1985 (4) TMI 11 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 45 of the Income-tax Act, 1961 regarding capital gains on the sale of a part of a property.
2. Applicability of section 51 of the Income-tax Act, 1961 in the context of capital gains from the sale of a property.

Analysis:

The judgment revolves around the interpretation of sections 45 and 51 of the Income-tax Act, 1961, concerning the assessment of capital gains on the sale of a part of a property. The case involved the purchase of a property by the assessee and subsequent sale of a portion of it, leading to a dispute over the capital gains accrued from the sale.

The Income-tax Officer assessed a sum as capital gains from the sale of the property, which was contested by the assessee in subsequent appeals. The primary contention raised by the assessee was that unless the entire capital asset was transferred, there should be no capital gain from the sale of a part of the asset. The assessee relied on a Division Bench ruling to support this argument.

The court examined the provisions of section 45 of the Act, which states that any profits or gains arising from the transfer of a capital asset shall be chargeable to income-tax under the head "Capital gains." The court emphasized that the words "the transfer of a capital asset" do not necessarily imply the transfer of the entire asset but can also include the transfer of a part of the asset. The court rejected the assessee's argument that interpreting the provision otherwise would lead to tax evasion opportunities.

Regarding the applicability of section 51 of the Act, the court held that this section did not support the assessee's claim and did not provide any basis for challenging the assessment of capital gains. The court concluded that both questions raised in the reference had to be answered affirmatively, against the assessee and in favor of the Revenue.

In light of the discussion and analysis of the relevant provisions, the court directed the parties to bear their own costs, ultimately upholding the assessment of capital gains on the sale of a part of the property as determined by the Income-tax Officer and the subsequent appellate authorities.