1986 (6) TMI 75 - AT - Income Tax

Summary

Issues:
1. Status of the assessee as HUF
2. Acquisition of asset for nothing and its impact on capital gains tax

Issue 1: Status of the assessee as HUF
The judgment dealt with the issue of the assessee's status as HUF. The assessee, a member of the erstwhile ruling family of Patiala, initially filed returns as an individual but later claimed HUF status. The ITO questioned the validity of the marriage of the assessee, which was crucial in determining the HUF status. The AAC accepted the HUF status based on evidence including photographs of the marriage ceremony and an affidavit confirming the marriage as per Sikh rites. The Tribunal upheld the AAC's decision, emphasizing that the marriage was performed according to Sikh customs, supported by uncontroverted facts and legal precedents. The Tribunal rejected the revenue's arguments based on wild surmises and confirmed the AAC's order, citing relevant case law and Section 49 of the Income-tax Act, 1961.

Issue 2: Acquisition of asset for nothing and its impact on capital gains tax
The second issue revolved around the acquisition of an asset by the assessee for nothing and its implications on capital gains tax. The asset in question was received through a 'sanad' issued by the government, and the assessee claimed that it was acquired at nil cost due to historical reasons. The ITO argued that some cost must have been involved in acquiring the property, but the Tribunal disagreed, citing a Supreme Court ruling that assets acquired without a visualized cost cannot attract capital gains tax. The Tribunal referred to a similar case decided by the Madhya Pradesh High Court, where it was held that assets acquired without any ascertainable cost are not subject to capital gains tax. Therefore, the Tribunal upheld the AAC's decision, confirming that the asset was acquired for nothing and dismissing the appeals.

The judgment by the Appellate Tribunal ITAT Chandigarh addressed the issues of the assessee's HUF status and the acquisition of assets for nothing, providing a detailed analysis based on evidence, legal principles, and precedents to arrive at a final decision dismissing the appeals.