1991 (9) TMI 59 - HC - Income Tax

Summary

Issues:
1. Refusal of the Tribunal to refer questions of law to the High Court under section 256(2).
2. Determination of capital gains arising from the exchange of two capital assets.
3. Consideration received in exchange for the capital assets transferred.
4. Liability of both transferors for capital gains in an exchange transaction.
5. Correctness of the Tribunal's reliance on specific case laws for the case.
6. Interpretation of provisions relating to capital gains in case of a change in asset holding.

Analysis:
The petitioners sought a reference to the High Court on various questions of law arising from the Appellate Tribunal's order, which the Tribunal refused. The primary issue revolved around determining if capital gains could arise from the exchange of two equal-value capital assets, specifically land and cash. The Tribunal's decision on the consideration received in exchange and the liability of both transferors for capital gains was challenged. Additionally, the correctness of the Tribunal's reliance on case laws like CIT v. George Henderson and Co. Ltd. [1967] 66 ITR 622 and CIT v. Gillanders Arbuthnot and Co. [1973] 87 ITR 407 was questioned. The interpretation of provisions related to capital gains concerning a mere change in asset holding was also a crucial aspect of the case.

The High Court, through Judge K. P. Radhakrishna Menon, examined the questions raised by the petitioners in light of the Supreme Court's ruling in CIT v. George Henderson and Co. Ltd. The Court emphasized that the consideration for a capital asset transfer is what the transferor receives in exchange, not the asset itself. The Court reiterated that the full consideration for a transfer is the value received by the transferor, whether in money or money's worth, and not the market value of the asset transferred. Based on this interpretation, the Court concluded that the questions raised did not require referral to the High Court, as the issues were not novel and were addressed by existing legal precedents.

Ultimately, the High Court dismissed the original petitions, upholding the Tribunal's decision and reinforcing the established legal principles regarding the computation of capital gains in cases of asset transfers. The judgment underscored the importance of understanding the true nature of consideration in such transactions and highlighted the significance of precedent in interpreting tax laws related to capital gains.