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TMI Blog1982 (10) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal with the sale of the residential house. The total consideration for the sale of the lands was Rs. 67,000. The assessment year is 1977-78. The assessment itself was completed on 16-2-1979. The assessee had returned the capital gains on the sale of these properties. She had adopted the market value as on 1-1-1954 as the cost of acquisition. The ITO made the assessment making certain modifications in the cost of acquisition. There appears to have been no appeal filed against that order of the ITO. The assessee had invested the sale proceeds in two banks, namely, Calicut Co-operative Bank and the Calicut branch of the Syndicate Bank. The deposits were for a period of 61 months. The assessment order and the demand notice were served on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, that these two provisions, viz., the amended section 55(2)(i) and the newly introduced section 54E, are measures intended to benefit the assessees and, therefore, should be considered to be retrospective in operation, so that all assessments made subsequent to those two provisions coming into force, should be governed by these provisions. Reliance is placed in this regard on two decisions of the Madras High Court in the case of Addl. CIT v. Madura South India Corporation (P.) Ltd. [1977] 110 ITR 322 and Addl. CIT v. Rajah Sir M. A. Muthiah Chettiar [1978] 112 ITR 731 and one decision of the Jammu and Kashmir High Court in the case of Fairdeal Motors v. CIT [1975] 101 ITR 687. It is further pointed out that section 155(10A) emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the Finance Act itself that these changes. viz., the amended section 55(2)(i) and the newly introduced section 54E, would come into effect from 1-4-1978. It has been held in a number of cases that it is the law as at the commencement of the assessment year that would govern the assessment for that assessment year. This has been laid down first in the case of CIT v. Maharajah of Pithapuram [1942] 10 ITR 1 at page 6 by the Madras High Court and affirmed by the Privy Council in Maharajah of Pithapuram v. CIT [1945] 13 ITR 221. This has been reaffirmed in a number of decisions subsequently, notably in CIT v. Isthmian Steamship Lines [1951] 20 ITR 572 at page 577 by the Supreme Court and in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar and related to the payment of interest under section 244 of the Act. The liability for the department to pay interest on the refund arose at the time the refund became payable to the assessee and not at the commencement of the assessment year in question. We do not see how these two decisions support the contention of the assessee regarding the commencement of these changes introduced in section 55(2)(i) and section 54E. These two provisions are clearly substantive law since they deal with the right of the assessee to have the tax liability determined. As has been pointed out earlier such changes in substantive law can only by applied prospectively unless the Legislature intended that they are to come into force retrospectively. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Tirur Municipality and used for agricultural purposes, the capital gains resulting from their sale would constitute agricultural income in the light of the Supreme Court decision in Shantilal Maneklal Shah v. CIT [1968] 68 ITR 503. The assessment has been made on the strength of sub-clause (iii) of clause 14 of section 2 which has recently been declared partially ultra vires by the Bombay High Court in Manubhai A. Sheth v. N.D. Nirgudkar, ITO [1981] 128 ITR 87. According to their Lordships, these provisions could apply only if the lands are not used for agricultural purposes and as the appellant's lands are used for agricultural purposes, the appellant's capital gains are to be totally exempted from income-tax." Reliance is plac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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