 of the Land Acquisition Act. Since the title of the owner of the lands acquired under the Land Acquisition Act passes to the Government on possession being taken by the Deputy Commissioner under s. 16 of the Act, the date of taking possession becomes relevant for purposes of s. 45 of the I.T. Act, so far as transfer of title is concerned.” (emphasis in bold supplied)

33. However, the propositions aforesaid do not directly apply to a case where, for any reason, possession of the land had already been taken by the Government or delivered by the owner before completion of process envisaged by Section 16 or Section 17 of the Act of 1894. In such a case, the question, obviously, would be as to when has capital gain accrued? And this is the core of the present matter. 33.1. Taking up the core question, as to when capital gains would accrue in a case of compulsory acquisition of land where possession had already been taken before reaching of the relevant stage for taking over possession in the structured process contemplated by the statute, we may usefully refer to the decision of Andhra Pradesh High Court in RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] the case of S. Appala Narasamma v. Commissioner of Income-Tax: (1987) 168 ITR 17. Therein, the land of the assessee was acquired for the Town Planning Trust but, during the course of land acquisition proceedings, possession of the land was delivered voluntarily by the assessee to the Town Planning Trust on 25.03.1970. The award of compensation was made on 22.03.1971. In the assessment proceedings, the question arose, as to in which year did the capital gain arise? Thus, similar question was involved therein, i.e., as to whether the land must be deemed to have vested in the State on the date when the possession was taken with the consent of the landlord or on the date of award? The Tribunal took the view that the land vested in the Government on the date of making of the award and this conclusion was affirmed by the High Court. While dealing with the principles relating to vesting of title and examining the fact situation where possession was taken before making of award, the High Court held that vesting of title to the land was a matter of law and not a matter of inference; and in the given situation, the moment the award was made, possession from that moment onwards should be related to the award; and on that date, the land vested in the Government. The High Court said (at pp. 20 and 21 of ITR),- “Vesting of title to the land is a matter of law, not a matter of inference. This is a case of transfer of property by operation of law and the relevant statute clearly provides the situations in which the land vests, viz., section 16, section 17(1) and section 17(2). According to these provisions, the taking of possession per se does not bring about vesting; the taking of possession must be consequent upon passing of an award (section 16) or an order contemplated by section 17(1), or in a situation contemplated by section 17(2). The Act does not provide for taking of possession before the passing of the award, except in situations contemplated by section 17 (1) and (2). The question is what is the reasonable view to take in such a situation? Should we relate back the award to the date of taking possession or should we relate the possession already taken to the date of the award? We think it more reasonable, and consistent with the provisions of the Act, to adopt the latter view. Since possession taken before the award continues to be with the Government, we must say that the moment the award is passed, possession from that moment onwards should be related to the award. It is on that date that the land vests in the Government.” (emphasis in bold supplied) 33.1.1. While affirming that in the given set of facts, the liability to tax for capital gains arose on the date of award, the High Court referred to various decisions on relating back, of the possession previously taken, to the date envisaged by the Act of 1894; and took guidance, inter alia, from the following enunciation by this Court in the case of Lt. Governor of Himachal Pradesh v. Avinash Sharma: (1971) 1 SCR 413:- “In the present case a notification under s. 17 (1) and (4) was issued by the State Government and possession which had previously been taken must, from the date of expiry of fifteen days from the publication of the notice under s. 9(1), be deemed to be the possession of the Government. We are unable to agree that where the Government has obtained possession illegally or under some unlawful transaction and a notification under s. 17(1) is issued the land does not vest in the Government free from all encumbrances. We are of the view that when a notification under s. 17(1) is issued, on the expiration of fifteen days from the publication of the notice mentioned in s. 9(1), the possession previously obtained will be deemed to be the possession of the Government under s. 17(1) of the Act and the land will vest in the Government free from all encumbrances.” (emphasis in bold supplied) 33.2. The said decision in S. Appala Narasamma was followed by the same High Court in the case of Commissioner of Income-Tax v. Pandari Laxmaiah: (1997) 223 ITR 671 where, possession of the subject land was taken on 03.08.1977 whereas the 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. The High Court held that the relevant date for vesting of the land in the Government would be the date of making the award.

34. Before dilating on the principles aforesaid, we may refer to the decisions cited by the learned counsel for the parties but, while pointing out at once that the said decisions are not of direct application to the present case for, they essentially relate to the right to receive compensation and not about the date of vesting of the land, with which we are concerned in the present matter. RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] 34.1. Learned counsel for the appellant has laid emphasis on the decision of the Full Bench of Kerala High Court in the case of Peter John (supra). In that case, the High Court essentially dealt with the questions as to when, in the matters of acquisition of land, the right to receive compensation arises and as to when interest accrues, as would be evident from the question of law referred, which had been as under (at p.713 of ITR) :- “Whether, on the facts and in the circumstances of the case, as per the ratio of the Supreme Court decisions in Shamlal Narula v. CIT [1964] 53 ITR 151 (SC) and Ramanathan Chettiar v. CIT [1967] 63 ITR 458 (SC), the land acquisition interest of Rs. 80,253 included by the Income Tax Officer under section 5(1)(b) of the Income-tax Act, 1961, in the total income for 1968-69 assessment, accrued de die in diem from the date of taking possession of the lands during the years 1961 and 1962 up to March 31, 1968, inclusive and, therefore, only Rs. 12,626 which accrued de die in diem during the concerned previous year of 366 calendar dates from April 1, 1967, to March 31, 1968, inclusive should have been included in the total income for 1968-69 assessment and the balance interest of Rs. 67,627 should be similarly included on accrual basis under section 5(1)(b) of the I.T. Act, 1961, in the income for the six assessment years from 1962-63 to 1967-68 inclusive, as had already been done by the Income Tax Officer by his orders dated June 6, 1972, for the 1967-68 and 1969-70 assessments? “ 34.1.1. In relation to the question as to when does the compensation accrue or when it is deemed to accrue, the High Court referred to the enunciation by this Court in the case of Joginder Singh (supra) and held that such right arises immediately on dispossession and does not await quantification of compensation. The High Court said (at p.716 of ITR), – “When does the compensation accrue or when is it deemed to accrue? It is well settled that the owner of the property is entitled to compensation from the date on which he is dispossessed of the property on acquisition. This is because what the Land Acquisition Officer does is to offer to purchase the property for the market value and when in the process he takes possession of the property at whatever stage it might be, the owner of the property is deprived of the income and enjoyment of the property from that time. Whether the offer in regard to the quantum of compensation is accepted by the land owner straightaway or finally settled by the court is a different question touching on the quantum of compensation, not of the right to receive compensation. We are here on the question as to from which date the land owner is entitled to receive it. There could be absolutely no doubt that both statutorily and in equity, the land owner has a right to receive compensation on the day on which he is dispossessed of the property. That right arises immediately on dispossession and does not await quantification of the compensation by the Land Acquisition Officer or by the court…..” 34.1.2. Further, in relation to the question as to when does the right to receive interest accrue or when it is deemed to accrue, the High Court again referred to the enunciation in Joginder Singh (supra) and held that it would not be at a point of time other than the date when the right to receive compensation accrues. The High Court again said (at pp.717-718 and 722 of ITR), – “Now, the question is, when does the right to receive interest accrue or is deemed to accrue; could it be at a point of time other than the date on which the right to receive compensation accrues? It could not be, as we have already noticed that the right to receive compensation accrues on dispossession of the land owner from the property on acquisition. He has a right in praesenti to receive compensation, though it might actually be quantified or paid at a later stage. If the entire compensation or true compensation as the Supreme Court would have it in Joginder Singh’s case, AIR 1985 SC 382: [1985] 1 SCWR 110, to which the land owner was entitled, on a correct evaluation on the basis of the standards and guidance under sections 23 and 24, was paid the moment he was dispossessed of the property, no question of right to interest would survive. It is only where the compensation payable is not paid on the date when it was actually due, in order to compensate the loss arising out of the deprival of the use of the amount, that interest is paid till the date of actual payment. That the right to receive interest arises on the date of dispossession on which date the land owner is entitled to receive compensation, admits of no doubt…. RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] In the light of the foregoing discussions, our conclusion is that interest on compensation awarded with respect to the land acquired under the Land Acquisition Act runs from day to day, accruing from the date on which the Government took possession of the land, that being the date on which the land owner’s right to receive the entire compensation arises, though determined and paid later….” 34.1.3. The principles aforesaid, that the right to receive compensation comes into being the moment Government takes possession of the property acquired; and the right to receive interest also accrues at the point of time when the right to receive compensation accrues and runs day to day, do not correspondingly result in completion of transfer of the property under acquisition and accrual of such a gain that may classify as “capital gain”. As noticed, in the matters of compulsory acquisition, accrual of capital gain depends upon completion of transfer of property from the owner to the Government and not upon accrual of right to receive compensation. Therefore, reference to the decision in Peter John (supra) is entirely inapt in the present case. 34.2. In the case of Rama Bai (supra), this Court dealt with a batch of appeals and references essentially involving the question regarding the point of time at which the interest payable under Sections 28 and 34 of the Act of 1894 accrues or arises, where such interest is paid on enhanced compensation awarded on a reference under Section 18 or on further appeal to the High Court and/or the Supreme Court. This Court found that the issue stood concluded by the decision in Commissioner of Income-Tax v. Govindrajulu Chetty (T.N.K.): [1987] 165 ITR 231; and it was held that the interest cannot be taken to have accrued on the date of the order granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession. This Court said as under:- “……we are of the opinion that the appeals before us (Civil Appeal No. 810 of 1974 and Civil Appeal No. 3027 of 1988) have to be allowed and the 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 the question of accrual of interest will have to be determined in accordance with the above decision of this court. The effect of the decision, we may clarify, is that the interest cannot be taken to have accrued on the date of the order of the court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order.” 34.2.1. Obviously, the decision in Rama Bai (supra), does not relate to the questions at hand as regards completion of transfer so as to result in capital gains. In fact, the principles aforesaid are relevant only to the second part of the re-assessment order dated 25.01.1988, whereby, as regards interest income, the AO carried out protective assessment on accrual basis at the rate of 12% per annum for the previous year relevant to the assessment year in question i.e., for the period 01.04.1970 to 31.03.1971. 34.3. Again, the decision of this Court cited by learned counsel for the revenue in the case of Joginder Singh (supra), which was followed by the Kerala High Court in Peter John (supra), relates to the right to receive compensation and the right to receive interest. In that case, the question was about the date from which interest had to be granted and arose in the circumstances that though the High Court enhanced the amount of compensation for acquisition and awarded 6% per annum as the rate of interest on the amount of compensation determined by the Land Acquisition Officer and the District Judge but, restricted such rate of interest on the amount of compensation enhanced by it at 4% per annum from the date of possession and 6% per annum from the date of its judgement. In that context, this Court held that the High Court erred in restricting the rate of interest on the enhanced amount of compensation because owner of the land was entitled to be paid the true value of land on the date of taking over of possession; and merely because the amount was determined later did not mean that the right to amount came into existence at a later date. This Court also observed that when the High Court held that the rate of interest at 6% per annum was applicable from the date of possession in relation to the component of compensation determined by the District Judge, there was no reason why the same rate should not be applied from the date of taking over possession in relation to the component of enhancement effected by the High Court. For the reasons already discussed, this judgement also does not directly relate with the question of completion of transfer for accrual of capital gain. 34.4. The case of Bombay Burmah Trading Corpn. Ltd. (supra), is also inapplicable to the present case because therein, the questions RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] basically related to the amount of damages received by the assessee due to the loss suffered during World War II. The observations therein, again, do not have bearing on the question as to when the transfer of land, in the matter of compulsory acquisition, be treated as complete so as to result in capital gains.

35. Therefore, the aforesaid decisions cited by the learned counsel for parties, even if of guidance on the question relating to the right to receive compensation, do not directly assist us in determination of the core question involved in this matter because, income-tax on capital gains is not levied on the mere right to receive compensation. For chargeability of income-tax, the income ought to have either arrived or accrued. In the matter of acquisition of land under the Act of 1894, taking over of possession before arrival of relevant stage for such taking over may give rise to a potential right in the owner of the property to make a claim for compensation but, looking to the 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 the point of time of vesting contemplated in the relevant provisions. 35.1. The decision of this Court in the case of Avinash Sharma (supra), however, supports the view that in the case of urgency acquisition, even if possession of the land under acquisition is taken earlier, it should be related to the process contemplated by Section 17 (1) of the Act of 1894, and deemed to be effective from the date on which the period prescribed by Section 17 (1) would expire that is, fifteen days from the publication of the notice under Section 9(1) of the Act of 1894. In S. Appala Narasamma and Pandari Laxmaiah (supra), the Andhra Pradesh High Court applied these principles to the cases pertaining to ordinary process of acquisition and held that if possession had been taken earlier, it would relate to the award; and the date of award would be the relevant date for vesting of the land in the Government. 35.2. In an overall conspectus of the matter, we are clearly of the view that the statements of law in the aforesaid decisions of Andhra Pradesh High Court, based on the enunciations by this Court in the case of Avinash Sharma (supra), are rather unquestionable and need to be given imprimatur for application to the controversy like the present one.

36. For what has been discussed hereinabove, in our view, in the matters relating to compulsory acquisition of land under the Act of 1894, completion of transfer with vesting of land in the Government essentially correlates with taking over of possession of the land under acquisition by the Government. However, where possession is taken over before arriving of the relevant stage for such taking over, capital gains shall be deemed to have accrued upon arrival of the relevant stage and not before. To be more specific, in such cases, capital gains shall be deemed to have accrued: (a) upon making of the award, in the case of ordinary acquisition referable to Section 16; and (b) after expiration of fifteen days from the publication of the notice mentioned in Section 9 (1), in the case of urgency acquisition under Section 17.

37. As per the facts-sheet noticed hereinbefore, in the present case, the land in question was subjected to acquisition under the Act of 1894 by adopting the ordinary process leading to award under Section 11. Therefore, ordinarily, capital gains would have accrued upon taking over of possession after making of the award. Consequently, capital gains to the assessee-appellant for the acquisition in question could not have accrued before the date of award i.e., 29.09.1970. 38. However, on the strength of the submissions that the land in question had already been in possession of the beneficiary of acquisition, it has been suggested on behalf of the assessee-appellant that the land vested in the Government immediately upon issuance of notification under Section 4 of the Act of 1894 i.e., 15.05.1968 and capital gain accrued on that date. This suggestion and the contentions founded thereupon remain totally meritless for a variety of factors as indicated infra. 38.1. Even if we keep all other aspects aside and assume that the land in question was, or came, in possession of the Government before passing of the award, the 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 the relevant stage of taking possession i.e., making of award and hence, capital gains cannot be taken to have accrued before the date of award i.e., 29.09.1970. 38.2. In order to wriggle out of the above-mentioned plain operation of law, it has been desperately suggested on behalf of the appellant that it had been a case of urgency acquisition and hence, the process contemplated by Section 17 of the Act of 1894 would apply. This suggestion is also baseless and suffers from several infirmities. 38.2.1. In the first place, it is evident on the face of the record that it had not been a matter of urgency acquisition and nowhere it RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] appears that the process contemplated by Section 17 of the Act of 1894 was resorted to. Even the contents of the award dated 29.09.1970 make it clear that the learned Land Acquisition Collector only awarded interest from the date of initial notification for the reason that the land was in possession of the College but, it was nowhere stated that he had received any directions from the Government to take possession of the land before making of the award while acting under Section 17. 38.2.2. Secondly, if at all the proceedings were taken under Section 17 of the Act of 1894, the land could have vested in the Government only after expiration of fifteen days from the date of publication of notice under Section 9(1); and, in any case, could not have vested in the Government on the date of publication of initial notification under Section 4 of the Act of 1894. Significantly, the assessee-appellant did not divulge the date of publication of notice under Section 9(1) of the Act of 1894 despite the queries of the Assessing Officer. The suggestion about application of the process contemplated by Section 17 of the Act of 1894 remains totally unfounded. 39. In view of the above, the only question that remains is as to what is the effect of possession of College over a part of the subject land at the time of issuance of initial notification for acquisition. 39.1. Going back to the facts-sheet, it is not in dispute that a large part of the subject land was given on lease to the College16 and the said lease expired on 31.08.1967 but, the land continued in possession of the College. The legal effect of these facts could be gathered from the relevant provisions of the Transfer of Property Act, 1882 and the enunciations by the Courts. 39.2. As noticed, where the time period of any lease of immovable property is limited, it determines by efflux of such time, as per Section 111(a) of the Act of 1882. Further, in terms of Section 108(q) of the Act of 1882, on determination of lease, the lessee is bound to put the lessor into possession of the leased property. In case where lessee does not deliver possession to the lessor after determination of the lease but the lessor accepts rent or otherwise assents to his continuing in possession, in the absence of an agreement to the contrary, the status of such lessee is that of tenant holding over, in terms of Section 116 of the Act of 1882. 16 As noticed from the contents of the award, the land comprising Khasra Nos. 361 and 364 admeasuring 5 kanals and 7 marlas was not on lease with the College But, in the absence of acceptance of rent or otherwise assent by the lessor, the status of lessee is that of tenant at sufferance. 39.3. The aforesaid aspects relating to the status of parties after expiry of the period of lease remain well settled and do not require much elaboration. However, for ready reference, we may point out that in the case of Nand Ram (D) through LRs. and Ors. v. Jagdish Prasad (D) through LRs.: 2020 (5) SCALE 723, this Court has re-expounded the relevant principles in sufficient details, albeit in a different context. The relevant background of the said case had been that the land of plaintiff was taken on lease by the defendant where it was agreed that the plaintiff-lessor will not seek ejectment of defendant-lessee except in the case where the rent for one year remained in arrears. The entire leased land was acquired under the Act of 1894. The Land Acquisition Collector determined the amount of compensation but then, dispute arose with regard to apportionment between the plaintiff and the defendant for which, the matter went in reference. The Reference Court held that lessee having not paid rent for more than twelve months, the lease had come to end and, therefore, he had no right to claim any share in the compensation. Later on, a part of the land was de-notified from acquisition and that part remained in possession of the defendant-lessee. Thereafter, the plaintiff-lessor took up action claiming possession of the land by filing a suit against the defendant-lessee. The suit was decreed by the Trial Court and the decree was affirmed by the First Appellate Court. However, the High Court allowed the second appeal holding that the finding recorded in the award about the lease coming to an end operated as res judicata and the suit was filed beyond the period of limitation. In further appeal, this Court did not approve the decision of High Court and, in the course of allowing the appeal, exposited on the principles relating to the status of parties after expiry of the lease but retention of possession by the lessee, inter alia, in the following passage:- “29. The Defendant was inducted as a lessee for a period of 20 years. The lease period expired on 23rd September, 1974. Even if the lessee had not paid rent, the status of the lessee would not change during the continuation of the period of lease. The lessor had a right to seek possession in terms of Clause 9 of the lease deed. The mere fact that the lessor had not chosen to exercise that right will not foreclose the rights of the lessor as owner of the property leased. After the expiry of lease period, and in the RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] absence of payment of rent by the lessee, the status of the lessee will be that of tenant at sufferance and not a tenant holding over. Section 116 of the TP Act confers the status of a tenant holding over on a yearly or monthly basis keeping in view the purpose of the lease, only if the lessor accepts the payment of lease money. If the lessor does not accept the lease money, the status of the lessee would be that of tenant at sufferance. This Court in the 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 a judgment in Sevoke Properties Ltd. v. West Bengal State Electricity Distribution Co. Ltd. examined the scope of Section 116 of the TP Act and held that the lease would be renewed as a tenant holding over only if the lessor accepts the pay-ment of rent after the expiry of lease period. This Court in Bhawanji Lakhamshi held as under: “9. The act of holding over after the expiration of the term does not create a tenancy of any kind. If a tenant remains in possession after the determination of the lease, the common law rule is that he is a tenant on sufferance. A distinction should be drawn between a tenant continuing in possession after the determination of the term with the consent of the landlord and a tenant doing so without his consent. The former is a tenant at sufferance in English Law and the latter a tenant holding over or a tenant at will. In view of the concluding words of Section 116 of the Transfer of Property Act, a lessee holding over is in a better position than a tenant at will. The assent of the landlord to the continuance of possession after the determination of the tenancy will create a new tenancy. What the section contemplates is that on one side there should be an offer of taking a new lease evidenced by the lessee or sub- lessee remaining in possession of the property after his term was over and on the other side there must be a definite consent to the continuance of possession by the 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 the principles stated by Delhi High Court in the case of MEC India Pvt. Ltd. v. Lt. Col. Inder Maira & Ors.: 80 (1999) Delhi Law Times 679. A relevant part of such quotation from the decision of Delhi High Court may also be usefully noticed for the present purpose as under:- “43. Thus, a tenant at sufferance is one who wrongfully continues in possession after the extinction of a lawful title and that a tenancy at sufferance is merely a legal fiction or device to avoid continuance in possession from operating as a trespass. A tenant remaining in possession of the property after determination of the lease does not become a trespasser, but continues as a tenant at sufferance till possession is restored to the landlord. The possession of an erstwhile tenant is juridical and he is a protected from dispossession otherwise than in due course of law. Although, he is a tenant, but being one at sufferance as aforesaid, no rent can be paid since, if rent is accepted by the landlord he will be deemed to have consented and a tenancy from month-to-month will come into existence. Instead of rent, the tenant at sufferance and by his mere continuance in possession is deemed to acknowledge both the landlord’s title and his (tenant’s) liability to pay mesne profits for the use and occupation of the property.” 39.4. The said principles, when applied to the present case, leave nothing to doubt that in relation to that part of the land in question which was given on lease, possession of the College, after determination of the lease on 31.08.1967, was only that of a tenant at sufferance because it has not been shown if the lessor i.e., the appellant accepted rent or otherwise assented to the continuation of lease. The possession of College over the part of land in question being only that of tenant at sufferance, had the corresponding acknowledgment of the title of the appellant and of the liability of the College to pay mesne profits for use and occupation. The same status of the parties qua the land under lease existed on the date of notification for acquisition i.e., 15.05.1968 and continued even until the date of award i.e., 29.09.1970. In other words, even until the date of award, the appellant-assessee continued to carry its status as owner of the land in question and that status was not lost only because a part of the land remained in possession of the College. In this view of the matter, the suggestion that the land vested in the Government on the RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] date of initial notification remains totally baseless and could only be rejected. 39.5. Apart from the above, the significant factor for which the entire case of the assessee-appellant is knocked to the ground is that neither on the date of notification i.e., 15.05.1968 nor until the date of award, the Government took over possession of the land in question. As noticed, the possession had been of the erstwhile lessee, the College. Even if the said College was going to be the ultimate beneficiary of the acquisition, it cannot be said that immediately upon issuance of notification under Section 4 of the Act of 1894, its possession became the possession of the 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 the present case had not taken place on 15.05.1968. If at all possession of the College was to result in vesting of the land in the Government, such vesting happened only on the date of award i.e., 29.09.1970 and not before. In other words, the transfer of land from the assessee-appellant to the Government reached its completion not before 29.09.1970 and hence, the earliest date for accrual of capital gains because of this acquisition was the date of award i.e., 29.09.1970. Therefore, the assessment of capital gains as income of the appellant for the previous year relevant to the assessment year 1971-1972 does not suffer from any infirmity or error. 40. An incidental aspect of the submissions on behalf of the appellant that interest and solatium accrued on 15.05.1968 as per the award and that being the income pertaining to the financial year 1968- 1969 could not have been taxed in the assessment year 1971-1972, also deserves to be rejected for the reasons foregoing and for additionally the reason that in his order dated 25.01.1988, the AO has consciously made protective assessment on accrual basis on the interest component referable to the previous year 1970-1971, relevant for the assessment year 1971-72. 40.1. We may also usefully observe that awarding of interest from 15.05.1968 in the award had only been just and equitable application of the provisions of law, including Section 28 of the Act of 1894 but that did not result in vesting of the land in Government on that date of notification. 41. For what has been discussed hereinabove, the answer to Point No. 1 is clearly in the negative i.e., against the assessee-appellant and in favour of the revenue that on the facts and in the circumstances of the present case, transfer of the capital asset (land in question), for the purposes of Section 45 of the Act of 1961, was complete only on 29.09.1970, the date of award and not on 15.05.1968, the date of notification for acquisition under Section 4 of the Act of 1894; and hence, capital gains arising out of such acquisition have rightly been charged to tax with reference to the date of award i.e., 29.09.1970. Point No. 2 42. Though we have found that vesting of land in question for the purpose of accrual of capital gains in this case was complete only on the date of award that falls within the previous year relevant for the assessment year 1971-72, the question still remains, in view of the submissions made on behalf of the appellant, about the effect of the decision of ITAT in relation to the other case of the assessee-appellant for the assessment year 1975-1976 where the issue concerning date of accrual of capital gains was decided against the revenue with reference to the date of taking possession. Admittedly, the said decision for the assessment year 1975-1976 was not appealed against and had attained finality. Hence, it has been argued on behalf of the appellant that it is not open for the revenue to question the similar decision of ITAT in the present case pertaining to the assessment year 1971-1972. 43. We may gainfully recapitulate that in the case pertaining to the assessment year 1975-1976, the question of capital gains arose in the backdrop of the facts that another parcel of land of the appellant was acquired for the purpose of construction of warehouse of Ambala City. The notification under Section 4 of the Act of 1894 was issued on 26.06.1971 and the award of compensation was made on 27.06.1974 but, possession of the said land was taken by the Government on 04.09.1972 i.e., before making of the award. In the given set of facts and circumstances, in ITA No.635/Chandi/84, the ITAT accepted the contention that the case fell under the urgency provision contained in Section 17 of the Act of 1894 where the assessee was divested of the title to the property, that vested in the Government with effect from 04.09.1972, the date of taking over possession. Hence, the ITAT held that the capital gains arising from the said acquisition were not assessable for the accounting period relevant for the assessment year 1975-1976. 43.1. Learned counsel for the appellant has strenuously argued that the revenue is not entitled to take a different stand in the present RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] case pertaining to the assessment year 1971–1972, after having accepted the said decision pertaining to the assessment year 1975–1976 where it was held that capital gains accrued on the date of taking over possession of the land under acquisition by the Government. The learned counsel has relied upon the following observations in Berger Paints India Ltd. (supra):- “In view of the 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, the principle established is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause.” 44. The question is whether the above-noted observations apply to the present case? In our view, the answer to this question is clearly in the negative for more than one reason. 44.1. In the first place, it is ex facie evident that the matter involved in the said case pertaining to the assessment year 1975-1976 was taken to be an acquisition under the urgency provision contained in Section 17 of the Act of 1894 whereas, the acquisition proceedings in the 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 the award. As noticed, the very structure of the ordinary process leading to possession under Section 16 of the Act of 1894 has been different than that of the urgency process under Section 17; and the said decision pertaining to the proceedings under Section 17 of the Act of 1894 cannot be directly applied to the present case. 44.2. Secondly, the fact that the said case relating to the assessment year 1975-1976 was not akin to the present case was indicated by the ITAT itself. As noticed, both the cases, i.e., the present one relating to the assessment year 1971-1972 (in ITA No. 634/Chandi/84) and that relating to the assessment year 1975-1976 (in ITA No. 635/Chandi/84) were decided by ITAT on the same date i.e., 19.12.1985. While the answer in relation to the assessment year 1975-1976 was given by the ITAT in favour of assessee-appellant to the effect that possession having been taken on the specified date i.e., 04.09.1972, capital gains were not assessable for the assessment year 1975-1976 but, while deciding the appeal relating to the present case for the assessment year 1971-1972, the ITAT found that the date of taking over possession was not available and hence, the matter was restored to the file of the ITO to find out the actual date of possession.17 44.3. Thirdly, even if we assume that the stand of revenue in the present case is not in conformity with the decision of ITAT in relation to the assessment year 1975-1976, it cannot be said that revenue has no just cause to take such a stand. As noticed, while rendering the decision in relation to the assessment year 1975-1976, the ITAT did not notice the principles available in various decisions including that of this Court in Avinash Sharma (supra) that even in the case of urgency acquisition under Section 17 of the Act of 1894, land was to vest in Government not on the date of taking over possession but, only on the expiration of fifteen days from the publication of the notice mentioned in Section 9(1). Looking to the facts of the present case and the law applicable, in our view, the revenue had every reason to question the correctness of the later decision of ITAT dated 29.06.1990 in the second round of proceedings pertaining to the assessment year 1971-1972. 44.4. Fourthly, the ITAT itself on being satisfied about the question of law involved in this case, made a reference by its order dated 15.07.1991 to the High Court. The High Court having dealt with the matter in the reference proceedings and having answered the reference in conformity with the applicable principles, the assessee cannot be heard to question the stand of the revenue with reference to the other order for the assessment year 1975-1976. In any case, it cannot be said that the decision in relation to the assessment year 1975-1976 had been of any such nature which would preclude the revenue from raising the issues which are germane to the present case. 45. Hence, the answer to Point No. 2 is also clearly in the negative i.e., against the assessee-appellant and in favour of the revenue that the fact situation of the present case relating to the assessment year 1971- 1972 is not similar to that of the other case of the appellant relating to the assessment year 1975-1976 and the revenue is not precluded from taking 17 Of course, one observation was made by the ITAT in the order dated 19.12.1985 relating to the present case that possession of the land in question was taken before making of the award. However, this observation turns out to be incorrect on facts as also in law, for the reasons mentioned hereinbefore in Point No. 1. RAJ PAL SINGH v. COMMISSIONER OF INCOME-TAX, HARYANA, ROHTAK [DINESH MAHESHWARI, J.] the stand that the transfer of capital asset in the present case was complete only on the date of award i.e., on 29.09.1970. Conclusion 46. For what has been discussed hereinabove, we have not an iota of doubt that in the second round of proceeding, the AO had rightly assessed the tax liability of the appellant, on long-term capital gains arising on account of acquisition, on the basis of the amount of compensation allowed in the award dated 29.09.1970 as also the enhanced amount of compensation accrued finally to the appellant; and as regards interest income, had rightly made protective assessment on accrual basis. 47. In the result, this appeal fails and is, therefore, dismissed. No costs. Ankit Gyan Appeal dismissed.