9911796707
TMI Blog2008 (4) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... rived by the assessee by way of capital gain, as the difference in the rate of interest on the security amount deposited with the assessee, which interest was stipulated to at the rate of 9 per cent. while, according to the assessing authority, interest rate was 18 per cent., therefore, this difference between 9 and 18 per cent. has been taken to be capital gain. 2. The appeal was admitted on November 7, 2005, by framing the following substantial question of law: "Whether capital value of such deemed interest to the extent it has been charged lesser than the market rate can be considered as consideration for grant of lease in respect of which the capital gains has to be computed?" 3. In very brief, the facts are that the assessee had lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per annum and accordingly the assessment was made as above. 4. It may be observed here that in the assessment order many things were considered and decided but then since the present appeal is confined only to the question, as referred to above, we need not go into other aspects of the matter. 5. The learned Commissioner (Appeals) in his judgment dated October 8, 1998 found that there is nothing to suggest that consideration in the rent is low or the consideration is understated. The necessity and rationale of such deposit is not questioned. The reasonableness of amount deposited has also not been doubted the transaction has also been not held to be ingenuine and significantly it was also found that inadequacy of annual rent consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown in the document of transfer should be adopted, being binding, as per the standing provisions of law in the absence of appropriate material. Thus, the full value of consideration which has not been shown actually to have been received or agreed to be received cannot be computed. It was held that it is always the price bargain by the parties and not the full market value of the asset on the date of transfer which is to be considered for the purpose of computing the long-term gain. 6. Against this order, the Revenue went in appeal before the Tribunal and the learned Tribunal has found that to charge capital gains under sections 45 and 48, the four conditions are required to be fulfilled, being as under: 1. There should be a capita) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain has to be computed. 9. Before proceeding further, we may gainfully quote the provisions of section 45(1) as well as section 48, which read as under: "45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H be Chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place...... 48. The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the benefit was prospective and it was found that unless the benefit is in the nature of income or specifically included by the Legislature as part of income the same is not taxable. Thus, since sections 45 and 48 unlike the provisions of wealth-tax, do not make provision, providing for any deemed profit or gain to be taxable as a capital gain the mere fact that the Assessing Officer was of the view that the prevalent market interest rate was 18 per cent, or was at any amount above 9 per cent. could not render the assessee liable for being taxed on the difference amount as capital gain. This is one aspect of the matter which, in our view, is sufficient to answer the question in favour of the assessee and against the Revenue. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agmal Gokulchand. The more appropriate criterion would be the rate of interest that was paid by the banks on deposits made with them. As noticed earlier, during the relevant period, the rate of interest which was being paid by the banks on fixed deposits for a period of 12 months was 5½ per cent. to 6 per cent. which was the same as the interest paid by Sobhagmal Gokulchand to the assessee." 14. Thus, this judgment is an authority for the proposition that the relevant market rate of interest to be taken into account could possibly be the rate of interest payable on the deposits being made and not the rate of interest on the borrowings. In the present case, the Assessing Officer has also not at all found that 18 per cent. was the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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