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Issues:
1. Assessability of amount under 'Capital gain' in hands of assessee. Analysis: The judgment pertains to a case where the assessee, a shareholder of a company that went into voluntary liquidation, became entitled to a share in the company's assets. The Assessing Officer included a sum of Rs. 11,226 in the assessee's total income as income from capital gains. The main contention raised by the assessee was that the assets received did not arise from the transfer of a capital asset and thus should not be treated as a capital gain. The Tribunal, relying on a decision of the Gujarat High Court, accepted the assessee's contention and deleted the inclusion of Rs. 11,226 in the total income. The High Court, in a previous case, held that the amount received by a shareholder on the liquidation of a company was not a transfer of a capital asset within the meaning of the Income Tax Act. However, due to the provisions of section 46(2) of the Act, the amount of capital gain, which would otherwise not be taxable, becomes chargeable to income tax. The Court emphasized that the money received by the assessee on the liquidation of the company, though not falling under income from the transfer of a capital asset, is taxable as income arising from capital gains under section 46(2). The Court rejected the argument that income falling under section 46(2) would not be treated as income for the purpose of income tax. It clarified that all capital gains become chargeable to income tax under section 45, and section 46(2) deems the receipt of money or assets by a shareholder on liquidation as a capital gain chargeable to income tax. Therefore, the amount of Rs. 11,226 was held to be assessable in the hands of the assessee under the head 'Capital gain'. The Court also directed the Tribunal to consider other grounds raised by the assessee challenging the inclusion of the sum in his income. In conclusion, the Court answered the question in the affirmative, holding that the amount in question was assessable as 'Capital gain' in the hands of the assessee. No costs were awarded in the circumstances of the case.
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