2004 (8) TMI 20 - HC - Income Tax

Question of law appeal to HC first dispute relates to the computation of capital gains - second dispute relates to the addition sustained by the Tribunal to the trading account of the assessee - third issue relates to levy of interest under section 234B - we are satisfied that the following substantial question of law does arise out of the order of the Tribunal for consideration by this court Whether on the facts and circumstances of the case the Tribunal was right in holding that to calculate the long-term capital gain cost indexing under section 48 of the Income-tax Act 1961 had to be made in respect of each payment separately on the basis of date when the same was actually paid? Assessee s appeal is admitted

Summary

Issues Involved:
1. Dispute over computation of capital gains
2. Dispute over addition to trading account
3. Levy of interest under section 234B of the Income-tax Act

Analysis:

1. Dispute over Computation of Capital Gains:
The assessee contested the Tribunal's decision regarding the computation of capital gains arising from surrendering the right for property allotment. The disagreement centered on the determination of the basic date for cost indexing. The assessee argued that the date of the first instalment payment should be considered as the basic date for cost indexing. Conversely, the Revenue contended that cost indexing for each instalment should be done separately based on the payment date. All lower authorities sided with the Revenue's position. The High Court emphasized that the determination of the basic date for cost indexing is crucial for computing capital gains accurately.

2. Dispute over Addition to Trading Account:
The second issue revolved around the addition to the trading account of the assessee. Initially, the Assessing Officer applied a gross profit rate of 32.95%, resulting in an assessment of Rs. 15,15,735. Subsequently, the Commissioner of Income-tax (Appeals) reduced the gross profit rate to 25%, leading to a reduced addition of Rs. 5,03,735. The Tribunal further decreased the addition by applying a gross profit rate of 23.5%, considering excessive wastage claimed by the assessee compared to previous years. The High Court highlighted that the determination of the gross profit rate is a factual matter, and the court would not intervene unless the Tribunal's estimate is deemed arbitrary or perverse.

3. Levy of Interest under Section 234B:
Regarding the levy of interest under section 234B of the Income-tax Act, the Tribunal accepted the assessee's plea for reduction due to decreased income. Consequently, the matter was remanded to the Assessing Officer for appropriate relief. As the Tribunal upheld the assessee's claim, the High Court found no further consideration required. However, the High Court identified a substantial question of law for consideration related to the calculation of long-term capital gains based on cost indexing for each payment separately.

In conclusion, the High Court addressed the disputes comprehensively, emphasizing the importance of factual assessments in determining capital gains, trading account additions, and interest levies under the Income-tax Act. The judgment underscored the significance of accurate cost indexing and gross profit rate estimation in resolving tax disputes effectively.