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Assessment of capital gains on sale of investment, application of first proviso to section 12B(2) of the Indian Income-tax Act, 1922, whether liability of the assessee under section 12B existed, attempt at reduction of liability to tax, deduction for brokerage on sale of shares. Analysis: The case involved the assessment of capital gains on the sale of investments for the assessment year 1960-61. The assessee requested substitution of the fair market value of shares as on January 1, 1954, under the second proviso to section 12B(2) of the Income-tax Act. The Income-tax Officer determined the fair market value based on the break-up value and found that the sales were to persons connected to the assessee, resulting in a capital loss. The Appellate Assistant Commissioner upheld the capital loss calculation, emphasizing the need for proof of brokerage expenses for deduction. Upon further appeal to the Tribunal, it was argued that the first proviso to section 12B(2) did not apply, and brokerage deduction should be allowed. The Tribunal held that both conditions of the proviso must be met simultaneously and found no attempt at avoidance or reduction of tax liability due to the absence of capital gains liability. The Tribunal directed the modification of the assessment. The High Court analyzed the provisions of section 12B of the Income-tax Act, emphasizing the cumulative nature of the conditions for applying the first proviso. Referring to the Supreme Court's decision in Commissioner of Income-tax v. George Henderson & Co. Ltd., the court affirmed the Tribunal's interpretation. The court concluded that if there was a capital loss, there could be no liability for capital gains under section 12B. As there was no liability, there was no attempt to reduce tax liability through the sale. The court answered the questions in favor of the assessee, highlighting the academic nature of the dispute due to the initial profit shown by the assessee and the revenue's pursuit of the matter. In a concurring opinion, the second judge agreed with the reasoning and conclusions of the main judgment, emphasizing the lack of purpose in pursuing the matter further given the factual and legal context of the case.
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