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TMI Blog2015 (2) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 of 2002, Tax Appeal No. 296 of 2002, Tax Appeal No. 297 of 2002 - - - Dated:- 3-12-2014 - KS Jhaveri And K. J. Thaker,JJ. For the Appellants : Mr S N Soparkar, Sr. Adv. Mrs Swati Soparkar, Adv. For the Respondents : Mr M M Bhatt, Sr. Adv. Mrs Mauna M Bhatt, Adv. JUDGMENT (Per : Honourable Mr. Justice KS Jhaveri) 1. Since all these appeals arise from the common order of the Income Tax Appellate Tribunal, they are being disposed of by this common judgment. 2. By way of these appeals, the appellants assessees have challenged the common order dated 03.05.2002 passed by the Income Tax Appellate Tribunal, Ahemdabad [for short the Tribunal ] in ITA Nos. 1785 to 1788/Ahd/96, whereby the Appeals filed by the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt had formulated the following substantial question of law:- Whether, in law and on facts and circumstances of the appellant s case the Tribunal was justified in law in holding that the capital gain is chargeable to tax on transfer of beneficial interest in the trust . 6. Mr. Soparkar, learned senior counsel appearing for the appellants-assessees has submitted that the Tribunal has committed error in reversing the order of the DCIT(A). He further submitted that the tribunal has not appreciated the fact that there was no cost of acquisition to the capital asset Beneficial interest , therefore, the amount of settlement by settlor cannot be treated as cost of acquisition. He, therefore, urged that this Court may quash and set aside th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax V. B.C. Srinivasa Setty held that all transactions encompassed by Section 45 must fall within the computation provisions of Section 48. If the computation as provided under Section 48 could not be applied to a particular transaction, it must be regarded as never intended by Section 45 to be the subject of the charge . In that case, the Court was considering whether a firm was liable to pay capital gains on the sale of its goodwill to another firm. The Court found that the consideration received for the sale of goodwill could not be subjected to capital gains because the cost of its acquisition was inherently incapable of being determined. Pathak J. as his Lordship then was, speaking for the Court said: What is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. The Apex Court in another decision in the case of PNB Finance Ltd.(supra) has held in paragraph Nos. 17 to 19 as under:- 17. As regards applicability of Section 45 is concerned, three tests are required to be applied. In this case, Section 45 applies. There is no dispute on that point. The first test is that the charging section and the computation provisions are inextricably linked. The charging section and the computation provisions together constituted an integrated Code. Therefore, where the computation provisions cannot apply, it is evident that such a case was not intended to fall within the charging section, which, in the present case, is Section 45. That section contemplates that any surplus accruing on transfer of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computation provisions cannot apply, such a case would not fall within Section 45. In the present case, the Banking Undertaking, inter alia, included intangible assets like, goodwill, tenancy rights, man power and value of banking licence. On facts, we find that item-wise earmarking was not possible. On facts, we find that the compensation (sale consideration) of ₹ 10.20 cr. was not allocable item- wise as was the case in Artex Manufacturing Co. (supra). 18. For the aforestated reasons, we hold that on the facts and circumstances of this case,which concerns assessment year 1970-71, it was not possible to compute capital gain and, therefore, the said amount of ₹ 10.20 cr. was not taxable under Section 45 of the 1961 Act. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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