TMI Blog2005 (7) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... h deserved to be rectified; and that while levying tax on capital gains as declared by the assessee in her return, the proviso to s. 112(1) of the Act could not be ignored. 3. The assessee filed her return of income declaring income from long-term capital gains on sale of shares. The tax on long-term capital gains was worked out according to s. 48 of the Act. The return was processed under s. 143(1) of the Act. Subsequently, the assessee moved an application under s. 154. It was submitted that the tax was worked out without giving effect to the provisions of s. 112(1) of the Act. 4. The AO rejected the application, observing that the assessee was seeking relief in long-term capital gains tax under the proviso to s. 112(1), substituting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of any improvement" for the words "cost of acquisition" and "Cost of any improvement". Sec. 112 of the Act provides for the rate of tax to be levied on the long-term capital gains computed in accordance with s. 48. The rate of tax provided under s. 112(1) is 20 per cent. As per the proviso to s. 112(1), where the tax payable @ 20 per cent in respect of long-term capital gains, computed after taking indexation provided for in the second proviso to s. 48, exceeds 10 per cent of the amount of capital gains before giving effect to the provision of indexation, such excess shall be ignored for the purpose of computing the tax payable by the assessee. The provisions of the proviso to s. 112(1) are mandatory. By no stretch of imagination can it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the assessee has submitted that in the revised return of the assessee, certain shares were with indexation whereas others were without indexation. It was only to exercise the option available to the assessee, that the revised return was filed. The provisions of s. 112 of the Act are clear. Each share can be worked out separately. In the revised return, the working was done after netting off. 9. The only issue before us is as to whether the application under s. 154 of the Act filed by the assessee was rightly rejected by the AO, as confirmed by the learned CIT(A). Sec. 112 of the Act states that where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, chargeable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso to s. 48 of the Act, the income chargeable under the head "Capital gains", with regard to a long-term capital asset is to be computed by deducting the indexed cost of acquisition of the asset and indexed cost of any improvement thereto, from the full value of the consideration received for the transfer of the capital asset, according to the first proviso to s. 112(1), where the total income of an assessee individual as reduced by the long-term capital gains is below the maximum amount not chargeable to income-tax, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount not chargeable to income-tax and the tax on the balance of such long-term cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing capital gains. The second proviso to s. 48 provides for indexing the cost of acquisition and the cost of improvement. Sec. 112 provides for taxing the long-term capital gains at concessional rate of 20 per cent. The proviso to s. 112(1) of the Act provides that if no indexation is availed of by the assessee, then the rate of tax applicable would be 10 per cent. Thus, in short, if the benefit of indexation is availed of by the assessee, the rate of tax would be 20 per cent and if the benefit of indexation is not availed of, the rate of tax would be 10 per cent. Sub-s. (1) of s. 112 begins with the sentence 'where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset............ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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