TMI Blog2018 (2) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... accepting agriculture income and treated the same is income from undisclosed sources without considering the submissions and evidences produced by the assessee. 2. Under the facts and circumstances of the case the Learned CIT(A) has erred in sustained the addition of ₹ 21,43,470/- on account of capital gain on the basis of remand report as against original addition of ₹ 25,15,980/-. 3. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing. The assessee has also raised the additional ground:- Under the facts and circumstances of the case no capital gains are taxable on sale of land when the same was awarded free of cost by the Government and accordingly the Learned Assessing officer has also taken the cost of acquisition at nill. Thus both the Learned Assessing and the learned CIT(A) have erred in taxing capital gains. 2. Admission of Additional ground:- The ld. AR of the assessee has submitted that this additional ground has been raised first time before the Tribunal as the same goes to the root of the matter and it is also purely legal in nature. For adjudication of this issue no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10.06.1969 placed at page 1 to 5 of the paper book. He has further submitted that the assessee participated in the second world war, therefore, the Government has awarded the assessee by allotting this land in question and therefore, it is clear that the cost of acquisition of the land is nil and this fact has been accepted by the AO while computing the capital gain as he has taken the cost of acquisition as nil. Thus, the ld. AR as contended that it is settled proposition of law that where the cost of acquisition is nil then no capital gain is chargeable. In the absence of cost of acquisition the charge under the head capital gain cannot be fasten to the full value consideration as capital gain cannot be equity with full value consideration. In support of his contention he has relied upon the decision of Hon ble Supreme Court in case CIT Vs. B.C. Srinivasa Setty 128 ITR 294 as well as decision of Hon ble Gujarat High Court in case of CIT vs. Mandharshingji P. Jadeja 281 ITR 19. The ld. AR has also relied upon the decision of Hon ble MP High Court in case of CIT vs. H.H. Lokendra Singh 227 ITR 638 and submitted that the assessee being the original owner of land in question th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal asset is required as per the mode of acquisition as provided u/s section 49(1) of the Act then, the cost of acquisition would be fair market value as on 01.04.1984. Thus, the ld. DR has submitted that even in case the cost of acquisition is nill in the hand of the assessee the capital gain has to be computed as per the provisions of sections 49(1) 55(2)(b)(ii) of the Act. 7. We have considered the rival submissions as well as relevant material on record. There is no dispute that the land in question was awarded to the assessee by the Government of Rajasthan free of cost and therefore, the cost of acquisition in the hand of the assessee is nil. The ld. AR of the assessee has contended that since the cost of acquisition is nil, therefore, the computation of capital gain fails and no capital gain is chargeable on full receipt of sale of the land. He has relied upon the various decisions including the decision of Hon ble Supreme Court in case of CIT Vs. B.C. Srinivasa Setty (supra). It is pertinent to note that all these decisions as relied upon by the assessees were rendered prior to the full bench decision of Hon ble Punjab and Haryana High Court in case of CIT vs. Raja Malw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Hon ble Punjab and Haryana High Court in case of CIT vs. Raja Malwinder Singh (supra) has held that even in a case where the cost of acquisition cannot be ascertained, section 55(3) prescribes the cost to the equal to the fair market value on the date of acquisition in case of acquiring the land either at some cost or without cost but there can be no situation when the cost is incapable of ascertainment. This view of the Hon ble Punjab and Haryana High court was again reiterated in case of Thakur Dwara Shri Krishanji Maharaja Handiyaya, Barnala (Supra). Thus it is clear that there are divergent views of Hon ble High Courts on this issue particularly the interpretation and understanding of the decision of Hon ble Supreme Court in case of CIT vs. B.C. Srinivasa Setty (supra). The issue before the Hon ble Supreme Court in case of CIT vs. B.C. Srinivasa Setty was the taxability of capital gain on transfer of goodwill of a newly commenced business. The Hon ble Supreme Court has observed that no business commenced for the first time possesses goodwill from the start. It is generated as the business is carried on and may be augmented with the passage of time. Therefore, goodwill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains. It is possible to say that the cost of acquisition mentioned in s. 48 implies a date of acquisition, and that inference is strengthened by the provisions of ss 49 and 50 as well as sub-s (2) of s. 55. 10. It may also be noted that if the goodwill generated in a new business is regarded as acquired at a cost and subsequently passes to an assessee in any of the modes specified in sub-s. (1) of s. 49, it will become necessary to determine the cost of acquisition to the previous owner. Having regard to the nature of the asset, it will be impossible to determine such cost of acquisition. Nor can sub-s. (3) of s. 55 be invoked, because the date of acquisition by the previous owner will remain unknown. 11. We are of opinion that the goodwill generated in a newly commenced business cannot be described as an asset within the terms of s. 45 and, therefore, its transfer is not subject to income tax under the head Capital gains . Thus it is clear that the ruling laid down by the Hon ble Supreme Court is based on specific facts and nature of capital asset being goodwill which is self generated as it is not possible to determine the date when it comes into existence. ..... 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(b) in relation to any other capital asset,-] (i) where the capital asset became the property of the assessee before the [1st day of April, [1981]], means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the [1st day of April, [1981]], at the option of the assessee ; (ii) where the capital asset became the property of the assessee by any of the modes specified in [sub-section (1) of] section 49, and the capital asset became the property of the previous owner before the [1st day of April, [1981]], means the cost of the capital asset to the previous owner or the fair market value of the asset on the [1st day of April, [1981]], at the option of the assessee ; (iii) where the capital asset became the property of the assessee on the distribution of the capital assets of a company on its liquidation and the assessee has been assessed to income-tax under the head Capital gains in respect of that asset under section 46, means the fair market value of the asset on the date of distribution ; (iv) [***] [(v) where the capital asset, being a share or a stock of a company, became the property of the assessee on- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in a newly started business the value of goodwill was not ascertainable, and on sale of goodwill, capital gain was not attracted. It is submitted that in the case of acquisition of land, the same is either acquired at some cost or without cost and under the scheme of the Act, there can be no situation when the cost is incapable of ascertainment. Section 55(2) provides for taking the cost either equal to the market value as on January 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 the 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. The Explanation to 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 the previous owner. According to the stand of the assessee, the 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in case of Thakur Dwara Shri Krishanji Maharaj Handiyaya, Barnala vs. CIT (supra) I am of the considered opinion that the land in question does not fall in the category of the capital asset for which the cost of acquisition is not possible to be ascertained. Accordingly, the cost of acquisition in the hand of the assessee would be the fair market value as on 01.04.1981. Accordingly this issue is decided against the assessees. Thus, it is clear that the Tribunal has analyzed various decisions relied upon the ld. AR of the assessee and was of the view that the decision of Hon ble Supreme Court in case of CIT Vs. B.C. Srinivasa Setty (supra) is based on specific fact of intangible asset being goodwill which is self- generated and therefore, it was not possible to determine the date when it came into existence. The Date of acquisition of the asset is a material factor as observed by the Hon ble Supreme Court in applying the computation provisions pertaining to the capital gain. Thus, as per the provisions of section 48 the cost of acquisition has to be taken on the date of acquisition and in case of goodwill in a newly set up business is considered as self-generated asset an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 1.1.1964 for assessment year 1978-79. Even in a case where cost of acquisition cannot be ascertained, section 55(3) statutorily prescribes the cost to be equal to the market value on the date of acquisition. This being the position, capital gain is not excluded even on the plea that value of the asset in respect of which capital gain is to be charged was incapable of being ascertained. The view taken in Amrik Singh's case [2008] 299 ITR 14 (P H) based on the assumption that where market value cannot be ascertained, capital gain cannot be applied, is not correct being against the statutory scheme. Similarly, the view taken by the Madhya Pradesh High Court in CIT v. H.H.Maharaja Sahib Shri Lokendra Singhji, [1986] 162 ITR 93 (MP) cannot be accepted. The said judgment also does not give effect to the mandate of section 55(3) which provide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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