COMMISSIONER OF INCOME TAX Vs. M SUBAIDA BEEVI

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Cochin Bench has referred the following questions for decision by this Court under S.256(1) of the Income Tax Act:

(2.) Agricultural lands 2.50 acres in extent situated within the Municipal area of Kayamkulam town belonging to the assessee was acquired by the Government as per the provisions of the Kerala Land Acquisition Act. The preliminary notification under S.3(1) of the Act was published in the Gazette dated 2-3-1971. The land acquisition officer awarded compensation for the land acquired and also solatium at 15 percent of the market value fixed. On reference under S.20 of the Land Acquisition Act at the instance of the assessee the Subordinate Judge, Mavelikara enhanced land value and solatium and also awarded a sum of Rs.7500/- for the injurious affection on account of severance to the remaining extent of land in the possession of the assessee. The transfer by way of acquisition was during the accounting period relevant to the assessment year 1973-74. The Income Tax Officer passed an order of assessment on the income received by the assessee by way of capital gains, and in the matter of computation of capital gains the compensation for injurious affection as well as solatium were included as part of the consideration received for the transfer of the capital asset. The Income Tax Officer estimated the market value of the property as on 1-1-1954 as the cost of acquisition of the capital asset by the assessee.

(3.) In the appeal at the instance of the assessee the Appellate Assistant Commissioner directed deletion of the compensation for injurious affection in computing the capital gains. In all other respects the assessment order was confirmed. The question raised by the assessee in the memorandum of appeal that the expenses incurred in connection with the reference for enhanced compensation should be deducted in computing the capital gains was not considered by the Appellate Assistant Commissioner. Both the assessee and the Revenue appealed to the Income Tax Appellate Tribunal. The Tribunal held that the cost of acquisition of the capital asset is to be reckoned with reference to the market value of the land on 1-1-1954, the solatium received by the assessee is part of the compensation for the land acquired and it cannot be excluded from computation. The Tribunal directed that the expenses incurred by the assessee in the land acquisition reference case before the Sub Court should be deducted in computing the capital gains. The appeal by the Revenue for inclusion of the compensation for injurious affection in the computation was rejected holding that the compensation in that regard received by the assessee cannot be said to be in any way related to the capital asset acquired.