Capital Gain in case of compulsory land acquisition accrues at the time of taking possession: Supreme Court of India

Capital Gains shall be deemed to have accrued upon arrival of the relevant stage of taking possession and not before that, the legal issue held by The Hon’ble Supreme Court of India in Raj Pal Singh V. Commissioner of Income Tax, Haryana, Rohtak [Civil Appeal No. 2416 of 2010] by a three-judge bench comprising of Hon’ble Justice AM Khanwilkar, Justice Hemant Gupta and Justice Dinesh Maheshwari.

The fact relating to this case is while referring to the statutory scheme of the Land Acquisition Act, the Hon’ble Court observed that the compulsory acquisition of land under the act for a public purpose, the property was to vest absolutely in the government only after taking possession in either of the methods i.e. after making of the award, as provided in section 16; or earlier than making of the award, as provided in section 17. In other words, the owner was divested of property and the same vested in the government in absolute terms only if and after the possession was taken by either of the processes envisaged in Sections 16 and 17 of the act.

The Hon’ble Court while referring to various judgements of High Court and Supreme Court held that the matters relating to compulsory acquisition of land under the Act of 1894, completion of transfer with the vesting of land in the government essentially correlates with taking over of possession of the land under acquisition by the government. However, where the possession is taken over before arriving at the relevant stage for such taking over, capital gains shall be deemed to have accrued upon arrival of relevant stage and not before. To be more specific, in such cases, capital gains 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

Considering all the points Hon’ble Court held that as the result, this appeal fails and is, therefore, dismissed.

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Judgement reviewed by-Sarita Kumari

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