Divakar Vijayasarathy, Founder and Managing Partner at DVS Advisors LLP, said that the current position of the Income Tax Act, 1961 is that the capital gain on compulsory acquisition of asset is taxable in the year in which the first installment of the compensation is received. This provision was introduced through the Finance Act, 1991 with retrospective effect from 1988. The judgement is with regard to the year of transfer of capital asset which has been compulsory acquired in the pre-1988 era since it was taxable in the year of transfer as per the erstwhile provisions. However the judgment could still have relevance since the indexation benefit is allowed only till the year of transfer.
