Capital Gains In Case Of Compulsory Land Acquisition Accrues On Arrival Of The Relevant Stage Of Taking Possession And Not Before

In RAJ PAL SINGH Vs. COMMISSIONER OF INCOME-TAX, an appeal was preferred before the Supreme Court from an order from High Court, in which it held that the capital gains arising out of land acquisition compensation were chargeable to income-tax under Section 45 of the Income Tax Act, 1961 for the previous year referable to the date of award of compensation i.e., 29.09.1970 and not the date of notification for acquisition. The legal issue that arose in this appeal was this: 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?

The Supreme Court has observed that capital gains in a case of compulsory acquisition of land [under Land Acquisition Act of 1894] 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.