TMI Blog2001 (8) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. J. P. Shah. Mr. Akil Qureshi, learned standing counsel for the Revenue has appeared on behalf of the Commissioner of Income-tax in both the matters. The assessees are individuals. The assessment year involved is 1980-81 and the relevant accounting period is calendar year ended on December 31, 1979. There was a joint Hindu family of Hargovandas Girdharlal which comprised the karta-Hargovandas Girdharlal, his wife Lalitaben, and son, Tulsidas Hargovandas. The Hindu undivided family was partitioned by registered deed on April 8, 1960. Shri Tulsidas Hargovandas received one bungalow known as "Tulsikunj" and other movable properties in the form of shares and securities on such partition. The aggregate value of the immovable and movable properties at that time was Rs.1,70,500. On May 16, 1960, Shri Tulsidas Hargovandas executed a trust deed whereby the properties received in partition were settled upon a trust. It appears from the record that Shri Tulsidas Hargovandas was unmarried and he was having a married sister by the name of Shakuntalaben. The two assessees before us, viz., Shri Chintan Parikh and Shri Vatsal Parikh, are two sons of Shakuntalaben. Under the trust de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on October 12, 1970. The Commissioner of Income-tax (Appeals) confirmed the assessment order and the assessee preferred second appeal before the Tribunal. When the matter was taken up for hearing by the Tribunal there was a difference of opinion between the two learned members who heard the appeal. The judicial member came to the conclusion that the assessee acquired the remainderman's interest only on October 12, 1970, when Smt. Shakuntalaben died and prior to that date the interest was not in existence and there was no 'last previous owner" as envisaged by the provision of section 49 read with the Explanation to sub-section (1) of the said section. Therefore, according to the judicial member, there was no identifiable or conceivable cost of acquisition in the hands of the assessee of such interest and hence the computation provisions for charging the capital gains under section 45 of the Act would not be applicable and the assessee would not be liable to capital gains on the transaction involved. The accountant member disagreed with the view of the judicial member and held that the asset sold by the assessee was not a self-generated asset and the said asset came in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a price. It was further held that though it might be difficult to compute the cost of such remainderman's interest in the hands of the previous owner that should not justify the conclusion that the cost cannot be ascertained. Therefore, as per the majority view it was held that the assessee was liable to be taxed on the capital gains arising out of sale of the remainderman's interest and the cost of acquisition could be ascertained, though with difficulty, and it was not a case where the computation provision would not apply. Mr. J. P. Shah, learned counsel for the assessee, contended that on the basis of the ratio of the Supreme Court decision in the case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294, the question that will have to be addressed is: Whether it is possible to visualise any purchaser for value on the date of acquisition of such an asset. Elaborating on the submission it was contended that the nature of interest will have to be borne in mind while answering the aforesaid question as Shakuntalaben was entitled to possess the property only after the death of the settlor and both the parents. That as the asset came into existence only on the day of settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted asset where the emphasis was on the improbability of envisaging cost in view of the fact that even date of acquisition of such self-generated asset would not be known. That in the present case the sale price was available. The last previous owner, viz., the Hindu undivided family, was known and Tulsidas had divested himself of all the rights when he executed the trust deed which he could do only if he was in possession of that right. It was submitted that it would not be possible to envisage that a capital asset could have two different forms-one at the time of acquisition and the other when it was sold. In support of this proposition, the decision of this court in the case of Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446, was referred to and relied upon. Mr. Qureshi further urged that under the Wealth-tax Act it was possible to ascertain the remainderman's interest by adopting discounted value and in support of this reliance was placed on the case of CWT v. V. Pugalagiri [1995] 212 ITR 156 (mad). He, therefore, summed up his case by stating that the provision of section 49(1) of the Act was fully applicable to the facts of the case and the majority view of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , specifically mentions in clause (2) that all the properties which have devolved on partition upon the settlor Shri Tulsidas are of his independent and absolute ownership and possession. Vide clause (3) it is stated that the settlor divests himself of all the ownership rights and transfers all the properties to the trustees to be held in trust. Clause (5)(a) provides that the settlor will have life interest in the usufruct of the trust properties after providing for all taxes and expenses. Clause (5)(b) states that in the event of the net income being less than Rs.12,000 per annum the trustees are bound to make good the difference from the corpus in case the settlor calls upon them to do so. Similarly, clause (5)(d) states that in case the settlor 3 falls ill, the entire expenses will have to be incurred by the trustees from the corpus of the trust property. Clause (6)(a) provides that the settlor or both his parents will have the right to reside in the bungalow "Tulsikunj" without payment of any rent till their death. Clause (6)(b) specifically provides that on the death of the settlor, subject to life interest to reside in the property of both the parents, Smt. Shakuntalaben wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bequeathed to A for life, and after his death to B if B shall then be living; but if B shall not then be living to C. A, B and C survive the testator. B and C each take a contingent interest in the estate until the event which is to vest it in one or in the other has happened." (Source-Mulla's Transfer of Property Act, eighth edition by Justice R. K. Abichandani). Similarly, under the Indian Succession Act, 1925, section 119 deals with date of vesting of legacy when payment or possession is postponed and section 120 deals with the situation when legacy is contingent upon specified uncertain event happening. Applying the aforesaid test to the facts on hand we find that the interest of the assessee was contingent when the trust deed was executed, i.e., on May 16, 1960. However, the same vested in the assessee on October 12, 1970, when Smt. Shakuntalaben died, i.e., when she predeceased the settlor. Therefore, the date of acquisition of the interest in the hands of the assessee would be the date of death of Smt. Shakuntalaben but that does not resolve the issue as regards the cost of acquisition. The concept of "cost" and 'value" are too well-known to be elaborately stated. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that he is in possession of a contingent right of tenancy in the entire bundle of rights which comprise his ownership. In the present case almost similar circumstances prevail. When Shri Tulsidas had not executed a trust deed he was the full and absolute owner of the property in question. It is not possible to state that in the rights of ownership which he was enjoying prior to the execution of the trust deed, he was in a position to enjoy the remainderman's interest, or in other words, to deal with such interest. Was it possible for Tulsidas to put up for sale the remainderman's interest without executing a trust deed? The answer has to be in the negative: and immediately the fallacy in the reasoning adopted by the Revenue and accepted by the Tribunal stands detected. We may examine the issue from a slightly different angle. In case Tulsidas was to die intestate prior to the execution of the trust deed in question what would be the position in relation to the rights which have been granted to Shakuntalaben or her sons on her death. Shakuntalaben being the sister of Shri Tulsidas it would not have been possible for her to stake any claim to the property as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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