G.N. Ghorpade (Huf) Vs. Dy. Cit - Court Judgment

Excerpt:
since the appeals by the assessee and department and cross-objections by the assessee pertain to one and the same assessee, these were taken up and heard together and, therefore, these are being disposed of by a combined order for the sake of convenience.let us first take up ita no. 1154/pune/1992 relating to the assessment year 1985-86. the assessee, who is a former jagirdar of ichalkaranji, is the karta of the assessee-huf. the first grievance of the assessee is that the learned commissioner (appeals) is not justified in holding that the concerned compensation received by the assessee on inam lands was liable to capital gains tax. the assessee had inherited agricultural lands from his forefathers who had got the same by way of inam from shree chhatrapati shivaji maharaj and the peshwas. survey no.574/2 was acquired by the government in the assessment year under appeal. the assessee claimed before the assessing officer that there was no liability to capital gains tax, relying on the decision of the honble madhya pradesh high court in the case of cit v. h.h. maharaja sahib shri lokendra singhji (1987) 162 itr 93 (mp). it was submitted before him that since the land was got by the ancestors of the assessee as inam lands, there was no cost of acquisition and when element of cost is absent, compensation received on such lands cannot be subjected to capital gains tax. the assessing officer did not agree to the contentions put forward by the assessee the assessing officer referred to clause 5 of the bombay merged territories miscellaneous alienation and abolition act, 1955, which makes all alienated lands liable to land revenue. since the lands under dispute were subject to land revenue, the assessing officer held that such land revenue was the cost of acquisition. he accordingly subjected the compensation received by the assessee to capital gains tax.the assessee appealed to the commissioner (appeals). the commissioner (appeals) has considered the issue at pages 2 to 4 of his order and the operative part of the order is to be found in sub-para (h) on page 4.while accepting the position that the lands were free of rent initially, the learned commissioner (appeals) held that after abolition of inam by the bombay merged territories miscellaneous alienation and abolition act, the position has changed as follows : "1. after regrant, land revenue became payable. this clearly shows that there is change in the nature of the title of land.2. the assessee had to pay occupancy price in respect of regrant. this occupancy price is nothing but cost of the acquisition of the land which was regranted to the appellant after abolition of inam.3. the ratio of the decision in (1987) 162 itr 93 (mp) (supra) is not applicable on above facts." shri g.n. gadgil, the learned counsel for the assessee submitted that the lands which were acquired by the government and consequently compensation received by the assessee from the government were inherited by the assessee from his forefathers who had got the lands as inam lands from shree chhatrapati shivaji maharaj and the peshawas. he draw our attention to page 9 of the paper book which contains extract of inam lands. he also drew our attention to the various provisions of the bombay merged territories miscellaneous alienation and abolition act placed at pages 12 to 18 of the paper book. he further, submitted that the extract of inam lands includes at the end of the list rs no.574/2 and, therefore, there cannot be any dispute that the r. nos.under consideration are inam lands. he submitted that under the 1955 act, ownership of the land which was obtained free of cost was not abolished. the effect of the 1955 act is that the land is made subject to land revenue and occupancy is continued on payment of six times the full assessment. he, therefore, submitted that the fact that some payment was made for continuation of the occupancy cannot be equated to the cost for the purchase of ownership. he concluded that the case of the assessee stands squarely covered by the judgment of the madhya pradesh court cited (supra).shri adhir jha, the learned departmental representative strongly supported the orders of the authorities below. he also referred to the various provisions of the bombay merged territories miscellanoues alienation and abolition act, 1955, and submitted that after the said act was brought on the statute book, all alienated lands were made liable to pay land revenue and such land revenue is nothing but cost of acquisition and, accordingly, the authorities below were justified in taxing the compensation to capital gains tax.we have considered the rival submissions and perused the facts on record. the assessee, who is a former jagirdar of ichalkaranji, inherited the lands under consideration from his forefathers who had got the same as inam lands from shree chhatrapati shivaji maharaj and the peshawas and this fact is clearly established from the extract of inam lands placed at page 9 of the paper book, we have also perused the provisions of the bombay merged territories miscellaneous alienation and abolition act, 1955, and, we find that the statement of objects and reasons in para 2 explains the impact of clauses 5 to 9 as under : "clause 5 makes all alienated land liable to pay land revenue and clauses 6 to 9 provide for the regrant of the former alienated land." "5. subject to the other provisions of this act, all alienated lands are and shall be liable to the payment of land revenue in accordance with the provisions of the code and the rules made thereunder and the provisions of the code and rules relating to unalienated land shall apply to such land." thus, under this clause, the inam lands are made liable to land revenue. but under clause 9 and proviso thereto, right of occupancy is continued on payment of six times of the amount of full assessment of such land. thus, under the 1955 act, ownership of the land which was obtained free of cost is not abolished.the only effect of the 1955 act is that the land is made subject to land revenue and occupancy is continued on payment of six times the full assessment. thus, it cannot be denied that the land was inam land and continued to be inam land. the only change brought out is that the land is made liable to land revenue, but occupancy is also continued.the fact that some payment is made for continuation of the occupancy cannot be equated to cost for purchase of ownership. ownership is continuous and as such, occupancy is also continued on certain payment.ownership cannot be equated with occupancy. as stated above, ownership was acquired by the forefathers of the assessee and had continued with the assessee.cit v. h.h. maharaja sahib shri lokendra singhji (supra), the maharaja of ratlam had sold some lands which were part of the property inherited by him from his forefathers to whom the property had been gifted by a moghul emperor. it was held by the honble madhya pradesh high court that the liability to tax on capital gains would arise in respect of only those capital assets in the acquisition of which an element of cost is either actually present or is capable of being reckoned and not in respect of those assets in the acquisition of which the element of cost is altogether inconceivable. it was further held that in a case where cost cannot be ascertained, the fair market value cannot be taken into consideration under section 55 of the income tax act, 1961, because the very basis of capital gains is that at some point of time the person who initially acquired the property did so at some cost in terms of money. since the maharaja of ratlam had inherited jagir property from his forefathers which was gifted to his forefathers by a moghul emperor, the honble high court held that having regard to the provisions of section 55(2), no capital gains accrued to the assessee. in our view, the ratio laid down by the honble madhya pradesh high court in the aforesaid case squarely applies to the facts of the assessees case because the assessee also inherited the land from his forefathers to whom lands were gifted by shree chhatrapati shivaji maharaj and the peshawas and there has been no change in the said inheritance by the bombay merged territories miscellaneous alienation and abolition act, 1955. accordingly, we reverse the findings of the authorities below and hold that the compensation received by the assessee on acquisition of lands cannot be subjected to capital gains tax. this ground accordingly succeeds.the next grievance of the assessee is that the learned commissioner (appeals) is not justified in holding that the interest of rs. 41,110 and rs. 74,572 received on compensation was liable to tax in the assessment year under appeal. the assessee received rs. 41,110 and rs. 74,572 as interest on additional compensation during the year under appeal. the assessee contended before the assessing officer that the additional compensation itself was in dispute and, therefore, interest thereon could not be included in the income of the assessee. the assessing officer assessed the above two amounts during the year under appeal.the assessee appealed to the commissioner (appeals) who confirmed the action of the assessing officer.shri g.n. gadgil, the learned counsel for the assessee, submitted that the, two items of interest on additional compensation related to different years and, accordingly, the assessing officer was not justified in assessing the entire interest during the year under appeal. the assessing officer should have brought to tax only the interest pertaining to the year under appeal.shri adhir jha, the learned departmental representative relied upon the orders of the authorities below.we have considered the rival submissions and perused the facts on record. in rama bai v. cit (1990) 181 itr 400 (sc), the honble supreme court has held that interest on enhanced compensation awarded by the court accrues from year to year. following the ratio laid down by the apex court, we direct the assessing officer to restrict to tax only the interest pertaining to the year under appeal. the assessee is directed to furnish year-wise details before the assessing officer for this purpose.the next grievance of the assessee is that the learned commissioner (appeals) is not justified in holding that the bonus of rs. 9,148 received by the assessee from panchaganga sugar factory was income receipt liable to income-tax. at the time of hearing, this ground was not pressed. the same is accordingly dismissed.the next grievance of the assessee is that the learned commissioner (appeals) is not justified in estimating the annual letting value of the self-occupied property "palace" at ichalkaranji at rs. 24,000 instead of rs. 5,400 declared by the assessee. the facts here are identical to those discussed by us in the assessees case relating to assessment year 1978-79 (ita 1153/pune/92). as such, our decision in the aforementioned order will apply mutatis mutandis to the facts of the present year. for the reasons discussed therein, we direct the assessing officer to adopt the annual letting value of the self-occupied property at rs. 12,000.the first grievance of the assessee is that the learned commissioner (appeals) is not justified in determining the annual letting value of the self-occupied pro perty "palace" at ichalkaranji at rs. 18,000 against rs. 5,400 declared by the assessee. the assessee had declared the value of the self-occupied property at rs. 5,400. the assessing officer noted that the judicial magistrate, ichalkaranji, had fixed the value of the palace for the assessment year 1964-65 at rs. 6,000. he further observed that the development of ichalkaranji had been much more during the period 1964 to 1976. accordingly, he adopted the alv of the palace at rs. 24,000.the assessee appealed to the commissioner (appeals) and submitted that the approach of the assessing officer was on an ad hoc basis. the assessee also placed reliance on the decision of the tribunal in the case of dr. vs. prayag v. income tax officer in wta nos. 642 & 643/pune/1981. reliance was also placed on the decision of the honble supreme court in the case of mrs. sheila kaushish v. cit (1981) 131 itr 435 (sc) and on the case of dewan daulat rai kapur v. new delhi municipal committee (1980) 122 itr 700 (sc). after considering the submissions of the assessee, the commissioner (appeals) held that the approach of the assessing officer was not ad hoc, but was based on the decision of the judicial magistrate referred to supra and subsequent development of ichalkaranji. however, he did not agree with the estimate of rs. 24,000 made by the assessing officer and directed the assessing officer to adopt the alv for the year at rs. 18,000.shri g.n. gadgil, learned counsel for the assessee submitted that ichalkaranji is a small town, it is not even a district headquarters.the palace is not in a good condition and requires extensive repairs.he submitted that in any case the alv retained by the commissioner (appeals) at rs. 18,000 is highly excessive, even keeping in view of the judgment of the judicial magistrate, ichalkarariji who had fixed the value of rs. 6,000 for the year 1964-65.shri adhir jha, the learned departmental representative submitted that over the years ichalkaranji has developed; there has been mushroom growth of powerloom sector and other industries and there is scarcity of accommodation he submitted that the assessee had declared alv of the palace at rs. 5,400 which was even below that fixed by the judicial magistrate for the year 1964-65 and that the commissioner (appeals) has given adequate relief and the alv as estimated by the commissioner (appeals) at rs. 18,000 should be retained.we have considered the rival submissions and perused the facts on record. in our view, the alv shown by the assessee at rs. 5,400 is on the lower side keeping in view the fact that the judicial magistrate, ichalkaranji, had fixed the value for municipal tax purposes at rs. 6,000, but the estimates made by the assessing officer at rs. 24,000 and retained by the commissioner (appeals) at rs. 18,000 are highly excessive, keeping in view the fact that ichalkaranji still continues to be a taluka town and though there has been some development in the town during the last few years, alv cannot be hiked to a figure of rs. 18,000. after taking into consideration the facts and circumstances of the case, we fix the alv for the year under appeal at rs. 12,000. the assessee will be entitled to a relief of rs. 6,000."on the facts and in the circumstances of the case, the learned commissioner (appeals) erred both in law and on merit in holding that the addition of rs. 2,65,042 on account of short-term capital gains was properly made." at the time of hearing, this ground was not pressed. the same is accordingly dismissed.the next grievance of the assessee is that the learned commissioner (appeals) is not justified in upholding the disallowance of agricultural loss. after hearing both the sides, we do not find any merit in this ground. since agricultural income is not taxable and is exempt from income-tax under section 10, the authorities below have rightly held that agricultural loss cannot be allowed. we accordingly dismiss this ground.we now take up ita no. 1155/pune/1992 pertaining to the assessment year 1989-90. the first grievance of the assessee is that the learned commissioner (appeals) is not justified in holding that the compensation received by the assessee on inam lands was liable to capital gains tax. the facts here are identical to those discussed by us in the assessees case relating to assessment year 1985-86 (ita no.1154/pune/1992). as such, our decision in the aforementioned order will apply mutatis mutandis to the facts of the present year. for the reasons discussed therein, we reverse the findings of the authorities below and hold that the compensation received by the assessee on acquisition of lands cannot be subject to capital gains tax. this ground accordingly succeeds."on the facts and in the circumstances of the case, the learned commissioner (appeals) erred both in law on merit in upholding the disallowance of agricultural loss." at the time of hearing, this ground was not pressed. the same is accordingly dismissed.we next take up the departments appeals, itas no. 1121/pune/1992 to 1125/pune/1992 relating to the asst, yr. 1977-78 to 1981-82.the only effective ground raised in ita no. 1121/pune/1992 (assessment year 1977-78) by the revenue reads as under : "on the facts and in the circumstances of the case, the commissioner (appeals) erred in directing the assessing officer to allow deduction under section 54e of the income tax act, 1961, when the section was not in the statute for this assessment year." the assessee had received additional compensation in respect of certain acquisition of land effected in the year relevant to the assessment year 1977-78. the additional compensation was received on 17-11-1981, 12-4-1982, and 25-3-1982. within six months of the receipt of additional compensation, the assessee had made investments for claiming deduction under section 54e. the assessing officer held that the assessee was not entitled to exemption under section 54e in respect of additional compensation since the transfer of land took place before the insertion of section 54e.on appeal, the commissioner (appeals) reversed the finding of the assessing officer observing as under : "i have considered the submission made by the appellant. the contention of the appellant appears to be justified. the appellant had received additional compensation during the period when the provision of section 54e was on the statute. further, second proviso to section 54e provides that the appellant could make requisite investment within six months from the date of receipt of compensation. this aspect has been dealt by the honble kerala high court in the case of fr. joseph villangatil v.union of india (1990) 186 itr 63 (ker)." shri adhir jha, the learned departmental representative strongly supported the order of the assessing officer. he submitted that when the acquisitions had taken place, section 54e was not on the statute and, accordingly, the assessee was not eligible for deduction under section 54e of the act. shri g.m gadgil learned counsel for the assessee, strongly supported the order of the commissioner (appeals).after hearing both the parties, we find sufficient force in the contention raised by the learned departmental representative.admittedly, the land was acquired by the government in the asst. yr.1977-78, while provisions of section 54e were inserted with effect from 1-4-1978, relevant to assessment year 1978-79. therefore, the assessee was not entitled to claim any exemption under section 54e since the transfer took place prior to insertion of section 54e. the case law relied upon by the learned counsel for the assessee as well as commissioner (appeals) are distinguishable on the facts of the case, inasmuch as in all those cases, the acquisition of land took place when provision of section 54e was very much on the statute. accordingly, we are unable to uphold the order of the commissioner (appeals) on this issue. consequently, the order of the commissioner (appeals) is reversed and the order of the assessing officer is restored on this issue.in itas no. 1122/pune/1992 to 1125/pune/1992 relating to assessment years 1978-79 to 1981-82, the only common ground raised by the revenue is as follows : "on the facts and in the circumstances of the case, the commissioner (appeals) erred in directing the assessing officer to take alv at rs. 18,000 as against rs. 24,000 determined by the assessing officer for the above assessment year(s) after considering comparable alv." this issue has been elaborately dealt with by us in the assessees appeal for the assessment year 1978-79 (ita no. 1153/pune/1992), wherein we have directed the assessing officer to adopt the annual letting value of the self-occupied property at rs. 12,000. for the reasons discussed therein, we hold accordingly. these appeals are allowed in part.in cross -objections no. 25/pune/1992 to 27/pune/1992 relating to assessment years 1979-80 to 1981-82, the assessee has taken the following common ground : "on the facts and in the circumstances of the case, the learned commissioner (appeals) erred both in law and on merit in determining the alv of the sc property palace at ichalkaranji at rs. 18,000 as a against rs. 5,400 declared by the assessee." for the reasons, discussed in the assessees appeal for the assessment year 1978-79 (ita no. 1153/pune/1992), wherein we have directed the assessing officer to adopt the alv of the self-occupied property at rs. 12,000, we allow this ground in part.

Judgment:
Since the appeals by the assessee and department and cross-objections by the assessee pertain to one and the same assessee, these were taken up and heard together and, therefore, these are being disposed of by a combined order for the sake of convenience.

Let us first take up ITA No. 1154/Pune/1992 relating to the assessment year 1985-86. The assessee, who is a former Jagirdar of Ichalkaranji, is the Karta of the assessee-HUF. The first grievance of the assessee is that the learned Commissioner (Appeals) is not justified in holding that the concerned compensation received by the assessee on Inam lands was liable to capital gains tax. The assessee had inherited agricultural lands from his forefathers who had got the same by way of Inam from Shree Chhatrapati Shivaji Maharaj and the Peshwas. Survey No.574/2 was acquired by the government in the assessment year under appeal. The assessee claimed before the assessing officer that there was no liability to capital gains tax, relying on the decision of the Honble Madhya Pradesh High Court in the case of CIT v. H.H. Maharaja Sahib Shri Lokendra Singhji (1987) 162 ITR 93 (MP). It was submitted before him that since the land was got by the ancestors of the assessee as Inam lands, there was no cost of acquisition and when element of cost is absent, compensation received on such lands cannot be subjected to capital gains tax. The assessing officer did not agree to the contentions put forward by the assessee the assessing officer referred to clause 5 of the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, 1955, which makes all alienated lands liable to land revenue. Since the lands under dispute were subject to land revenue, the assessing officer held that such land revenue was the cost of acquisition. He accordingly subjected the compensation received by the assessee to capital gains tax.

The assessee appealed to the Commissioner (Appeals). The Commissioner (Appeals) has considered the issue at pages 2 to 4 of his order and the operative part of the order is to be found in sub-para (h) on page 4.

While accepting the position that the lands were free of rent initially, the learned Commissioner (Appeals) held that after abolition of Inam by the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, the position has changed as follows : "1. After regrant, land revenue became payable. This clearly shows that there is change in the nature of the title of land.

2. The assessee had to pay occupancy price in respect of regrant. This occupancy price is nothing but cost of the acquisition of the land which was regranted to the appellant after abolition of Inam.

3. The ratio of the decision in (1987) 162 ITR 93 (MP) (supra) is not applicable on above facts." Shri G.N. Gadgil, the learned counsel for the assessee submitted that the lands which were acquired by the government and consequently compensation received by the assessee from the government were inherited by the assessee from his forefathers who had got the lands as Inam lands from Shree Chhatrapati Shivaji Maharaj and the Peshawas. He draw our attention to page 9 of the paper book which contains extract of Inam lands. He also drew our attention to the various provisions of the Bombay Merged Territories Miscellaneous Alienation and Abolition Act placed at pages 12 to 18 of the paper book. He further, submitted that the extract of Inam lands includes at the end of the list RS No.574/2 and, therefore, there cannot be any dispute that the R. Nos.

under consideration are Inam lands. He submitted that under the 1955 Act, ownership of the land which was obtained free of cost was not abolished. The effect of the 1955 Act is that the land is made subject to land revenue and occupancy is continued on payment of six times the full assessment. He, therefore, submitted that the fact that some payment was made for continuation of the occupancy cannot be equated to the cost for the purchase of ownership. He concluded that the case of the assessee stands squarely covered by the judgment of the Madhya Pradesh Court cited (supra).

Shri Adhir Jha, the learned Departmental Representative strongly supported the orders of the authorities below. He also referred to the various provisions of the Bombay Merged Territories Miscellanoues Alienation and Abolition Act, 1955, and submitted that after the said Act was brought on the statute book, all alienated lands were made liable to pay land revenue and such land revenue is nothing but cost of acquisition and, accordingly, the authorities below were justified in taxing the compensation to capital gains tax.

We have considered the rival submissions and perused the facts on record. The assessee, who is a former Jagirdar of Ichalkaranji, inherited the lands under consideration from his forefathers who had got the same as Inam lands from Shree Chhatrapati Shivaji Maharaj and the Peshawas and this fact is clearly established from the extract of Inam lands placed at page 9 of the paper book, We have also perused the provisions of the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, 1955, and, we find that the statement of objects and reasons in para 2 explains the impact of clauses 5 to 9 as under : "Clause 5 makes all alienated land liable to pay land revenue and clauses 6 to 9 provide for the regrant of the former alienated land." "5. Subject to the other provisions of this Act, all alienated lands are and shall be liable to the payment of land revenue in accordance with the provisions of the Code and the rules made thereunder and the provisions of the Code and rules relating to unalienated land shall apply to such land." Thus, under this clause, the Inam lands are made liable to land revenue. But under clause 9 and proviso thereto, right of occupancy is continued on payment of six times of the amount of full assessment of such land. Thus, under the 1955 Act, ownership of the land which was obtained free of cost is not abolished.

The only effect of the 1955 Act is that the land is made subject to land revenue and occupancy is continued on payment of six times the full assessment. Thus, it cannot be denied that the land was Inam land and continued to be Inam land. The only change brought out is that the land is made liable to land revenue, but occupancy is also continued.

The fact that some payment is made for continuation of the occupancy cannot be equated to cost for purchase of ownership. Ownership is continuous and as such, occupancy is also continued on certain payment.

Ownership cannot be equated with occupancy. As stated above, ownership was acquired by the forefathers of the assessee and had continued with the assessee.CIT v. H.H. Maharaja Sahib Shri Lokendra Singhji (supra), the Maharaja of Ratlam had sold some lands which were part of the property inherited by him from his forefathers to whom the property had been gifted by a Moghul emperor. It was held by the Honble Madhya Pradesh High Court that the liability to tax on capital gains would arise in respect of only those capital assets in the acquisition of which an element of cost is either actually present or is capable of being reckoned and not in respect of those assets in the acquisition of which the element of cost is altogether inconceivable. It was further held that in a case where cost cannot be ascertained, the fair market value cannot be taken into consideration under section 55 of the Income Tax Act, 1961, because the very basis of capital gains is that at some point of time the person who initially acquired the property did so at some cost in terms of money. Since the Maharaja of Ratlam had inherited Jagir property from his forefathers which was gifted to his forefathers by a Moghul emperor, the Honble High Court held that having regard to the provisions of section 55(2), no capital gains accrued to the assessee. In our view, the ratio laid down by the Honble Madhya Pradesh High Court in the aforesaid case squarely applies to the facts of the assessees case because the assessee also inherited the land from his forefathers to whom lands were gifted by Shree Chhatrapati Shivaji Maharaj and the Peshawas and there has been no change in the said inheritance by the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, 1955. Accordingly, we reverse the findings of the authorities below and hold that the compensation received by the assessee on acquisition of lands cannot be subjected to capital gains tax. This ground accordingly succeeds.

The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in holding that the interest of Rs. 41,110 and Rs. 74,572 received on compensation was liable to tax in the assessment year under appeal. The assessee received Rs. 41,110 and Rs. 74,572 as interest on additional compensation during the year under appeal. The assessee contended before the assessing officer that the additional compensation itself was in dispute and, therefore, interest thereon could not be included in the income of the assessee. The assessing officer assessed the above two amounts during the year under appeal.

The assessee appealed to the Commissioner (Appeals) who confirmed the action of the assessing officer.

Shri G.N. Gadgil, the learned counsel for the assessee, submitted that the, two items of interest on additional compensation related to different years and, accordingly, the assessing officer was not justified in assessing the entire interest during the year under appeal. The assessing officer should have brought to tax only the interest pertaining to the year under appeal.

Shri Adhir Jha, the learned Departmental Representative relied upon the orders of the authorities below.

We have considered the rival submissions and perused the facts on record. In Rama Bai v. CIT (1990) 181 ITR 400 (SC), the Honble Supreme Court has held that interest on enhanced compensation awarded by the court accrues from year to year. Following the ratio laid down by the Apex Court, we direct the assessing officer to restrict to tax only the interest pertaining to the year under appeal. The assessee is directed to furnish year-wise details before the assessing officer for this purpose.

The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in holding that the bonus of Rs. 9,148 received by the assessee from Panchaganga Sugar Factory was income receipt liable to income-tax. At the time of hearing, this ground was not pressed. The same is accordingly dismissed.

The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in estimating the annual letting value of the self-occupied property "Palace" at Ichalkaranji at Rs. 24,000 instead of Rs. 5,400 declared by the assessee. The facts here are identical to those discussed by us in the assessees case relating to assessment year 1978-79 (ITA 1153/Pune/92). As such, our decision in the aforementioned order will apply mutatis mutandis to the facts of the present year. For the reasons discussed therein, we direct the assessing officer to adopt the annual letting value of the self-occupied property at Rs. 12,000.

The first grievance of the assessee is that the learned Commissioner (Appeals) is not justified in determining the annual letting value of the self-occupied pro perty "Palace" at Ichalkaranji at Rs. 18,000 against Rs. 5,400 declared by the assessee. The assessee had declared the value of the self-occupied property at Rs. 5,400. The assessing officer noted that the judicial magistrate, Ichalkaranji, had fixed the value of the palace for the assessment year 1964-65 at Rs. 6,000. He further observed that the development of Ichalkaranji had been much more during the period 1964 to 1976. Accordingly, he adopted the ALV of the Palace at Rs. 24,000.

The assessee appealed to the Commissioner (Appeals) and submitted that the approach of the assessing officer was on an ad hoc basis. The assessee also placed reliance on the decision of the Tribunal in the case of Dr. VS. Prayag v. Income Tax Officer in WTA Nos. 642 & 643/Pune/1981. Reliance was also placed on the decision of the Honble Supreme Court in the case of Mrs. Sheila Kaushish v. CIT (1981) 131 ITR 435 (SC) and on the case of Dewan Daulat Rai Kapur v. New Delhi Municipal Committee (1980) 122 ITR 700 (SC). After considering the submissions of the assessee, the Commissioner (Appeals) held that the approach of the assessing officer was not ad hoc, but was based on the decision of the judicial magistrate referred to supra and subsequent development of Ichalkaranji. However, he did not agree with the estimate of Rs. 24,000 made by the assessing officer and directed the assessing officer to adopt the ALV for the year at Rs. 18,000.

Shri G.N. Gadgil, learned counsel for the assessee submitted that Ichalkaranji is a small town, it is not even a district headquarters.

The palace is not in a good condition and requires extensive repairs.

He submitted that in any case the ALV retained by the Commissioner (Appeals) at Rs. 18,000 is highly excessive, even keeping in view of the judgment of the judicial magistrate, Ichalkarariji who had fixed the value of Rs. 6,000 for the year 1964-65.

Shri Adhir Jha, the learned Departmental Representative submitted that over the years Ichalkaranji has developed; there has been mushroom growth of powerloom sector and other industries and there is scarcity of accommodation He submitted that the assessee had declared ALV of the palace at Rs. 5,400 which was even below that fixed by the judicial magistrate for the year 1964-65 and that the Commissioner (Appeals) has given adequate relief and the ALV as estimated by the Commissioner (Appeals) at Rs. 18,000 should be retained.

We have considered the rival submissions and perused the facts on record. In our view, the ALV shown by the assessee at Rs. 5,400 is on the lower side keeping in view the fact that the judicial magistrate, Ichalkaranji, had fixed the value for municipal tax purposes at Rs. 6,000, but the estimates made by the assessing officer at Rs. 24,000 and retained by the Commissioner (Appeals) at Rs. 18,000 are highly excessive, keeping in view the fact that Ichalkaranji still continues to be a taluka town and though there has been some development in the town during the last few years, ALV cannot be hiked to a figure of Rs. 18,000. After taking into consideration the facts and circumstances of the case, we fix the ALV for the year under appeal at Rs. 12,000. The assessee will be entitled to a relief of Rs. 6,000.

"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred both in law and on merit in holding that the addition of Rs. 2,65,042 on account of short-term capital gains was properly made." At the time of hearing, this ground was not pressed. The same is accordingly dismissed.

The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in upholding the disallowance of agricultural loss. After hearing both the sides, we do not find any merit in this ground. Since agricultural income is not taxable and is exempt from income-tax under section 10, the authorities below have rightly held that agricultural loss cannot be allowed. We accordingly dismiss this ground.

We now take up ITA No. 1155/Pune/1992 pertaining to the assessment year 1989-90. The first grievance of the assessee is that the learned Commissioner (Appeals) is not justified in holding that the compensation received by the assessee on Inam lands was liable to capital gains tax. The facts here are identical to those discussed by us in the assessees case relating to assessment year 1985-86 (ITA No.1154/Pune/1992). As such, our decision in the aforementioned order will apply mutatis mutandis to the facts of the present year. For the reasons discussed therein, we reverse the findings of the authorities below and hold that the compensation received by the assessee on acquisition of lands cannot be subject to capital gains tax. This ground accordingly succeeds.

"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred both in law on merit in upholding the disallowance of agricultural loss." At the time of hearing, this ground was not pressed. The same is accordingly dismissed.

We next take up the departments appeals, ITAs No. 1121/Pune/1992 to 1125/Pune/1992 relating to the asst, yr. 1977-78 to 1981-82.

The only effective ground raised in ITA No. 1121/Pune/1992 (assessment year 1977-78) by the revenue reads as under : "On the facts and in the circumstances of the case, the Commissioner (Appeals) erred in directing the assessing officer to allow deduction under section 54E of the Income Tax Act, 1961, when the section was not in the statute for this assessment year." The assessee had received additional compensation in respect of certain acquisition of land effected in the year relevant to the assessment year 1977-78. The additional compensation was received on 17-11-1981, 12-4-1982, and 25-3-1982. Within six months of the receipt of additional compensation, the assessee had made investments for claiming deduction under section 54E. The assessing officer held that the assessee was not entitled to exemption under section 54E in respect of additional compensation since the transfer of land took place before the insertion of section 54E.On appeal, the Commissioner (Appeals) reversed the finding of the assessing officer observing as under : "I have considered the submission made by the appellant. The contention of the appellant appears to be justified. The appellant had received additional compensation during the period when the provision of section 54E was on the statute. Further, second proviso to section 54E provides that the appellant could make requisite investment within six months from the date of receipt of compensation. This aspect has been dealt by the Honble Kerala High Court in the case of Fr. Joseph Villangatil v.Union of India (1990) 186 ITR 63 (Ker)." Shri Adhir Jha, the learned Departmental Representative strongly supported the order of the assessing officer. He submitted that when the acquisitions had taken place, section 54E was not on the statute and, accordingly, the assessee was not eligible for deduction under section 54E of the Act. Shri G.M Gadgil learned counsel for the assessee, strongly supported the order of the Commissioner (Appeals).

After hearing both the parties, we find sufficient force in the contention raised by the learned Departmental Representative.

Admittedly, the land was acquired by the government in the asst. yr.

1977-78, while provisions of section 54E were inserted with effect from 1-4-1978, relevant to assessment year 1978-79. Therefore, the assessee was not entitled to claim any exemption under section 54E since the transfer took place prior to insertion of section 54E. The case law relied upon by the learned counsel for the assessee as well as Commissioner (Appeals) are distinguishable on the facts of the case, inasmuch as in all those cases, the acquisition of land took place when provision of section 54E was very much on the statute. Accordingly, we are unable to uphold the order of the Commissioner (Appeals) on this issue. Consequently, the order of the Commissioner (Appeals) is reversed and the order of the assessing officer is restored on this issue.

In ITAs No. 1122/Pune/1992 to 1125/Pune/1992 relating to assessment years 1978-79 to 1981-82, the only common ground raised by the revenue is as follows : "On the facts and in the circumstances of the case, the Commissioner (Appeals) erred in directing the assessing officer to take ALV at Rs. 18,000 as against Rs. 24,000 determined by the assessing officer for the above assessment year(s) after considering comparable ALV." This issue has been elaborately dealt with by us in the assessees appeal for the assessment year 1978-79 (ITA No. 1153/Pune/1992), wherein we have directed the assessing officer to adopt the annual letting value of the self-occupied property at Rs. 12,000. For the reasons discussed therein, we hold accordingly. These appeals are allowed in part.

In cross -objections No. 25/Pune/1992 to 27/Pune/1992 relating to assessment years 1979-80 to 1981-82, the assessee has taken the following common ground : "On the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred both in law and on merit in determining the ALV of the SC property palace at Ichalkaranji at Rs. 18,000 as a against Rs. 5,400 declared by the assessee." For the reasons, discussed in the assessees appeal for the assessment year 1978-79 (ITA No. 1153/Pune/1992), wherein we have directed the assessing officer to adopt the ALV of the self-occupied property at Rs. 12,000, we allow this ground in part.