COMMISSIONER OF INCOME TAX1 Vs. PANDARI LAXMAIAH

JUDGEMENT

(1.) In this application, filed under section 256(2) of the Income-tax Act, 1961, the Commissioner of Income- tax, Guntur, seeks a direction to the Income-tax Appellate Tribunal to state the case and refer the following question of law for the opinion of this court :

(2.) It is useful to notice the facts giving rise to the present application. The land of the respondent-assessee was acquired under the Land Acquisition Act (for short, "the L.A. Act"). The draft notification under section 4(1) of the Land Acquisition Act was issued on 1/09/1977. However, it appears the possession of the land was taken on 3/08/1977, even before the draft notification was published in the Gazette. Notice under section 9(1) of the Land Acquisition Act was issued on 20/05/1980, and the award was passed on 25/03/1981. The compensation amount was assessed to tax in the assessment year 1978-79. On appeal the Commissioner of Income-tax found that the lands were not agricultural lands in nature and that they were acquired on 3/08/1977, the date of taking possession. On further appeal by the assessee, the Tribunal held : (a) that the land was an agricultural land; and (b) that the gains from the land did not accrue in the previous year relevant to the assessment year 1978-79. The Commissioner of Income-tax, Guntur, had filed the application under section 256(1) of the Income-tax Act, but that application was dismissed. Hence, he filed the present application.

(3.) The proposed question is in two parts-the first part is : whether the land in question was an agricultural land; this is purely a question of fact; the second part of the question is : whether the capital gain on agricultural land is taxable under the Income-tax Act, which obviously means in the assessment year 1978-79. It is clear that there is a controversy as to when the land would be deemed to have been acquired. As the possession of the land was taken on 3/08/1977, Sri S, R. Ashok, learned counsel appearing for the Department, relying on the judgment of this court in CIT v. Nawab Mahmood Jung Bahadur [1988] 172 ITR 592, submits that the land was acquired when the possession of the land was taken. In that case the possession of the land was taken on 12/01/1967, by invoking the urgency clause under section 17 of the Land Acquisition Act, as such capital gains had been assessed in the assessment year 1967-68. In our view that judgment has no application to the facts of the present case inasmuch as in the present case possession was not taken by invoking the urgency clause under section 17 of the Land Acquisition Act. Therefore, the ratio laid down in that case is not helpful to the Revenue.