SUPREME COURT OF INDIA

Before:-S. Rajendra Babu and R.C. Lahoti, JJ.

Civil Appeal No. 9834 of 1995. D/d. 8.9.1999.

Commissioner of Income Tax, Hyderabad - Appellant

Versus

M.J. Swamy - Respondent

Income Tax Act, 1961, Section 2(14)

Case Referred :-

J. Raghottama Reddy v. ITO, (1988) 169 ITR 174 (AP).

ORDER

1. For Assessment Year 1971-72 a claim was made by the original assessee, respondent herein, that capital gains arising in respect of the compensation received on the acquisition of land could not be assessed as the same was beyond the scope of Section 2(14) of the Income Tax Act, 1961. The assessing authority did not agree with the claim and brought the same to tax. Ultimately, the matter reached the Tribunal, which decided in favour of the assessee. Thereupon, a question was referred to the High Court in the following terms:

?Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in holding that no capital gains arise on the transfer of the lands coming within the purview of Section 2(14)(iii) of the Income Tax Act, 1961 as it stood on 1-7-1970.?

2. Answering this question, the High Court took note of the decision in J. Raghottama Reddy v. ITO, (1988) 169 ITR 174 (AP) and answered the question referred to in the affirmative and against the Revenue. During the pendency of these proceedings, an amendment has been made by introduction of an Explanation by the Finance Act, 1989 with retrospective effect from 1-4-1970. The High Court did not have occasion either while dealing with the decision in J. Raghottama Reddy, (1988) 169 ITR 174 (AP) or the order out of which this matter arises to consider the said amendment. Unless a finding is given on this aspect of the matter, it would be difficult to answer the question referred to the High Court one way or the other. In the circumstances we set aside the order under challenge and remit the case to the High Court for a fresh consideration in the light of what we have stated above.

3. The civil appeal is allowed accordingly with no order as to costs.

Appeal allowed.