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TMI Blog2011 (1) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee sold certain plots for consideration and the income derived therefrom was sought to be taxed as 'capital gains'. The CIT(A) reversed the view taken by the Assessing Officer, holding that cost of acquisition of property in question was nil and thus, no capital gain was attracted. The Tribunal upheld the said view, inter-alia, relying upon judgment of the Hon'ble Supreme Court in CIT v. B.C.Srinivasa Setty, (1981) 128 ITR 294. 3. We have heard learned counsel for the parties. 4. Learned counsel for the revenue submitted that the principle of excluding taxability of capital gains where asset is not capable of being valued, such as goodwill, cannot extend to capital assets like land which are capable of being valued. Judgment of the Hon'ble Supreme Court in B.C.Srinivasa Setty was not applicable to such a situation. Reliance has been placed on judgment of the Hon'ble Supreme Court in CIT v. D.P.Sandu Bros. Chembur P.Limited, (2005) 273 ITR 1, wherein the judgment in B.C.Srinivasa Setty was distinguished in its applicability to an asset which was capable of acquisition at a cost. The observations therein are as under:- 'In other words, an asset which is capable of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinder Singh and Shiv Dev Inder . 3. Since at the time of hearing of the references before the Division Bench, reliance was placed upon a judgment of this Court in Amrik Singh's case (supra), prima facie, differing with the view taken therein, the matter was referred to be heard by a larger Bench. 4. Learned counsel for the revenue submits that the plea of the assessee that no capital gain was attracted, is untenable in the face of Section 55(2) & (3) read with sections 48 and 49 of the Act. The said provisions as existed on 1.4.1978 are as under:- "Mode of computation and deductions: 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 capital asset and the cost of any improvement thereto. Cost with reference to certain modes of acquisition: 49. 1) Where the capital asset became the property of the assesseei) on any distribution of assets on the total or par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 1954 and the fair market value of the asset on that day is taken as the cost of acquisition at the option of the assessee, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset on or after the said date by the previous owner or the assessee, and ii) in any other case, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the assessee after it became his property, and, where the capital asset became the property of the assessee by any of the modes specified in sub section (1) of section 49, by the previous owner, but does not include any expenditure which is deductible in computing the income chargeable under the head 'interest on securities', 'income from house property', Profits and gains of business or profession', or 'income from other sources', and the expression 'improvement' shall be construed accordingly. (2) For the purposes of sections 48 and 49, 'cost of acquisition', in relation to a capital asseti) where the capital asset became the property of the assessee before the Ist day of January 1954 means the cost of acquisition of the asset t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for taking the cost either equal to the market value as on 1.1.1954 or at the option of the assessee equal to the cost of acquisition of the previous owner. Section 55(3) provides that where cost of acquisition of the previous owner cannot be ascertained, it has to be taken to be equal to the market value on the date the asset was acquired by the previous owner. Explanation to section 49 provides that previous owner is the person not covered by the clauses mentioned in section 49(2) i.e. who acquires property otherwise than by way of gift, will or by succession. 6. In the present case, the assessee acquired the property by succession from previous owner. According to the stand of the assessee, cost of acquisition by the previous owner could not be ascertained. However, he failed to exercise the option of going either by the date of market value on the date of acquisition or by the cost of the previous owner in which case only option available to the Assessing Officer was to proceed to compute capital gain by taking the cost of the asset to be fair market value on the specified date i.e. 1.1.1954 as per applicable provision for assessment year 1977-78 and as on 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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