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TMI Blog1996 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... u undivided family of which M. L. M. Mahalingam Chettiar was the karta. The karta of the joint family purchased certain lands in Kodambakkam, Madras, prior to 1954. They were then agricultural lands. These agricultural lands were converted into house sites during the assessment year 1961-62. For the purpose of wealth-tax for that year the value offered was Rs. 2,341 per ground. The family was partitioned in 1968 and part of those house sites fell to the share of the assessee. In the account year relating to 1972-73, the assessee sold five grounds and 1,320 sq. ft. for a sum of Rs. 55,500. For the purpose of computing the capital gains, the assessee adopted the value of these lands as on January 1, 1954, at Rs. 6,500 per ground on the basis of a valuer's report. The Income-tax Officer determined the value as on January 1, 1954, at Rs. 2,000 per ground and accordingly determined the capital gains. In the year 1973-74, the assessee sold seven grounds and 800 sq. ft. for a total sum of Rs. 73,334. In this assessment year also, the Income-tax Officer adopted the value as on January 1, 1954, at Rs. 2,000 per ground as against Rs. 6,500 claimed by the assessee. The capital gain was compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectified the assessment under section 154 in another case adopting the value at Rs. 6,500. Later, in the assessee's own case it was further reduced to Rs. 2,000. The contention was that there could not be such wide fluctuations and in any case the estimate made by the valuer should have been accepted. Learned counsel further submitted that the asset when it was bought by the erstwhile family was agricultural land. It was converted into house sites in the assessment year 1961-62. The capital asset became a taxable asset only from that year onwards. The cost of acquisition would, therefore, be taken at the time when it was converted into capital asset. For this purpose reliance was placed on the decision of the Supreme Court in CIT v. Bai Shirinbhai K. Kooka [1962] 46 ITR 86. Reliance was also placed upon a decision of the Supreme Court in CIT v. Groz-Beckert Saboo Ltd. [1979] 116 ITR 125. According to learned counsel, the decision of the Gujarat High Court in Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446, would not be applicable to the facts of this case. For these reasons it was submitted that the Tribunal was not correct in adopting the value of the land at Rs. 2,000 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of wealth-tax for that year, the value offered was Rs. 2,000 per ground. The family partition took place in the year 1968. In the accounting year relevant to the assessment year 1972-73, the assessee sold five grounds and 1,320 sq.ft. for Rs. 55,500. For the purpose of computing the capital gains, the assessee adopted the value of those lands as on January 1, 1954 at Rs. 6,500 per ground on the basis of the valuer's report. In the assessment year 1973-74, the assessee sold seven grounds and 800 sq.ft. for a sum of Rs. 73,334. The assessee submitted the value per ground at Rs. 6,500 for the purpose of determining the capital gain. However, the Income-tax Officer computed the capital gain on the basis of the value as on January 1, 1954, at Rs. 2,000 for both the assessment years under consideration. The case of the assessee was that inasmuch as the agricultural lands were converted into house sites in the assessment year 1961-62, the value as in the year 1961 should be taken into consideration. It means the value of the land should be taken into consideration when there was conversion of the agricultural land into house sites. The assessee filed a valuation report stating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also not for ascertaining the business income of the assessee. The issue involved in the present case is to ascertain the capital gains as per the provisions contained in sections 45, 48, 49 and 55 of the Act. Under such circumstances, it is not possible to apply the principle laid down by the Supreme Court in the above mentioned two cases to the facts of the present case. Learned counsel for the assessee also relied on the provisions contained in sub-section (2) of section 45 of the Act. Sub-section (2) was not in force during the assessment years under consideration, and it was a later introduction in the statute book. Further, sub-section (2) also is concerned with profits and gains arising from the transfer by way of conversion by the owner of the capital asset into, or its treatment by him as stock-in-trade of a business carried on by him. Therefore, this provision, even though according to learned counsel for the assessee is procedural in nature would not be applicable to the facts of these cases. On the other hand, learned standing counsel in order to support his contention that the capital gains should be ascertained as per the provisions contained in sections 45, 48, 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be taken as on April 1, 1970, itself. The cost of acquisition of every capital asset had to be determined in accordance with section 48, or, upon option being exercised by the assessee, under section 55(2) of the Income-tax Act, 1961. The Karnataka High Court further held that determination of the cost of acquisition by taking the fair market value as on January 1, 1954, is perfectly justified. In the case of CIT v. Smt. M. Subaida Beevi [1986] 160 ITR 557, the Kerala High Court held that the cost of acquisition of a capital asset within the meaning of section 48 of the Income-tax Act, 1961, is not the cost on the date on which the asset transferred became the capital asset. The incident of levy under section 45 is on the capital gains to be computed in the manner provided for in section 48 read with section 55(2) of the Act. The deduction permissible under section 48 is the cost of acquisition of the capital asset transferred for consideration, whether or not it was a capital asset on the date of its acquisition. What is taxable under section 45 are the " profits or gains arising from the transfer of a capital asset " and the charge of income-tax on the capital gains is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of acquisition of an asset could be reckoned in a manner different from that provided in section 48 read with section 55(2). " In the case of Keshavji Karsondas v. CIT [1994] 207 ITR 737, the Bombay High Court while considering the provisions of section 2(14)(iii), 48, 49(1) and 52(2) of the Income-tax Act, 1961, held as follows : " That what was relevant was the 'cost of acquisition' and not the date on which the asset became a capital asset for the purpose of levy of capital gains tax. The cost of acquisition did not change. It was the cost on the date when the asset was actually acquired by the assessee or by his grandfather. The property which was transferred could become the property of the assessee only at one point of time. It would not become the property of the assessee as a non-capital asset at one point of time and as a capital asset at another point of time. The date of acquisition of the land for the purposes of section 48 read with section 49(2) of the Act was the date when the land in question was acquired by the grandfather of the assessee prior to 1941. The assessee, therefore, had the option, either to take the original cost of acquisition or its fair ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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