COMMISSIONER OF INCOME TAX Vs. PREMCHAND SITANATH ROY

JUDGEMENT

(1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1971-72, the following question of law has been referred to the court :

(2.) The facts shortly stated are that, according to the Income-tax Officer, the assessee-firm was, at one time, the owner of the building at premises No. 13, Kapalitola Lane, Calcutta, together with land admeasuring 15 eottahs and 12 chittaks. The said property was acquired by the Government of West Bengal for the accommodation of the Calcutta Police, vide notification under Section 4 of the Land Acquisition Act of 1894 and notification under Section 6 of the said Act dated June 6, 1970. The Second Land Acquisition Collector, Calcutta, vide award dated February 4, 1971, determined the compensation payable to the assessee at Rs. 7,69,887.06.

(3.) Admittedly, the compensation awarded was not acceptable and, according to the Income-tax Officer, the assessee took the matter in appeal under Section 18 of the aforesaid 1894 Act to the Special Land Acquisition Judge, First Court, Alipore, 24-Parganas, who, vide his judgment and decree dated May 15, 1973, determined the compensation payable to the assessee at Rs. 9,60,250 with interest at the rate of 6% per annum from the date of taking possession of the property in question up to the date of payment of the additional compensation of Rs. 1,90,362 which consisted of the enhanced value of the land and the solatium payable on account of the enhancement of the compensation. According to the Income tax Officer, "though the assessee initially objected to the charging of capital gains tax, it later on admitted that the provisions of Section 45 do apply and opted for the valuation as on January 1, 1.954. The assessee failed to lead evidence as to the value of the said property as on January 1, 1954. The Income-tax Officer proceeded to estimate the same on the basis of the municipal valuation prevailing in the financial year 1950-51 at Rs. 46,960. He then went on to compute the capital gains at Rs. 4,99,560 in the following manner : "The fair market value is taken at 16 times of the above maintainable rent of Rs. 2,985, i.e., Rs. 46,960. Therefore, capital gains works out at Rs. 9,13,290 (Rs. 9,60,250 less Rs. 46,960). <FRM>JUDGEMENT_446_ITR187_1991Html1.htm</FRM>