Commissioner of Income Tax vs Jitendre Singh

This reference u/s 256(1) of the Income Tax Act, 1961, is at the instance of the Revenue for answering the following question of law, namely:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the bonds were received in 1968, but in law the right to receive compensation accrued to the assessee in 1956, when the jagir was resumed by the State Government and, therefore, the gain arising from the sale of jagir bonds were to be treated as long-term capital gains ?"

The assessee''s jagir was resumed on September 12, 1956, when he became entitled to payment of compensation on resumption of his jagir. The Jagir Commissioner passed an order quantifying the amount of compensation in 1962 and the bonds representing the amount of compensation due to the assessee were issued in 1968. The assessee claimed that the surplus amount obtained by sale of the jagir bonds should be treated only as a capital gain. The Income Tax Officer rejected the assessee''s contention, but that contention was accepted by the Appellate Assistant Commissioner in appeal. The Tribunal has affirmed the view taken by the Appellate Assistant Commissioner. Aggrieved by this view, the Revenue applied for a reference which has been made by the Tribunal to decide the abovequoted question of law u/s 256(1) of the Act.

There is no dispute about the correctness of the first part of the Tribunal''s finding that the jagir bonds were received in 1968, when in law the assessee''s right to receive compensation accrued in 1956 on the resumption of his jagir by the State. The only controversy is about the nature of the surplus receipt on the sale of the jagir bonds. It has been held by this court in D. B. Income Tax Reference No. 20 of 1978-- Eklingji Trust Vs. Commissioner of Income Tax, that the annuity received by the assessee by way of compensation on the resumption of the jagir land was a capital receipt and not a revenue receipt. Reliance has been placed therein on several decisions relating to payments received on resumption of proprietary rights like those of the assessee in the present case. It must, therefore, be held that in the present case also, the amount of jagir bonds was a capital receipt and the Tribunal was justified in the view it has taken about the nature of the surplus received from the sale of the jagir bonds.

Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal''s view is justified. No costs.