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TMI Blog2001 (9) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... ee encashed certain investments made by him in the earlier years in Mutual Funds. In the return, he declared the income on repurchase by adopting indexed cost. Observing that the provisions of section 45(6) are clear in that indexed cost cannot be adopted in respect of repurchase of units specified in section 80CCB(2), the Assessing Officer treated the difference between the repurchase price and the capital value as per proviso to section 45(6), as the capital gains assessable in the hands of the assessee. He thus worked out the capital gains to be assessed in the following manner. -------------------------------------------------------------------- "Capital gains as discussed in para-7 above: Repurchase price of: LIC Dhan 80CCB(2)&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Rs. 4,475" --------------------------------------------------------------------- On appeal, the CIT(A), after considering the provisions of Section 45(6) and Explanation thereunder, deleted the addition made by the Assessing Officer, in the following manner-- "Section 45(6) was inserted by the Finance Act, 1990 with effect from 1-4-1991. It is to be noted that there is no express ban on indexing the cost of acquisition of the units in section 45(6). Further, the mode of computation of capital gains has been specified in section 48 of the I.T. Act, 1961. In terms of this section, capital gains are to be computed by deducting from the full value of the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the learned counsel for the assessee supported the order of the CIT(A) and submitted that the assets involved in the present case are units of Mutual Funds, as distinct from Bonds or Debentures mentioned in second proviso to section 48, and as such indexation for arriving at the capital value of such investments is clearly applicable. 11. I am afraid, I cannot agree with the view taken by the CIT(A). The provisions of section 45(6) read as under:-- "45(1) ............... (6) Notwithstanding anything contained in sub-section (1), the difference between the repurchase price of the units referred to in sub-section (2) of section 80CCB and the capital value of such units shall be deemed to be the capital gains arising to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der clause (23D) of section 10 or Unit Trust of India. The deduction shall be allowed on so much of the amount invested as does not exceed ten thousand rupees. 25.2 The new provision also provides that when any amount in respect of which deduction has been allowed is returned to the assessee either by way of repurchase of the units by the Fund or the Trust or on the termination of the plan, it shall be deemed to be his income for the previous year in which the amount is returned. Further, where the amount is so returned to a member of a Hindu undivided family or of an association of persons after partition of the Hindu Undivided Family or the dissolution of the association of persons, the amount so received shall be deemed to be the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto; Provided ..... Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement' had respectively been substituted. Provided also ............" It is the cost of acquisition and cost of improvem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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