2010 (1) TMI 1196 - HC - Income Tax

Summary

Issues Involved:
1. Validity of block assessment u/s 158BC r/w s. 158BD.
2. Status in which assessment is made.
3. Manner and method of determination of capital gain in block assessment.
4. Double assessment of the same income.
5. Method of computation of capital gains.

Summary:

1. Validity of Block Assessment u/s 158BC r/w s. 158BD:
The connected appeals were filed against orders by the Tribunal sustaining block assessment made u/s 158BC on the individual assessee and u/s 158BC r/w s. 158BD on the AOP. The appellants contended that block assessment in the hands of AOP is untenable as AOP does not exist. The court upheld the Tribunal's decision, stating that the clear finding based on seized documents, including an indemnity bond, proved the sale of the bar hotel with land, building, furniture, fixtures, and bar license as a going concern for Rs. 83.5 lakhs. The court concluded that the applicability of s. 45(3) or s. 45(4) does not arise as the transaction is a clear transfer of property within the meaning of s. 2(47) of the Act.

2. Status in Which Assessment is Made:
The appellants challenged the assessment of Sri Anto Thomas and his wife as constituting an AOP. The court held that since the purpose was found to be the sale of the property and to earn profit therefrom, treating both as an AOP is justified. The court upheld the block assessment u/s 158BC r/w s. 158BD in the hands of Sri Anto Thomas and his wife as AOP.

3. Manner and Method of Determination of Capital Gain in Block Assessment:
The appellants contended that the method of computation of capital gains was not considered in detail by the Tribunal. The court directed the AO to recompute the capital gains, taking into account the date of acquisition as 1st April 1989, and allowing deductions for improvements and indexation of cost of acquisition. The court also directed the AO to apportion the sale consideration towards goodwill, charges for transfer of bar license, and cost of furniture and fixtures.

4. Double Assessment of the Same Income:
The appellants objected to the assessment of the same income in the hands of the AOP and the individual partner, Sri Anto Thomas. The court noted that the tax effect is the same irrespective of in whose hands the assessment is sustained and directed recovery of arrears of tax with interest from Sri Anto Thomas and his wife.

5. Method of Computation of Capital Gains:
The court directed the AO to recompute the capital gains, considering the acquisition date as 1st April 1989, and allowing deductions for improvements and indexation. The AO was also directed to estimate the cost of the land and building after excluding the consideration for goodwill, charges for transfer of bar license, and cost of furniture and fixtures.

Conclusion:
The appeals were disposed of by upholding the assessments confirmed by the Tribunal in principle, but remanding the matter to the AO for recomputation of capital gains after granting eligible deductions and giving an opportunity of hearing to the appellants. The court also upheld the rate of tax applied, i.e., 60%, as appropriate.