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Issues Involved:
The judgment addresses the following Issues: 1. Interpretation of section 49 of the Income-tax Act regarding the computation of capital gains. 2. Determination of the cost of acquisition of a capital asset sold based on market value at the time of gift. Issue 1: Interpretation of Section 49 of the Income-tax Act: The case involved a dispute regarding the application of section 49 of the Income-tax Act in computing capital gains. The assessee contended that section 49 was not applicable as the lands acquired were initially agricultural and only became capital assets upon conversion to non-agricultural use. The Commissioner disagreed, asserting that section 49 required the cost of acquisition to be determined as per its provisions. The Tribunal upheld the Commissioner's view, stating that the cost of acquisition should be based on the amount at which the previous owner acquired the lands. The Tribunal also directed consideration of a circular issued by the Central Board of Direct Taxes, although it did not accept the alternative contention that the cost should be based on the land's value at the time of conversion to non-agricultural use. Issue 2: Determination of Cost of Acquisition Based on Market Value at Time of Gift: The second question revolved around whether the cost of acquisition for the capital asset sold should be computed based on the market value at the time of the gift. The assessee argued for this approach, citing a specific market value at the time of the gift. However, the Commissioner disagreed and directed that the cost of acquisition should be determined as per section 49(1) of the Act. The Tribunal concurred with the Commissioner, rejecting the assessee's contention and emphasizing that the cost should align with the amount at which the previous owner acquired the lands. In conclusion, the High Court upheld the decisions of the Commissioner and the Tribunal, ruling in favor of the Revenue and against the assessee on both issues. The court found that the provisions of section 49 of the Income-tax Act were applicable in determining the cost of acquisition for the capital asset sold, and rejected the alternative contentions put forth by the assessee. No costs were awarded in the reference.
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