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TMI Blog1985 (7) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act at the time when it was acquired ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the cost of acquisition of the capital asset sold was not to be computed on the basis of the market value on the date of the gift ? " A few relevant facts need be noticed in order to appreciate the contentions urged on behalf of the assessee in support of this reference. The assessment years under reference are 1971-72 and 1972-73, the corresponding previous years being the years which ended on March 31, 1971, and March 31, 1972, respectively. The assessee had sold certain lands during the assessment years under reference and, therefore, one of the questions which arose for consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, since the Income-tax Officer had allowed deduction under section 80T of the Act at 45% instead of 35% of the amount by which the capital gains exceeded Rs. 5,000. The Commissioner, therefore, issued show-cause notice to the assessee as to why the order of the Income-tax Officer be not revised under section 263 of the Income-tax Act, 1961. In response to the show-cause notice, the assessee's contention was that the provisions of section 49 of the Act had no application to the facts of the present case, inasmuch as when his predecessor, Shri N. N. Vyas, purchased the lands, they were all agricultural lands and, therefore, they could not be treated as capital assets as defined under section 2(14) of the said Act, and they could be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before the Tribunal which by its order of July 9, 1976, held that section 49 was applicable to the facts of the case, and the cost of acquisition would be the cost at which the previous owner had acquired the lands, and such cost only could be deducted for computation of the capital gains. The Tribunal, therefore, rejected the contention of the assessee that the cost should be taken as equivalent to the market value of the lands as on the date of the gift. On the alternative contention of the assessee that the cost of acquisition should be taken as the value of the land as on the date when it was allowed to be put to non-agricultural use, that is, March 12, 1962, the Tribunal found that it was prima facie supported by instruction No. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce that decision was rendered in the context of the question of computation of capital gains in case of subsequent conversion of the user of the agricultural land by putting it to non-agricultural purpose by the assessee himself, and was not one where computation to be made in case of special mode of acquisition. In the alternative, the learned advocate for the assessee submitted that the Tribunal could not have dismissed the appeal of the assessee which would virtually amount to affirmation of the order of the Appellate Assistant Commissioner who had held that the cost of acquisition of the capital asset should be as on the date of the original acquisition by the previous owner of the lands since the instructions contained in the circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejecting the contention urged on behalf of the assessee was that the property which is acquired by given assessee would be acquired only once and its character merely changes in the sense that whereas originally it was a non-capital asset, it becomes a capital asset on permission for conversion of the use, and to accept the contention urged on behalf of the assessee would be doing violence to the language of section 48, clause (ii), to read the words "the cost of acquisition of the capital asset ", in the manner suggested on behalf of the assessee, and there was no conceivable reason for introducing such an unwarranted fiction. In pursuance to this reasoning, the Division Bench observed as under (p. 458): ".. ...... But this is a wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence is intended to be made only to the cost of acquisition of the property regardless of the question whether it was capital asset or non-capital asset at the date of acquisition." (emphasis supplied) We do not think, therefore, that the first contention Urged by Mr. Patel can be sustained. As regards the alternative contention, we find ourselves unable to go into the question since no question has been referred to us though the Tribunal, while dismissing the appeal, has directed the Income-tax Officer to consider the benevolent circular issued by the Central Board of Direct Taxes. The alternative contention urged before us, therefore, is not capable of being examined here. The result, therefore, is that we answer both the questions i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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