TMI Blog1987 (3) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... n the previous year relevant to the assessment year 1966-67, two hundred and fifty of these shares were sold by the Hindu undivided family for a sum of Rs. 86,250. In the previous year relevant to the assessment year 1968-69, seven hundred and fifty of these shares were sold by the Hindu undivided family for sum of Rs. 2,37,375. The 250 shares sold by the Hindu undivided family in the previous year relevant to the assessment year 1966-67 had been originally purchased by the said Maneklal for Rs. 25,000. Their market value on the date on which they were thrown into the hotch-pot of the Hindu undivided family was Rs. 1,57,342. The seven hundred and fifty shares which were sold by the Hindu undivided family in the previous year relevant to the assessment year 1968-69 had been originally purchased by the said Maneklal for Rs. 75,000. Their market value on the date on which they were thrown into the hotch-pot of the Hindu undivided family was Rs. 2,41,890. The Hindu undivided family contended before the Income-tax Officer that for the purposes of computing the capital gains under section 48 of the Income-tax Act, 1961, in respect of the aforesaid sales, there should be deducted from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended on behalf of the Hindu undivided family that its cost of acquisition of the shares was their market value on the date on which they were thrown into the hotch-pot of the Hindu undivided family. It was contended by Mr. Jetly, learned counsel for the Revenue, that the cost of their acquisition was the price at which the said Maneklal had acquired the shares. In the alternative, Mr. Jetly advanced the contention that was raised by the Revenue before the Tribunal, namely, that the cost of their acquisition was nil. Section 45 of the Income-tax Act, 1961, charges to income-tax under the head of " Capital gains " any profits or gains arising from the transfer of a capital asset effected in the previous year ". Section 48 of the said Act lays down the mode of computation of the income chargeable under the head " Capital gains ". It requires that " from the full value of the consideration received or accruing as a result of the transfer of the capital asset ", there shall be deducted the expenditure incurred in connection with such transfer and " the cost of acquisition of the capital asset and the cost of any improvement thereto ". Section 49 of the said Act sets out the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset in the acquisition of which it was possible to envisage a cost. The intent went to the nature and character of the asset, that it was an asset which possessed the inherent quality of being available on the expenditure of money to a person seeking to acquire it. It was immaterial that although the asset belonged to such a class, it might, on the facts of a certain case, be acquired without the payment of money. That kind of a case was covered by section 49 of the Income-tax Act, 1961, and its cost for the purpose of section 48 of the said Act was determined in accordance with those provisions. None of the provisions pertaining to capital gains suggested that they included an asset in the acquisition of which no cost at all could be conceived. Accordingly, the Supreme Court held that the goodwill generated in a newly commenced business could not be described as an asset within the meaning of section 45 and its transfer was not subject to tax under the head " capital gains ". Mr. Jetly, in support of his submission that the cost of acquisition of the shares by the Hindu undivided family was the price which the said Maneklal had paid for them, relied upon the judgments of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The principle was that where a depreciable asset in the hands of one was given over gratis to another, the gratuitous transferee must be treated as having acquired that asset at its then written down value. Following that principle, the Madras High Court held that the written down value of the machinery at the time when the assessee got it gratis was its cost of acquisition thereof. As we have stated, we find it difficult, with respect, to take the view that section 48 of the Income-tax Act, 1961, provides for the taking into account of anything other than the actual cost of acquisition of the asset by the assessee, though that cost may, in a given case, be nil. The only legal fiction in this behalf is created by section 49 of the said Act and the fiction operates only in the circumstances set out therein. There is no warrant, we think, with respect for a deemed cost of acquisition in the circumstances not comprehended in section 49 or section 55 of the said Act. In CIT v. S. Krishnamurthy [1985] 152 ITR 669, in circumstances similar to those before us, the Madras High Court relied upon the word "devolution" in section 49(1)(iii)(a) of the Income-tax Act, 1961, and held that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
