1981 (1) TMI 112 - AT - Income Tax

Summary

Issues:
1. Determination of long-term capital gain on the sale of loose Diamonds.
2. Interpretation of the period for which the jewellery was held by the assessee.
3. Application of Section 80T of the Income Tax Act.
4. Assessment of the nature of capital gain - short term or long term.

Analysis:
The judgment revolves around the assessment of long-term capital gain on the sale of loose Diamonds by the assessee during the year 1976-77. The assessee declared a sum as long-term capital gain, subject to deduction under Section 80T of the Act. However, the Income Tax Officer (ITO) disputed this claim, stating that the assessee failed to establish the long-term nature of the capital gain. The CIT (A)-II, Kanpur also rejected the claim, emphasizing the need for the appellant to prove that the jewellery was held for more than 60 months preceding its transfer to qualify for long-term capital gains under Section 80T.

Upon appeal before the Tribunal, the representative for the assessee argued that the jewellery was held for over 60 months, making the capital gain long-term. The Tribunal analyzed the voluntary disclosure made by the assessee in 1975, where it was disclosed that the jewellery was acquired during the assessment years 1966-70. The Tribunal clarified that the jewellery was acquired in the assessment years, not the accounting years, as assumed by the CIT (A). This clarification led to the conclusion that the loose Diamonds were not short-term capital assets, as defined in Section 2(42A) of the Act.

The Tribunal held that since the loose Diamonds were acquired during the assessment years 1966-70 and sold in 1976, they did not qualify as short-term capital assets. Consequently, the capital gain was deemed long-term, entitling the assessee to statutory deduction under Section 80T. Therefore, the appeal by the assessee was allowed, and the ITO was directed to grant the statutory deduction under Section 80T of the Act.