9911796707
TMI Blog1982 (12) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... of land amounting to Rs. 54,900 and legal fees of Rs. 3,000 paid to Mrs. Devadasan, Advocate, Madras for finalising the transaction. Apart from these expenses, the assessee had paid urban land taxes and corporation taxes totalling Rs. 33,165.18, the break up of which is as follows : Accounting year Particulars Amount paid 1973-74 Urban land tax 6,721.34 1974-75 6-8-1974 Corporation taxes 254.06 1974-75 18-12-1974 Urban land tax -- Fasli 1382 8,452.50 1974-75 29-1-1975 Urban land tax -- Fasli 1383 8,452.50 1974-75 1-3-1975 Urban land tax -- Fasli 1384 8,452.50 1974-75 3-3-1975 Corporation tax 254.06 1974-75 3-3-1975 Corporation tax 289.11 1974-75 3-3-1975 Corporation tax 289.11 ----------------- 3,165.18 ------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 91,065 referred to above could be capitalised or not. Thereafter, the ITO passed a fresh assessment order dated 4-11-1980 by which he came to the conclusion that the sum of Rs. 91,065 could not be capitalised with the result that the proportionate cost of the land sold was only 9,35,545 and the capital gains exigible to tax was Rs. 2,08,055. On appeal the Commissioner (Appeals) accepted the claim of the assessee that the interest paid on borrowed funds could be capitalised along with the advocate's fees, but the urban land tax and other taxes paid for maintaining the asset could not be capitalised. He, therefore, directed the ITO to recompute the capital gains accordingly. The assessee is in further appeal to reiterate its contention t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sugars Ltd. v. CIT [1975] 98 ITR 167 and it was observed that as the expression 'actual cost' has not been defined, it should be construed in the sense which no commercial man would misunderstand. It was further laid down that for this purpose it would be necessary to ascertain the connotation of the expression in accordance with the normal rules of accountancy prevailing in commerce and industry. We may note in this connection that the audited balance sheet exhibited by the assessee-company presented a picture in which the expenditure listed above were capitalised obviously in conformity with the normal accountancy rules. Such capitalisation of interest on capital borrowed is also in conformity with the legal position enunciated by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was contended on behalf of the revenue by referring to section 55(1)(b) of the Act, that the cost of improvement in relation to capital asset meant only expenditure of a capital nature and therefore, the expenditure incurred for payment of taxes could not be taken into account since they are of a revenue nature. We are of the opinion that this contention is irrelevant to the issue, because we have considered this expenditure in relation to the determination of cost of acquisition and not in relation to the determination of cost of improvement to the property. Section 48 of the Act requires that the income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of consideration received : (1) the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly capital gains was not taxable because obviously it did not amount to income. It is only by the provisions of section 12B of the 1922 Act that capital gains was deemed to be income of the previous year in which the transfer took place. The rigour of this charge was compensated to an extent by providing for a large deduction in the computation of the capital gains. While presenting the Budget for the assessment year 1962-63, the Finance Minister observed (46 ITR Statutes) : "Capital gains are already taxable under our Income-tax Act. The incidence is, however, restricted in the case of non-company assessees to income-tax only, calculated in the prescribed manner. In an equitable system of taxation, capital gains realised during a short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this period to 60 months. As a result, only capital assets held by a taxpayer for a period exceeding 60 months will qualify for concessional tax treatment applicable in relation to long-term capital assets." The concessional treatment was thus restricted to long-term capital gains. In this background, it will be clear that in the case of short-term capital gains the profit or gains arising from the transfer could not be computed at a figure larger than that which could be ascertained on the application of commercial principles. If such a computation were to be attempted by unnecessarily restricting the scope of cost of acquisition in section 48, it would mean that short-term capital gains which is not to enjoy any concessional treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
