9911796707
TMI Blog1987 (9) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase value of land and building 8,00,000 Less : Value of land as determined by Valuation Cell of the Income Tax Department in the Acquisition proceedings. 6,59,400 -------- Balance cost of Bldg. demolished - I 1,40,600 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; -------- Balance Short Term Capital loss 1,12,875" -------- The ITO was not impressed with the contention of the assessee that there was a "transfer" within the meaning of sec. 2[47] because there was extinguishment of rights and hence a capital loss had resulted. The reasons for the ITO not accepting this plea have been set out in the directions given by the IAC not accepting this plea have been set out in the directions given by the IAC under sec. 144B [4] in his order dated 28.07.1984 and are as under : "1. The act of demolition is voluntary and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property. The assessee reiterated the stand taken before the IAC and also referred to various judicial pronouncements such as that of the Supreme Court in the case of CIT v. R. M. Amin [1977] 106 ITR 368 to submit that unilateral acts could also lead to extinguishment of rights and that even voluntary extinguishment could lead to a transaction falling within the definition of "transfer" in sec. 2(47) according to the decision of the Gujarat High Court in the case of Kartikey V. Sarabhai v. CIT [1982] 138 ITR 425. Reference was also made to the decision of the Tribunal in ITO v. Air India [1984] 10 ITD 120 (Bom.) in the case of Air India on the loss of an aircraft. The CIT (A) referred to the decision of the Calcutta High Court in the case of Shaw Wallace & Co. Ltd. v. CIT [1979] 119 ITR 399 and stated that at page 408, the Court had pointed out that a transfer always invoked more than one party, and since in the present case there was only a single party, namely, the assessee who purchased the building and demolished it by spending Rs. 3,600, there was no extinction of any rights which involved any transfer since there was no second party to the transaction. While expressing appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was extinguishment of rights in the present case and consequently a 'transfer' within the meaning of sec. 2(47). The decision of the Tribunal in the case of Air India was also referred to wherein many of the judicial pronouncements relied on by the learned counsel for the assessee had been considered. The learned counsel for the assessee had been considered. The learned counsel submitted, in particular, that the transaction had to be viewed as a whole and just because there was a series of steps in finalising the transaction, it did not mean that each step was a different transaction. If the transaction as a whole amounted to a 'transfer', them, he submitted, there was a capital loss which would have to be allowed. For this proposition, particular reference was made to the observations of the Gujarat High Court in Vania Silk Mills (P.) Ltd.'s case at pages 312 and 313. 4. The learned Departmental Representative, on the other hand, stated that in order that there should be a 'transfer', there should be two parties at least to the transaction and for this proposition, reliance was placed on the observations of the Calcutta High Court in the case of Shaw Wallace &co. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; CONDITIONS (1) I shall separate without any damage the doors, windows, rafters, reaper tiles, glass, iron, etc., during demolition separate them. (2) I agree to separate size Bricks, Bricks during demolition and keep them in order. (3) I agree to remove up to basement and level up the ground. (4) I agree to complete the work within 15 days from 12-4-1980. (Sd.) Raju Coimbatore 12-4-1980." It is clear that the agreement with Raju was that Raju should demolish the building and should separate doors, windows, rafters, reaper tiles and bricks according to size etc., There the agreement with Raju ended. Raju fulfilled this part of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock. This was an ordinary transaction of sale of goods and the money received had no relation to the extinguishment of rights in the capital asset itself, namely, in the building which was pulled down. The Gujarat High Court in Vania Silk Mills (P.) Ltd.'s case stated at pages 312 and 313 as under : "There is one aspect, however, which must be emphasised at this stage and it is that in order to subject any profit or gain received by or accruing to the assessee to the charge of 'capital gains' the sine qua non is that the receipt or actual must have originated in a 'transfer' within the meaning of section 45 read with section 2(47). This requirement clearly flows from the words 'any profits or gains arising from the transfer of a capital asset' in section 45. There must, therefore, be a causal nexus between the 'transfer', that is, the extinguishment of any rights in a capital asset and the profit or gain accruing to or received by the assessee. In other words, it is such extinguishment which must have occasioned the profit or gain and not any other independent transaction as a result of which some different rights are terminated by satisfaction or otherwise. However, merely becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, namely, the transaction which occurred after the extinguishment of such rights, i.e., the sale of the doors, windows, rafters, etc., which still remained the property of the assessee. There was, therefore, no causal nexus between the extinguishment of some of the bundle of rights or rather the most of it of the capital asset, which was the building, by pulling down the same and the loss which accrued to the assessee, which was out of the sale of the material which had been garnered and handed over to the assessee by Raju in terms of the letter of 12-4-1980. It is not a case where the transaction resulting in extinguishment consisted of a series of steps all of which have to be considered as one. The transaction which was independent. The transaction of sale of the material garnered was an entirely different transaction. By extinguishment of rights in the building, therefore, in the present case, there was no "transfer" within the meaning of sec. 2(47) of the Income-tax Act and, therefore, the assessee is not entitled to the allowance of capital loss as claimed of Rs. 1,12,875. 8. We have discussed the law to the extent necessary for rendering a decision on the facts as ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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