1973 (3) TMI 29 - HC - Income Tax

Computation of capital gains - computation of capital gians and the eligibility of the assessee to exemption were to be tested with reference to each transaction separately - applicability of the exemption under section 53 is to be tested with reference to each transaction independently and with reference to the position of the holding of the assets as on the date of that transaction

Summary

Issues:
Interpretation of section 53 of the Income-tax Act, 1961 regarding exemption from capital gains tax based on multiple property transactions.

Analysis:
The case involved the sale of two house properties and a vacant site by the assessee to different buyers under separate sale deeds. The assessee claimed exemption under section 53 of the Income-tax Act, 1961, for the capital gains arising from these transactions. The key issue was whether each property sold or each transfer effected should be considered independently for the application of section 53.

The Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal held that the aggregate value of consideration from all transactions should be taken into account for applying section 53. However, the assessee contended that each transaction should be considered separately, as per the scheme of the Act and the provisions of sections 45, 48, and 53.

Section 53 provides conditions for exemption from capital gains tax, including that the aggregate value of consideration for the transfer should not exceed Rs. 25,000 and the aggregate fair market value of all properties owned should not exceed Rs. 50,000 immediately before the transfer. These conditions need to be cumulatively satisfied for the exemption to apply.

The court emphasized that each transaction should be independently considered for the applicability of the exemption under section 53. The proviso to the section requires evaluating the assets as on the date of each transfer, indicating that each transaction should be assessed separately. The court provided illustrations to demonstrate how the exemption should be applied based on individual transactions and asset values at the time of each transfer.

Ultimately, the court answered the reference in favor of the assessee, stating that the exemption under section 53 should be tested independently for each transaction and based on the asset holding position at the time of that specific transaction. The assessee was entitled to costs, including counsel's fee.

In conclusion, the judgment clarified that for the purposes of claiming exemption under section 53 of the Income-tax Act, each property transaction must be evaluated independently, and the applicability of the exemption should be determined based on the asset values at the time of each transfer.