2014 (10) TMI 786 - HC - Income Tax

Eligibility for benefit u/s 47(v) - Whether the Tribunal is right in holding that capital gain chargeable to tax u/s. 46(2) will also be eligible for grant of benefit envisaged u/s 47(v) - Held that - Following the decision in Commissioner of Income Tax vs. Brahmi Investments Pvt Ltd. 2006 (2) TMI 129 - GUJARAT High Court - Once section 46(2) comes into play, there is no question of invoking the provisions of section 45 of the Act, and the deeming fiction under section 47 of the Act operates only in relation to transfers amenable to the provisions of section 45 of the Act. This is abundantly clear from the opening portion of section 47 of the Act thus, the capital gain tax is not leviable upon the assessee on the receipt.

Summary

Issues: Challenge to impugned judgment by Revenue, interpretation of tax law on capital gains and benefit eligibility under section 47(v).

Analysis:
1. The appellant-Revenue challenged the judgment of the Income-tax Appellate Tribunal, Ahmedabad Bench, regarding the assessment year 1994-95. The Tribunal dismissed the appeal of the department.

2. The appeal was admitted to consider the question of law regarding the eligibility of capital gain for benefit under section 47(v) of the Income Tax Act.

3. A previous Division Bench order directed this Tax Appeal to be heard alongside another Tax Appeal.

4. The assessee, an Investment Company, declared a total income of Rs. Nil in the return filed. The Assessing Officer found that the company received an amount from the liquidators of a subsidiary, which was claimed as exempt under specific sections of the IT Act. However, the AO decided to tax a surplus distribution as capital gain based on a different decision.

5. The advocates for both parties presented their arguments. The assessee's advocate cited a previous judgment in favor of the assessee, emphasizing that capital gain tax should not apply to the said receipt.

6. The Court noted that the issue raised in the present Tax Appeal aligns with a previous judgment in the case of Commissioner of Income Tax vs. Brahmi Investments Pvt Ltd. Consequently, the present Tax Appeal was disposed of in accordance with the earlier judgment.

This detailed analysis covers the issues involved in the legal judgment, focusing on the challenge raised by the Revenue, the interpretation of tax law concerning capital gains, and the eligibility for benefits under section 47(v) of the Income Tax Act.