Judgment :- Radhakrishna Menon, J. The year of assessment is 1974-75. Reference is at the instance of the assessee. The question referred reads. "Whether, on the basis of materials available, the Appellate Tribunal was justified in law in holding that the capital gains arising from the compulsory acquisition of the land of the assessee's wife of an extent of 24.5 acres has to be treated separately and that there is no scope for the application of S.54(1) of the Income-tax Act in respect thereof?" 2. Facts relevant and requisite can briefly be stated thus. The land measuring an extent of 2.45 acres (50 cents) comprised in Sy. No.945/1 of Poonithura Village originally belonged to the assessee. He gifted the same to his wife in the year 1960. He thereafter constructed a building on the said land in the year 1970. The Government of Kerala in the year 1973 acquired the aforesaid land and the building and also the adjoining land of an extent of 5.79 acres belonging to the assessee for the public purpose namely, widening of the National Highway. The Land Acquisition Officer awarded compensation in a sum of Rs.73,500/- for the land belonging to the wife and Rs. 1,05,518 for the building. Both the assessee and his wife, not being satisfied with the compensation so awarded, got the question relating to enhancement of compensation referred to the court of the Second Additional Subordinate Judge, Ernakulam as is seen from L. AR. 899/ 1973. The Subordinate Judge by his judgment and decree awarded additional compensation of Rs.2341S.21 for the land and Rs.33992.31 for the building. Solatium at 15% was also awarded. As a result of the judgment and decree the assessee's wife received a total amount of Rs.1,16,692/- as compensation for the land and trees thereon and the assessee was paid compensation in a sum of Rs. 1,59,766 for the building. 3. The return for the assessment year in question filed by the assessee however, did not include the capital gains arising from the compulsory acquisition of the land belonging to his wife. When questioned he gave the explanation that he was not liable to account the capital gains, the wife probably would be liable to account. The assessing authority did not accept the contention. When questioned he gave the explanation that he was not liable to account the capital gains, the wife probably would be liable to account. The assessing authority did not accept the contention. He accordingly held that the capital gains arising from the compulsory acquisition of the land belonging to the wife is liable to be assessed in the hands of the assessee in view of the provisions contained in S.64 of the Income-tax Act. Aggrieved by the order of assessment the assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Ernakulam, wherein he reiterated the various contentions, he had raised before the assessing authority. He also raised the contention that if the capital gains, the wife is liable to account, is liable to be assessed in his hands then he is entitled to the benefit of S.54. The Appellate Assistant Commissioner by his order accepted this case of the assessee. He accordingly found that the assessee is entitled to the benefit of S.54 in respect of the capital gains, he has been called upon to account which, but for S.64, should have been accounted for by the wife. The assessee as also the Department attacked the said order of the Appellate Assistant Commissioner by filing appeals. These appeals were disposed of by the common order, annexure- c. It can be seen from this order that the case set up by the Department was that the compensation awarded by the Land Acquisition Officer for acquiring the land and the building, the wife of the assessee alone can lay claim to. This contention was resisted by the assessee. He in this connection reiterated the contentions he had raised before the assessing authority as also the Appellate Assistant Commissioner. Considering the various aspects of these competing contentions the Tribunal held that the wife alone is entitled to get the compensation for acquiring the land. The Tribunal also held that the husband alone can get the compensation for the building. We shall in this connection reproduce the said finding. "... The income-tax Officer has proceeded on the basis that the building which was compulsorily acquired belonged only to the husband. It is not disputed that it was constructed by him with his own funds. The Appellate Assistant Commissioner also has proceeded on the basis that the building in question belonged only to the husband. "... The income-tax Officer has proceeded on the basis that the building which was compulsorily acquired belonged only to the husband. It is not disputed that it was constructed by him with his own funds. The Appellate Assistant Commissioner also has proceeded on the basis that the building in question belonged only to the husband. There is no case for the Department that the assessee had gifted the building to his wife though he had built it with his own funds. Merely because the building had been constructed on the land which originally belonged to the assessee, but which he had gifted to his wife, it will not follow that the building in question also belonged to the assessee's wife.... What is more important, is compensation for the building has been awarded by the Land Acquisition Officer and by the learned Second Addl .Subordinate Judge, Ernakulam only to the husband in respect of the buildings, while compensation for the land was awarded to the assessee's wife. In the face of these circumstances, it is idle for the department to contend, for the first time, before us that the building in question also belonged to the assessee's wife, and the assessee was residing there only as a member of the family and not in his capacity as the owner". The only inference possible from the above findings, which stand unchallenged, can be stated thus. The compensation for the buildings, the assessee can claim whereas the compensation for the land in dispute the wife of the assessee alone is entitled to get. 4. The question therefore is. would the capital gains arising out of the compensation paid to the wife for the acquisition of the land belonging to her, attracat the provisions of S.54 while the same being assessed in the hands of the husband by virtue of the provisions contained in S.64. To find an answer to this question we necessarily have to refer to Ss.45, 54 and 64. S.45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in Ss.53, 54, 548 (S.45 as it stood at the time of assessment), be chargeable to income-tax under the head 'capital gains', and shall be deemed to be the income of the previous year in which the transfer took place. It is clear from the scheme of this Section that the capital gains chargeable is deemed to be income as defined under S.2(24) (b). It therefore follows that if any profits or gains arises from the transfer of a capital asset the same must be treated as income in the hands of the person to whom the capital asset belonged. Such profit or gains is charged subject to the sections made mention of therein. But the profit or gains arising from the transfer of a Capital asset belonging to the wife however, will be treated as the income of the husband and assessed in his hands provided the conditions stipulated under S.64 are satisfied. We shall now consider the scope of S.64. "64(1) -In computing the total income of any individual, there shall be included all such income as arising directly or indirectly (iv) subject to the provisions of clause (1) of S.27, in a case not falling under clause (1) of this sub-section, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration and in connection with an agreement to live apart". The compensation amount, the wife of the assessee was found entitled to get on her land being acquired by the Government, satisfies the requirements prescribed under clause (iv) of sub-s.1 of the Section is the common case of the parties. The capital gains arising out of the said transaction can therefore be lawfully assessed in the hands of the assessee. The capital gains which is sought to be assessed in the hands of the assessee, the learned counsel for the assessee argues, must be treated as the capital gains arising out of the acquisition of land with the building and if that be so, the assessee is entitled to claim the benefit of S.54. Dilating on this argument the learned counsel submitted that the capital gains which by virtue of S.64, is treated as the capital gains of the assessee, is in no way different from the capital gains he is found to have got by way of acquisition of the house. The provisions of S.64(1)(iv) therefore, have the same effect as the words deemed to be used in S.64(2)(c). The provisions of S.64(1)(iv) therefore, have the same effect as the words deemed to be used in S.64(2)(c). In support of this argument he cited a ruling of the Supreme Court in C.I.T. v. Gotla (1985) 156 I.T.R.323) particularly the following passage therefrom. "In view of the aforesaid and in view of the attitude of the law-makers in dealing with this problem as evidenced by the amendment and in the circular originally issued prior thereto and bearing in mind that under the scheme of the Act where the wife or minor child carries on a running business, the right to carry forward the loss in the running business would be available to the wife or minor child if they themselves were assessed, but the right would be completely lost if the individual in whose total income the loss is to be included is not permitted to carry forward the loss under S.24(2), since that would be the result of the strict literal construction, it is apparent that that could not have been the intent of Parliament. Therefore, where S.16(3) of the Act operates, the profit or loss from a business of the wife or minor child included in the total income of the assessee should be treated as the profit or loss from a 'business carried on by him' for the purpose of carrying forward and set off of such loss under S.24(2) of the Act. On a consideration of the scheme of the Act and the provisions therein as noted before, the share income of the wife and minor children included in the assessee's total income under S.16(3) of the Act should be regarded as business income derived from business carried on by the assessee and, in-that view of the matter, the assessee is entitled to set off his loss carried forward from the previous years". The counsel for the Revenue, however contended that the Parliament in S.64(1) (iv) has not used the expression deemed to be the income' in contradistinction to the said expression used in S.64(2)(c). The capital gains in question included in the income of the assessee, cannot therefore be treated as income earned by him and as such he cannot take advantage of none of the Sections namely., 53,54 and 54b of the Act. This argument reflects the plain literal interpretation of the Section. The capital gains in question included in the income of the assessee, cannot therefore be treated as income earned by him and as such he cannot take advantage of none of the Sections namely., 53,54 and 54b of the Act. This argument reflects the plain literal interpretation of the Section. This interpretation, if accepted, would defeat the object sought to be achieved by enacting the Section. On going through the whole scheme of the Act, particularly the object to accomplish which, the section is enacted, it can be inferred without fear of contradiction, that it has been enacted to counteract the effect of the transfer of assets so far as the computation of the income of the assessee is concerned. This object sought to be achieved shall be born in mind to find out what exactly was the intention of the Parliament. This shall be found out from the language employed by the Parliament, and if strict literal interpretation leads to an absurd result in that the object sought to be accomplished would get defeated by such interpretation then, a construction that would avoid such absurdity shall be thought of. Under such circumstances a construction which results in equity rather than injustice shall be preferred although it is often said that equity and taxation are strangers. This principle of construction in our view, shall govern the field here, because in the case on hand we are dealing with an artificial liability created for counteracting the effect of attempts by the assessee to reduce tax liability by transfer of assets. If that be so the 'capital gains' in question cannot be said to be in no way different from the 'capital gains' of the assessee for the purpose of the Act. (See Gotla's case). 5. The assessing authority therefore is bound to treat the 'capital gains' which, but for S.64 should have been assessed in the hands of the wife, as the capital gains of the assessed liable to be assessed in his hands in the same way in which the same would have been assessed in the hands of the wife. The capital gains is chargeable in terms of S.54 read with S.72 of the Act. The facts of the case do not attract the provision ofS.72. What about S.54. The capital gains is chargeable in terms of S.54 read with S.72 of the Act. The facts of the case do not attract the provision ofS.72. What about S.54. The main purpose of the Section is only to give relief in respect of profits on the sale of residential houses. Construing this Section the Supreme Court in C.l.T. v. Aravinda Reddy (120 I.T.R.46 at page 48) has observed that if you sell your house to make a profit, pay Caeser what is due to him unless it be that you have bought or built another house, subject to the conditions of S.54(1). If that be the position the capital gains in question, inasmuch as the same does not arise from out of the acquisition of a house property, would not attract S.54. We accordingly hold that the finding of the Tribunal namely., that 'the capital gains arising from the compulsory acquisition of the land of the assessee's wife of an extent of 24.5 acres has to be treated separately and that there is no scope for the application of S.54(1) of the Income-tax Act in respect thereof is beyond challenge. For the reasons stated above the question is answered in the affirmative and in favour of the Department. A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.