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TMI Blog2009 (7) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ,125. 4. Apart from transferring his entire shareholding in the company in favour of the buyer the assessee had under a separate agreement agreed to transfer the liabilities in connection with a software that the assessee himself had developed, some of the assets of the company, namely, computers and some software information, Oracle software as also intellectual property rights of all patents and copyrights which he personally owned valued as under : (Rs. in lakhs) 1. Debtors (GTC) 6.75 lakhs HNR 0.85 lakhs Total debtors 7.60 2. Computers of VT 3.14 3. Intellectual property rights of all patents and copyrights owned by Mr. P. R. Seshadri 34.78 4. Oracle software 0.48 Total 45.00 Totalling a sum of Rs. 45 lakhs 5. It appears the assessee in the computation of his capital gains from the sale of the shares and other assets whether of the company or of his own had offered to tax the capital gains attributable to the shares which he had worked as under : Income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have taken the receipt of Rs. 25,00,000 as income due to capital gain for the very year as it was only an advance payment. It was, therefore, contended that the Assessing Officer was in error in adding this amount. The further ground raised is that the assessee is invoking the benefit of section 54F of the Act. 10. The appellate authority having not been impressed upon by any of the grounds taken by the assessee, dismissed the appeal in its entirety. 11. The assessee appealed further to the Tribunal and met with success. The Tribunal was of the view that the assessee himself having contributed to the construction of the new residential building out of his funds generated by the sale of shares, irrespective of the fact that the spouse claimed on the very same provision where the assessee had made from out of the sale of shares for the construction of the building, though was on a land belonging to his wife, was nevertheless entitled to the benefit under section 54F and accordingly allowed the deduction claimed by the assessee. 12. In so far as the computation under the head of capital gains is con- cerned, the Tribunal for examining the addition of Rs. 25,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price ; and (ii) in any other case not being a case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49, shall be taken to be nil. and therefore opined that when section 55(2) is not available for the assessment year 1996-97 there is no way of suspending the applicability of the principle as evolved in B. C. Srinivasa Setty s case [1981] 128 ITR 294 (SC) and directed deletion of addition of Rs. 25,00,000. 13. The Tribunal also held the addition of Rs. 8.78 lakhs is also to be deleted for the same reason as the amount was on par with the sum of Rs.25,00,000. The Tribunal allowed the appeal on such findings. 14. It is against this finding of the Tribunal, the Revenue is in appeal. The Revenue has raised the following substantial questions of law for examination in this appeal : (i) Whether the Tribunal was correct in holding that the assessee was entitled to claim deduction under section 54F of the Act on the income derived from sale of shares on the ground that the same had been invested on a house owned by his wife at No. 797, Rustumbagh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 54F in respect of one building. It is also submitted that the build- ing itself stood in the name of the spouse of the assessee and therefore also there cannot be any claim of investment by the assessee in respect of the construction of such a building, etc. 17. The next argument is that the Tribunal has committed a serious error in law in simply proceeding to apply the principle evolved by the Supreme Court in B. C. Srinivasa Setty s case [1981] 128 ITR 294 even without examining the present set of facts and circumstances and it is further submitted that the Tribunal failed to examine the possibility of bringing to tax the capital gain attributable to the transfer of copyrights technical know- how by the assessee in which he had property rights. His submission is that even before the amendment to section 55(2) of the Act, there is requirement to examine the assessability of the capital gains to tax and the Tribunal has not examined the question independently but blindly proceeded to apply the principle laid down in B. C. Srinivasa Setty s case [1981] 128 ITR 294. It is also submitted that valuing goodwill cannot be said to be on par with valuing assets like intelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of the provisions of section 54F of the Act. 20. With regard to the deletion of amounts of Rs. 25,00,000 and Rs. 8.78 lakhs by the Tribunal, the learned counsel would submit that it is quite jus- tified for the reason the Tribunal had followed the ratio laid down by the Supreme Court in the case of B. C. Srinivasa Setty [1981] 128 ITR 294 and as the opinion of the Tribunal the said principle was applicable to the case of the assessee and therefore the appeal has to be inevitably allowed in this respect. He also submitted that if for any reason the matter requires re- examination at the hands of the Tribunal held the entire computation of capital gain has also to be re-examined and therefore the same principle should have been applied in the matter of computation of capital gain in respect of sum of Rs. 8.78 lakhs or Rs. 25 lakhs both of which are directed to be deleted by the Tribunal. In this regard Sri Lava would submit that it is well-settled on the authority of the rulings of the Supreme Court in the matter of taxation that consent cannot be the basis for fixing the liability which is not found in the statutory provision. The mere fact that the assessee himself had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief to the extent of Rs. 20,96,008 as his contribution towards the cost of construction of the building and this amount we find that will fall within the cost of the building. Accordingly, questions (i) and (ii) are answered in the affirmative and against the Revenue. 26. In so far as the question relating to the addition of Rs. 25,00,000 by the Assessing Officer and the direction of the Tribunal to delete this amount is concerned, we find that the Tribunal has simply proceeded to apply the ratio of the decision of the Supreme Court in B. C. Srinivasa Setty s case [1981] 128 ITR 294 to this situation and also for the reason that the pro- vision of section 55(2) had not come in the statute for the assessment year relevant for the accounting period. We find that the Tribunal has in fact not examined the facts and circumstances of the case before applying the prin- ciple as evolved in B. C. Srinivasa Setty s case and recording a finding that the principle is attracted to the facts and circumstances of the case. 27. We would like to sound a word of caution to the Tribunal passing orders on the premise of question involved in a case being covered by an authority either of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles are applied we find that the Tribunal has without examining such aspects, simply opined that by applying the principle of B.C. Srinivasa Setty s case [1981] 128 ITR 294, the addition of Rs.25,00,000 has to be deleted. Here again we have to notice that the Tribunal has not bothered to find out about the receipt of the amount in the assessment year as indicated by the Assessing Officer and as to whether it was assess- able as the assessee s sale of goodwill was not a receipt, was also not examined. 31. It is for this reason we have to answer questions Nos. (iii) and (iv) in the negative and in favour of the Revenue and remand the matter to the Tribunal to examine the facts situation and to give a finding on the question of computation of capital gain on the amount of Rs. 25,00,000 by applying the principle as indicated above and by re-examining the matter. 32. In so far as the question of amount of Rs. 8.78 lakhs being assessed to capital gain as offered by the assessee being directed to be deleted by the Tribunal is concerned, we find and as rightly submitted by Sri Lava learned counsel for the assessee this amount forms part of value of Rs. 33.78 lakhs towards ..... 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