2006 (7) TMI 167 - HC - Income Tax

Summary

Issues:
1. Determination of the cost of acquisition of agricultural land for capital gain purposes.

Analysis:
The case involved a question of law referred to the High Court by the Income-tax Appellate Tribunal regarding the determination of the cost of acquisition of agricultural land for capital gain purposes. The assessee had sold agricultural land during the assessment year and declared the cost price as on February 28, 1970, while the Assessing Officer adopted the cost as on January 1, 1954. The Appellate Assistant Commissioner accepted the assessee's plea that the land became a capital asset only from February 28, 1970, due to an amendment in the Income-tax Act. The Appellate Assistant Commissioner reduced the estimated value of the land, leading to an appeal by the Revenue to the Tribunal.

The Tribunal, in its decision, relied on a judgment of the Supreme Court in a similar case, emphasizing that the valuation of a capital asset should be based on the date when it became a capital asset. The Tribunal held that the principles of law established in the Supreme Court judgment applied to the present case, where agricultural land became a capital asset upon which capital gain tax was applicable. Therefore, the Tribunal upheld the view that the valuation of the land should be determined based on the date when it became a capital asset.

Ultimately, the High Court decided in favor of the assessee, ruling against the Revenue and affirming the Tribunal's decision that the valuation of the agricultural land for capital gain purposes should be ascertained based on the date when it became a capital asset. The judgment highlighted the significance of the date of conversion of the asset into a capital asset in determining the cost of acquisition for capital gain taxation purposes.