TMI Blog1992 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... he assets transferred as cost of acquisition of the assets. The Income-tax Officer did not agree with the assessee. He computed the capital gains taking the cost of acquisition of assets transferred as on January 1, 1954. For the view the Income-tax Officer took, he relied upon the provisions contained in sub-section (2) of section 55 of the Act. On appeal, the claim made by the assessee was accepted by the Appellate Assistant Commissioner of Income-tax which also was upheld by the Income-tax Appellate Tribunal while dismissing the second appeal filed by the Revenue. The Income-tax Appellate Tribunal was of the opinion that, as the agricultural land became a capital asset for the first time on April I 1970, because of the amendment brought about in section 2(14) of the Act, by the Finance Act, 1970, the assessee was entitled to adopt the value of the land as on April 1, 1970, as the cost of acquisition of the asset, inasmuch as the agricultural land held by the assessee prior to April 1, 1970, was not a capital asset. The Income-tax Appellate Tribunal accordingly directed that the cost of acquisition of the capital asset should be the cost as on April 1, 1970, for purposes of compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut does not include - . . . (iii) agricultural land in India." By the Finance Act, 1970, which came into effect from April 1, 1970, the definition of " capital asset " contained in section 2(14) of the Act was amended and in place of clause (iii) extracted above, a new clause (iii) was substituted as a result of which, agricultural land in India, which fell within the mischief of sub-clauses (a) and (b) of clause (iii) came within the ambit of " capital asset ". The result of this amendment was that any profits or gains arising from the transfer of such land became exigible to capital gains tax, which hitherto were not amenable to capital gains tax. There is no dispute before us and none was raised before the tax authorities that the agricultural lands held by the assessee which were the subject of transfer in the previous years relevant to the assessment years in question, were covered either by sub-clause (a) or sub-clause (b) of clause (iii) of sub-section (14) of section 2 of the Act. By the same Finance Act, an amendment was also effected in section 47 of the Act and clause (viii) was inserted in that section. In so far as it is relevant for our purpose, the amended prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or accruing on the transfer of such lands became amenable to income-tax with effect from April 1, 1970, and consequently, in reckoning capital gains, the cost of acquisition to be deducted, ought to be the market value as on the date the land assumed the character of. "capital asset" and not with reference to any anterior date. According to learned counsel, any other view would be harsh to the assessee and cannot be sustained. It was also urged that section 49 of the Act had no application, for it applied to a case where the asset was a "capital asset" not only at the time of its transfer but also at the time of its acquisition by the previous owner, position not obtaining in the instant case. We have considered the matter carefully, but regret our inability to sustain the view taken by the Tribunal. We can neither accept any of the contentions put forward on behalf of the assessee. Chapter IV-E of the Act deals with capital gains. It provides an integrated code concerning the determination and computation of the charge under the head "Capital gains". It has within its fold sections 45 to 55A of the Act. If certain fundamental concepts underlying some of these provisions are ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 49 does not contemplate any pre-condition for its application that the asset which was sold had to be a capital asset within the meaning of section 2(14)at the time it was acquired by the previous owner, as was sought to be argued before us. The contention in that behalf, in our opinion, is without any substance and cannot be sustained. It would be profitable to refer to the observations of the Gujarat High Court in this connection in Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446, which came to be made repelling a similar contention as canvassed before us, though in different context. The court observed (at page 459) : "The words cost of acquisition of the capital asset, 'the cost for which the asset was acquired' and 'the cost for which the previous owner of the property acquired it' are variously used by the Legislature to denote the same idea and the reference is intended to be made only to the cost of acquisition of the property regardless of the question whether it was a capital asset or non-capital asset at the date of acquisition. " Another section which has an important bearing on calculating the capital gain is section 55 of the Act. Under clause (ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the head "Capital gains" takes into account the capital appreciation from the date of acquisition to the date of sale, subject of course to certain provisions. The only laxity permitted is to substitute the market value, of the asset as on January 1, 1954, if the asset sold was in existence at the time, in the place of the cost of acquisition. The amendment brought about by the Finance Act of 1970, does not alter this legal position, nor furnish a different basis to determine the cost of the asset transferred otherwise than in accordance with section 55(2) of the Act as on January 1, 1954. The effect of the amendment is to bring certain types of agricultural land within the meaning of "capital asset" under the Act, but it does not influence the computation or determination of the taxable gains in terms of the provisions discussed earlier so as to add or detract anything from them. This is what the Income-tax Officer had held. The appellate authorities including the Income-tax Appellate Tribunal were not justified in interfering with the manner in which the capital gains were computed by the Income-tax Officer. The problem with which we are concerned also came up for considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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