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TMI Blog1987 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the decision of the Supreme Court in the case of CIT v. Bai Shirinbai K. Kooka [1962] 46 ITR 86, the cost of jewellery on the date when it became capital asset under law should be taken at the market value as on that date. Reliance was further placed on two orders of the Benches of the Tribunal, one in the case of Shri Vishwanath, 37 ITR 32 by the Allahabad Bench of the Tribunal and the other in the case of Gurjit Singh Mansahia v. ITO [1983] 5 ITD 125 by the Chandigarh Bench. The AAC accepted the plea of the assessee after referring to the above order and determined the capital gains at Rs. 50,500. 3. Before the Tribunal, the assessee had also made similar submissions and had relied on the orders of the Tribunal referred to in the order of the AAC. However, when the case was fixed for hearing on21-4-1987, no body appeared before the Tribunal though the notice had been duly served. We have heard the Departmental Representative and proceed to decide the case on merit. We are of the view that the decision of the Supreme Court in the case of Bai Shirinbai K. Kooka has no application to the facts of this case. That was a case where an assessee was earlier holding certain share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cising that option does not arise as the asset was acquired in 1966. Such a question was considered by the Gujarat High Court in the case of Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446. In that case, the capital asset which had been transferred was agricultural land. The assessee had contended that agricultural land became capital asset only from a later date and according to the assessee's submission at the time of acquisition also the asset should be a capital asset. While holding that the land in question was not agricultural land, the High Court proceeded to consider the question of computation of capital gains and for that purpose also considered, the question of cost of acquisition of the capital asset. Their Lordships observed as under : "Now the question which arises for consideration is as to what is the true meaning and import of the words 'the cost of acquisition of the capital asset' in section 48, clause (ii). One construction suggested on behalf of the assessee was that these words, on a plain grammatical construction, require that the property which is sold must be 'capital asset' at the date of acquisition by the assessee, for, otherwise, these words wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be given to the words 'the cost of acquisition of the capital asset' ? How is full effect to be given to these words if the property transferred need not be capital asset at the date of acquisition ? The answer to this question is simple if only we read these words in the light of sec. 45. Section 45 says that profits or gains arising from the transfer of a capital asset shall be chargeable to tax and sec. 48, clause (ii), then proceeds to add that such profits or gains shall be computed by deducting from the fall value of the consideration for the transfer 'the cost of acquisition of the capital asset'. The words 'the capital asset' in section 48, clause (ii), are clearly intended to refer to the capital asset which is transferred as mentioned in sec. 45. They are identificatory words to denote the property transferred and they do not introduce any requirement that the property transferred shall be capital asset at the date of acquisition. The law says that when property which is a capital asset is transferred, profits or gains arising from the transfer shall be liable to tax and you shall compute such profits or gains by deducting from the consideration for the transfer, what co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this contention that the assessee urged that 'the cost of acquisition of the capital asset', in the present case must be taken to be the market value of the land on 23rd January, 1963, and not the original cost of acquisition of the land. But this contention is plainly contrary to the language of sec. 48, clause (ii). It is difficult to see how this construction accords with the words 'the cost of acquisition of the capital asset'. These words emphasise two aspects : one is 'acquisition' and the other is 'cost'. The reference clearly is to the point of time when the capital asset is acquired and the cost of such acquisition is required to be deducted from the full value of the consideration. Where the property transferred was not capital asset at the date of acquisition but subsequently became capital asset as in the present case, it is difficult to see how it can be said that the property as a capital asset was acquired by the assessee when it was converted into a capital asset and how it would be possible in such a case to determine the cost of acquisition. There are no two different acquisitions of property, one as a non-capital asset and the other as a capital asset. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 55(2), clause (i) and would be clearly impermissible on any recognised canon of construction. Then again, it is apparent from sections 49, 51 and 55(3), that the words 'the cost of acquisition of the capital asset', 'the cost for which the asset was acquired' and 'the cost for which the previous owner of the property acquired it' are variously used by the Legislature to denote the same idea and the reference is intended to be made only to the cost of acquisition of the property regardless of the question whether it was capital asset or non-capital asset at the date of acquisition." 5. The above decision of the Gujarat High Court was not considered by the Allahabad Bench of the Tribunal and it was not taken into consideration by the Chandigarh Bench as well. In view of this, we hold that the view taken by the two Benches do not represent the correct position in law. This decision of the Gujarat High Court was followed by that very High Court in the case of B.N. Vyas v. CIT [1986] 25 Taxman 133. Their Lordships have clearly held that the cost of acquisition can have only one meaning with respect to a particular asset and it was not necessary to consider the value when it became c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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