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TMI Blog1983 (12) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... given some gold ornaments and jewellery. Between18-4-1978to7-11-1978, the assessee sold the gold ornaments and jewellery worth Rs. 27,763 to his son and the total consideration came to Rs. 45,789. The assessee declared capital gains of Rs. 18,178. The assessee further claimed that the capital gains should be treated as long-term capital gains. 2. The ITO first of all invoked the provisions of section 52(1) of the Income-tax Act, 1961 (' the Act '). He fixed the market price of the gold ornaments and jewellery sold at Rs. 68,273. Secondly, he held that the capital gains would be short-term capital gains. On both these accounts the assessee failed before the AAC. 3. Mr. M.L. Khanna, the learned counsel for the assessee, contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is totally absent. Though Mr. Khanna argued that there is no finding that the transaction was with a view to avoid tax, perhaps the finding is inherent in the order of the ITO. But that question need not detain us as we have held that section 52(1) cannot be applied in the absence of a finding with regard to the understatement of consideration. 5. The next question is whether the capital gains should be short-term capital gains or long-term. Though Mr. Khanna referred to the provisions of section 49 to impress upon us that the cost of acquisition should be taken as the cost of acquisition in the hands of the previous owner, which only would mean that the period between the date of acquisition and the date of sale would be beyond 36 month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such situation has arisen in this case. Here again, the authorities and the commentaries relied on by the learned departmental representative as to whether the stock-in-trade would become capital assets and vice versa are not necessary to be discussed at all. In the absence of any other material, it is safe and proper to proceed on the basis that the gold ornaments became the capital assets of the assessee on the receipt of the same at the time of dissolution. 7. The third question is whether the gold ornaments received by him are all old ornaments or not. Evidence has been produced that the very same gold ornaments have been shown for the last seven to eight years and they have come in the hands of the assessee. At this stage, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 49(1)(iii)(b), which is as under : " (b) on any distribution of assets on the dissolution of a firm, body of individuals or other association of persons, or " The scheme of levy of capital gains is self-contained in sections 45 to 55A of the Act. There is no controversy that capital gains arose on the sale of gold ornaments by the assessee to his son. As already stated, the controversy is whether the assessee held the capital assets for more than 36 months. Without looking to Explanation (i)(b) read with section 49, it may look superficially that the assessee has not held the capital asset for more than 36 months. But the Explanation makes an artificial rule for the purpose of determining the period of 36 months. Evidently the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis of the provisions of section 2(42A), it appears to us that the previous owner need not have held the asset as capital asset in his hands. The language used is the ' asset was held '. The learned departmental representative argued that when the words ' the asset ' is used, it should mean only the capital asset. We are afraid such an interpretation is not possible. No doubt in clause (b) the words ' a capital asset ' are mentioned, while using the word ' asset ' with the article ' the ' in the latter portion of the provision, it cannot be said that the Legislature used the asset as the capital asset. According to us, ' the asset ' must be understood in a generic sense as asset of any kind. The asset must be understood as an asset appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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