TMI Blog2008 (4) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... K. K. Bissa for the appellant. N. M. Ranka assisted by N. K Jain and S. Johari for the respondent. JUDGMENT N. P. GUPTA J. - This appeal by the Revenue has been filed against the judgment of the Tribunal dated March 23, 2004. The learned Commissioner (Appeals) has allowed the appeal of the assessee and set aside the order of the learned Assessing Officer, assessing capital gain at an amount of Rs. 51,39,366, on the ground of treating it to be the income derived by the assessee by way of capital gain, as the difference in the rate of interest on the security amount deposited with the assessee, which interest was stipulated to at the rate of 9 per cent. while, according to the assessing authority, interest rate was 18 per cent., therefore, this difference between 9 and 18 per cent. has been taken to be capital gain. 2. The appeal was admitted on November 7, 2005, by framing the following substantial question of law: "Whether capital value of such deemed interest to the extent it has been charged lesser than the market rate can be considered as consideration for grant of lease in respect of which the capital gains has to be computed?" 3. In very brief, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration to the assessee has not been established by the Assessing Officer, which is the prerequisite to arrive at a logical conclusion for substituting the full value of consideration for such transaction. It was found that there was no specific finding about adequacy or otherwise of the lease rent and if it is held to be not insufficient consideration the concept of full value of consideration does not come into picture. Then regarding lower rate of interest, if any, agreed between the parties cannot by itself cause evidence as well as effect result for resorting to the provisions of section 45/48 of the Act. Thus it was found that there appears to be no basis to assume and compute both consideration for transfer and cost of acquisition of leasehold rights without any evidence. Then it was found that the provisions of sections 45 and 48 are specific and cannot be invoked by presumption and assumption. The deeming provision for capital gain, have specifically been provided for, under different sections like sections 45(2), 45(3), 45(4) etc. and the charging section 45(1) cannot be construed to be a deeming provision rather it should be strictly interpreted to charge the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for grant of lease in respect of which capital gain has to be computed. 9. Before proceeding further, we may gainfully quote the provisions of section 45(1) as well as section 48, which read as under: "45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H be Chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place 48. The income chargeable under the head 'Capital gains' shall be 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; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: " Thus, according to section 45, any profit or gain, arising from transfer of capital asset effected in the previous year is deemed to be the income of the previous year in which transfer took place and, according to section 48, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d more where it is without security. The rate of interest for the purpose of deposit differs from the rate for the purposes of borrowing. For the purpose of judging the adequacy of the rate of interest in the present case, what is relevant to be considered is the rate prevalent in the market for the purpose of depositing money and the rate of interest for the purpose of borrowing money cannot be made the criterion for judging the adequacy of the rate of interest. The Appellate Assistant Commissioner as well as the Tribunal have held that the rate of interest paid by Sobhagmal Gokulchand was not adequate for the reasons that the banks were charging interest at the rate of 12 per cent. to 15 per cent. on money advanced by them. In our opinion, the rate of interest which is charged by the banks on money advanced by them cannot be used as a criterion for judging the adequacy of rate of interest paid on monies deposited by the assessee with Sobhagmal Gokulchand. The more appropriate criterion would be the rate of interest that was paid by the banks on deposits made with them. As noticed earlier, during the relevant period, the rate of interest which was being paid by the banks on fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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