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Commissioner of Income-tax Vs. Shri Ramadhar - Court Judgment

LegalCrystal Citation
Subject Direct Taxation
CourtDelhi High Court
Decided On
Case NumberIncome-tax Reference No. 164 of 1976
Judge
Reported in[1985]156ITR755(Delhi)
ActsIncome Tax Act, 1961 - Sections 5
AppellantCommissioner of Income-tax
RespondentShri Ramadhar
Cases ReferredIn Raja Harish Chandra Raj Singh v. Deputy Land Acquisition Officer
Excerpt:
- - is it the assessed in his personal capacity or is it the firm of which he is a partner ? the income-tax officer had held that the amount was assessable in the hands of the assessed but the appellate assistant commissioner as well as the tribunal have reached the opposite conclusion. so it will be difficult to support the assessment of both the individual as well as the partnership on the same income......enquiry into the amount that is to be given by way of compensation for an acquisition under the land acquisition act has to be held by the collector under section 11 of the procedure mentioned therein. the determination of the rate of compensation, the person to be granted compensation and other details mentioned in section 11 results in an award which is made by collector. such an award has to be filed in the collector's office and notice has to be given to the persons interested who are not present personally or through 12 of act. the fact that in this case, the award has one date and it was announced later, would mean that, in fact, it is not really communicated to the parties till such a notice is given. the next step in the acquisition after an award is to take possession of the.....
Judgment:

D.K. Kapur, J.

1. For the assessment year 1964-65, the following question has been referred to us by the Income-tax Appellate Tribunal :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the profit of Rs. 95,935 is assessable in the hands of the firms and not in the hands of the assessed, an individual, and thus upholding the order of the Appellate Assistant Commissioner ?'

2. The controversy in this case was concerned with whether the assessed, whose name is Shri Ramadhar was entitled to the gain resulting from acquisition of land situated in Bagh Majlis Sarai situated at village Wazirpur, Delhi, or whether that gain was to go to the firm, M/s. Ramadhar and Company, of which he was a partner. The facts were that a firm of this name which had six partners, originally purchased the land for a sum of Rs. 10,740 on April 9, 1957. This firm was a coloniser and dealing in purchase of land and conversion into plots and sale of the same. The firm was dissolved on May 4, 1962, and thereafter the assessed himself became its sole proprietor. On December 1, 1962, a new firm was constituted of which Ramadhar was also a partner. This had four partners. It so happened that the land which was acquired and for which compensation was granted was acquired under Award No. 1430 which was signed on November 9, 1962, but announced on December 15, 1962.

3. The controversy which arose was whether the gain of Rs. 95,935 resulting from the acquisition of the land was to be assessed in the hands of the assessed because he was the sole proprietor on November 9, 1962, or whether it was to be assessed in the hands of the firm which had taken over the business on December 1, 1962, which was before the announcement of the award on December 15, 1962.

4. The reference to this court really amounts to determining who is the person entitled to get the compensation amount. Is it the assessed in his personal capacity or is it the firm of which he is a partner The Income-tax Officer had held that the amount was assessable in the hands of the assessed but the Appellate Assistant Commissioner as well as the Tribunal have reached the opposite conclusion.

5. Though it is not necessary to give many details, it seems obvious that the Award No. 1430, which was dated November 9, 1962, could not be effective till it was announced on December 15, 1962. Moreover, we are told that the firm of four partners, M/s. Ramadhar & Company, has also been assessed on the same amount as per the eventual decision by the Tribunal. So it will be difficult to support the assessment of both the individual as well as the partnership on the same income.

6. Turning now to the sections involved in this case, it may be noticed that the enquiry into the amount that is to be given by way of compensation for an acquisition under the Land Acquisition Act has to be held by the Collector under section 11 of the procedure mentioned therein. The determination of the rate of compensation, the person to be granted compensation and other details mentioned in section 11 results in an award which is made by Collector. Such an award has to be filed in the Collector's office and notice has to be given to the persons interested who are not present personally or through 12 of Act. The fact that in this case, the award has one date and it was announced later, would mean that, in fact, it is not really communicated to the parties till such a notice is given. The next step in the acquisition after an award is to take possession of the land as mentioned in section 16 and it is then that the land vests absolutely in the Government. The various steps are, thereforee, that evidence and other details required by section 11 are to be collected, an award has to be given under section 12, then it has to be intimated to the parties concerned and then possession has to be taken under section 16. At the same time or soon after, the compensation amount which is the consideration for transfer of ownership to the Government has to be tendered to the persons entitled to the same. It is not necessary to mention the other provisions which come into effect thereafter such as reference under section 18 to the court, etc.

7. The only question we are interested in this case is to determine who is the person who is entitled to get the compensation amount, that is the person who has to be taxed in respect of the gains resulting from the acquisition. As interpreted above, it appears that ownership is transferred after the compensation amount has been determined possession of land taken. This would be after December 15, 1962, and, thereforee, it is the partnership firm as finally constituted which would be the assessed in whose hands that amount could be taxed.

8. In Raja Harish Chandra Raj Singh v. Deputy Land Acquisition Officer : [1962]1SCR676 , the Supreme Court had occasion to determine the date when an award was made keeping in view the nature of the rights that flowed from such an award. It was held that the date of the award was the date on which the party concerned was informed of same. We would also hold that the date of the award was the date of its announcement and not the date when it was signed. Hence, the date December 15, 1962, would be the relevant date and not November 9, 1962.

9. In this view of the matter, we have to determine who was entitled to get the compensation on December 15, 1962, which was after the partnership had come into being. Thus, the compensation would be payable only to the firm. We note that the firm has already been assessed and consequently, we would answer the question referred to us in the affirmative, in favor of the assessed and against the Department, but leaving the parties to bear their own costs.


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