TMI Blog2003 (3) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 1986-87 the same could not be assessed to capital gains. - - - - - Dated:- 25-3-2003 - Judge(s) : D. K. SETH., R. N. SINHA. JUDGMENT D.K. SETH J.-The assessee, admittedly, was carrying on business in respect of some items other than white cement. It obtained a licence for setting up manufacturing business of white cement. Instead of setting up a business, the assessee had transferred the licence to some other concern. However, the assessee had some interest by way of shares held in the said concern and some of the directors were common. On account of transfer of the said licence, the assessee received a sum of Rs. 10 lakhs. In the return for the year 1986-87, this amount was shown but exemption was claimed by the assessee on the ground that this is not taxable either as income from business or as capital gains. It had treated the same as a capital receipt, which is not chargeable to tax. The Assessing Officer treated the same as capital gains since it was not in dispute that the licence was treated as a capital asset. The assessee preferred an appeal. The Commissioner (Appeals) had held that this amount cannot be treated to be capital gains but it was def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge the order as the case may be even without preferring any cross-objection or appeal. The finding of the learned Tribunal is perverse since it had not gone into the said question. In the present facts and circumstances of this case, the consideration received out of the transfer of a capital asset was definitely a capital gain assessable to tax. Once some amount is received on transfer of a capital asset, the same is definitely chargeable to tax. He had sought to distinguish the decision in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC). He contended that there was no escape from the charging of the income under the head "Capital gains". He alternatively contended that if it cannot be charged under the head "Capital gains", it was definitely a business income since this was a receipt by the assessee in the course of its business. Even if it was a capital asset, a benefit derived there from was chargeable to tax under section 28, clause (iv). Therefore, in no way it could be exempted from being taxed under the said hear. Mr. J.P. Khaitan, learned counsel appearing for the assessee, on the other hand, contended that when the heads of income are specified, a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising out of the business the assessee had been carrying on. Therefore, it could not come within the scope of business income. He also contended that the jurisdiction of the court is confined to the reference made and it cannot travel beyond the scope thereof. Here in this care though the question was framed with the opening phrase "without prejudice to question No. 1" question No. 1 was not referred to consciously. It is the order of reference that will determine the issue, not the framing of the question. What was not referred to this court consciously cannot be deemed to have been referred because of the framing of the question referred. When it was not held that question No. 2 includes question No. 1 particularly when questions Nos. 1 and 2 are directly in conflict with each other. On these grounds, he pressed for dismissal of the reference. We have heard the submission of the respective counsel at length. So far as the question with regard to the reference of the question is concerned, admittedly the court under section 256(2) had consciously referred question No. 2 omitting to refer to question No. 1. It is the order of reference that will determine the scope, not the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged under that head, it cannot be charged under a different head or as income from other sources. A subject cannot be taxed unless the charging provision clearly imposes the obligation. It cannot be so done even by fiction, unless expressly created by the statute The scope of a charging section cannot be enlarged by importing further fiction by deeming the sum received as income of business. If the words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the Legislature. It was so held in the decision in B.K. Roy P. Ltd. v. CIT [1995] 211 ITR 500 (Cal), affirmed by the Division Bench in CIT v. B.K. Roy P. Ltd. [2001] 248 ITR 245 (Cal); CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC) and in CIT v. Justice R.M. Datta [1989] 180 ITR 86 (Cal) following the ratio laid down in Nalinikant Ambalal Mody v. S.A.L. Narayana Row, CIT [1966] 61 ITR 428 (SC) respectively. Therefore, the amount received on transfer of the licence, a capital asset, could not be charged under section 28(iv) as income of business. For all these reasons, we are unable to persuade ourselves to agree with the contention of Mr. Saha, who, in reply, relied on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure incurred wholly and exclusively in connection with such transfer, and (ii) the cost of acquisition of the capital asset and the cost of improvement thereto. In the present case, the cost of acquisition could not be determined in the manner provided in section 55(2) as it stood then. A reading of these two sections shows that if the cost of acquisition of the licence could not be assesses, it could not be computed under section 48 and unless it was computable under section 48, it could not be charged under section 45. The apex court in B.C. Srinivasa Setty's case [1981] 128 ITR 294 had held that section 45 and section 48 are integral parts of the charging section. Profits or gains arising from the transfer of a capital asset are chargeable under section 45. In order to compute the profits or gains under that head, Parliament has enacted detailed provisions. Unless those provisions can be applied to a particular transaction, it must be regarded as never intended by section 45 to be the subject of the charge. This is clear from the general arrangement of the provisions in the Act. The charging provision is accompanied by a set of provisions for computing the income subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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