9911796707
|
Home
Issues Involved:
1. Whether the sum received as solatium forms part of the consideration for the purpose of working out the capital gain under the Income-tax Act, 1961. 2. If the solatium is considered part of the consideration, whether the assessee is entitled to the deduction of the value of the solatium as on January 1, 1954, or January 1, 1964, in computing the capital gains. Issue-wise Detailed Analysis: Issue 1: Inclusion of Solatium in Capital Gains The primary question was whether the amounts received as solatium (Rs. 28,810 for the assessment year 1977-78 and Rs. 3,353 for the assessment year 1978-79) should be included in the consideration for calculating capital gains under the Income-tax Act, 1961. The assessee argued that solatium, awarded under section 23(2) of the Land Acquisition Act, 1894, was compensation for injured feelings and not part of the market value of the land. The Tribunal initially agreed with this view, excluding solatium from the sale consideration. However, the court examined the nature of solatium, noting that under section 23(2) of the Land Acquisition Act, it is awarded in addition to the market value of the land due to the compulsory nature of the acquisition. The court referenced multiple cases, including decisions from the Kerala High Court and the Bombay High Court, which held that solatium is part of the sale consideration and assessable under "Capital gains." The court concluded that solatium is a profit arising from the transfer of land and should be included in the full consideration for determining capital gains. Therefore, the first question in both assessment years was answered in the negative, affirming that the amount of solatium received by the assessee formed part of the consideration for capital gains. Issue 2: Deduction of Solatium's Value as on January 1, 1954, or January 1, 1964 The second issue was whether the assessee could deduct the value of solatium as on January 1, 1954, or January 1, 1964, in computing capital gains. The assessee claimed that the value of solatium should be deducted from the compensation while computing capital gains under section 48 of the Act. The Assessing Officer and the Tribunal rejected this plea, while the Appellate Assistant Commissioner had initially accepted it for the assessment year 1977-78. The court noted that deductions under section 48 are allowed for expenditure incurred wholly and exclusively in connection with the transfer of capital assets, the cost of acquisition, and the cost of any improvement. Since solatium is awarded based on the market value of the land due to compulsory acquisition, there is no basis for assuming an entitlement to solatium on January 1, 1954, or January 1, 1964. The cost of acquisition or improvement does not include any assumed value of solatium as of these dates. Therefore, the second question in both assessment years was answered in the negative, indicating that the assessee is not entitled to any deduction of the value of solatium as on January 1, 1954, or January 1, 1964. Conclusion The court concluded that: 1. The amount of solatium received by the assessee forms part of the consideration for determining capital gains. 2. The assessee is not entitled to any deduction of the value of solatium as on January 1, 1954, or January 1, 1964, in computing capital gains.
|
