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TMI Blog1980 (2) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 52(1) would be applicable ? 2. If the answer to the first question is in the negative and in favour of the revenue, whether the Appellate Tribunal is right in its conclusion that the assessee is not liable to tax on capital gains amounting to Rs. 56,462 under section 45 read with section 52(2) of the Income-tax Act, 1961 ? " The relevant assessment year is 1968-69 for which the accounting year ended on 31st :March, 1968. The facts briefly stated are that on 1st September, 1967, the assessee sold one of her properties known as Subhash Talkies " together with furniture and fittings to a partnership firm bearing the name " M/s. Subhash Theatres " for a consideration of Rs. 2,50,000. The partners of the partnership firm are near relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the transfer took place. The mode of computation of income chargeable under the head " Capital gains is given in s. 48. The income under this head, according to this section, is 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; (i) expenditure incurred wholly and exclusively in connection with such transfer ; and (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto. Section 55(2) defines the cost of acquisition. This expression means the cost of acquisition of the asset to the assessee on 1st January, 1954, or the fair market value of the asset on that date at the option of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was effected with the object of avoidance or reduction of the liability of the assessee under s. 45. If these two conditions are satisfied, the full value of the consideration for the transfer is taken to be the fair market value of the asset on the date of the transfer. The object behind s. 52(1) is evidenced by the heading of the section which is " Consideration for transfer in cases of under-statement ". When the transfer is effected with the object of avoiding or reducing tax under the head " Capital gains ", there would naturally be concealment or understatement of the consideration for transfer. In such cases, when the transfer is in favour of a person connected with the assessee, the full value of the consideration is deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is applicable to both s. 52(1) and s. 52(2). This heading clearly indicates that s. 52(2) like s. 52(1) is not aimed at honest and genuine transactions where the assessee has not received any extra amount over and above what is shown in the transaction between the parties. There should be an element of avoidance of tax under the head " Capital gains " before either of the provisions can be pressed in aid by the revenue. If the sale deed correctly shows the consideration received by the assessee, it is not possible to apply any of the sub-sections of s. 52) for, in such a case, there cannot be any intention to avoid the tax by understating the consideration. If a bona fide transfer is made for inadequate consideration, the transaction may b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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