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TMI Blog1986 (4) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-12-1962. The ITO sought to assess the balance of Rs. 3,25,000 to capital gains tax. The property was subjected to mortgage since the purchasers had undertaken to discharge the mortgage liability with interest. The ITO increased the sale consideration by adding the mortgage debt of Rs. 34,000 and interest payable thereon amounting to Rs. 26,520. Thus, he determined the total sale consideration at Rs. 4,10,520 from which he deducted the cost of acquisition at Rs. 25,000 and the balance of Rs. 3,85,520 was held to be liable to capital gains tax. He issued notice under section 139(2) of the Income-tax Act, 1961 ('the Act') to the Official.Receiver who filed a nil return. It was contended by him that Shri J. Narayana Murthy ceased to be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to sell the properties and distribute the proceeds as dividends amongst them. Since Shri J. Narayana Murthy ceased to be the owner, no capital gains tax would be leviable on thistle of land by the Official Receiver. The learned counsel also submitted that Official Receiver is not included in section 160(1)(iii) of the Act. He further urged that no capital gains tax is leviable on sale of agricultural land. The learned departmental representative submitted that the Official Receiver comes under section 160(1)(iii) capital gain is a deemed income. So assessment made on the Official Receiver is valid. He submitted that capital gains tax is leviable on the sale of land of Shri J. Narayana Murthy. Thus, he supported the orders of the lower au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loses all rights, title or interest in the property once, it is vested in the Official Receiver. The Official Receiver is the officer of the Court and he is appointed by the Government under the Act. The property will be held by him in trust for the creditors and he has no interest of his own. Once, the property vests in him he has the power to sell the same. 6. In Paleti Chandrayya v. Yeruva Chinnappa Reddi AIR 1941 Mad. 753, the Madras High Court held that the legal consequence of adjudication in bankruptcy is that the ownership of the insolvent in all the property owned and possessed by him on the date of adjudication is divested from him and vested in the Official Receiver. In Kripa Nath v. Ganga Prasad AIR 1962 All. 256, the Allahaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the insolvent under section 67 of the Provincial Insolvency Act is entitled to surplus of the sale proceeds of the property that may remain after all the creditors are paid off it is not a legal right but is a mere hope or expectation. This is well settled by the decisions of the Nagpur High Court in Shyam Kali Bai's case and of the Allahabad High Court in Raghubir Singh v. Balkishen AIR 1952 All. 328. In the latter decision it was held that section 67 gives him only a contingent right in the surplus left after satisfaction of the debt but so long as the debt has not been completely discharged no question of his retaining any interest in the property can arise. The property for the purpose of payment of debts vests completely in the Offici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by section 48(ii) is an asset in the acquisition of which it is possible to envisage the cost and none of the provisions pertaining to the head 'Capital gains' suggests that they include and asset in the acquisition of which no cost can be conceived. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section for the levy of capital gains tax. In that case it was held that transfer of goodwill initially narrated in a new business does not give rise to a capital gain for the purpose of income-tax. The decision of the Calcutta High Court in the matter of In re., Official Assignee for Bengal [1937] 5 ITR 233 is distinguishable and it has no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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