TMI Blog1979 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds and on the same day they entered into a partnership under which the properties allotted to them were brought into the firm as its assets. The partnership deed is dated 6th July, 1962. During the calendar year 1966, seven house properties in Rewang and a rubber garden in the same place were sold for a total sum of $ 26,260.15. In the books of the firm their total value was shown as $ 11,671.88. In the return filed by the assessee for the assessment year 1967-68, the capital gains derived by the sale of the aforesaid properties was shown as $ 6,565, the same being computed at 25% of the total sale proceeds. The ITO did not accept this computation and he took the book value of the properties as their market value as on January 1, 1954, and computed the capital gains as $ 14,588 equivalent to Rs. 35,594. The assessee preferred an appeal to the AAC. He rejected the contention of the assessee that the firm was not liable to be taxed on the capital gains. Noticing that the assessee-firm had exercised the option to have the market value as on January 1, 1954, at 70% of the sale proceeds, he directed the computation of capital gains at 30% of the sale proceeds. The department prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be lower than Rs. 19,222, then the said figure of Rs. 19,222 would be left undisturbed, but if it was a higher figure than the said amount, the higher amount should be determined as the capital gains liable to be taxed. The question was answered accordingly. It is against the same order of the Tribunal that the present question has also been referred as a result of the order of the direction of this court as seen already. The learned counsel for the Commissioner contended that the provisions of the I.T. Act did not envisage any computation of capital gains on the basis of the market value of the assets on any date other than 1st january,1954. In view of the fact that in the present case the assets had been acquired by the firm after 1st January, 1954, the contention was that the cost of acquisition of assets as on the date of acquisition alone should be taken into account. For the assessee, the submission was that there was no error in the order of the Tribunal which required interference at the hands of this court. It was submitted that the market value of the assets as on 1st July, 1962, could be taken as the basis for the computation of the capital gains. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assets in respect of which a deduction on account of depreciation has been obtained by the assessee, then the written down value of the asset shall be taken as the cost of acquisition. With reference to other assets acquired before 1954, it is the market value of the asset on 1st January, 1954, that has to be taken into account at the option of the assessee. The cost of acquisition of the asset has then to be taken as the fair market value as on that date (i.e., January 1, 1954) as reduced by the amount of depreciation, if any, allowed to the assessee. In the present case, the asset having been acquired by the firm only on 1st July, 1962, s. 50 has also no scope for application. In para. 4 of the order of the Tribunal it is mentioned : " It is not disputed that when the partnership was commenced on July 1, 1962, the value of the assets was mentioned in the books not with reference to their market value as on that date but only with reference to their original cost of acquisition. " However, in para. 6 of its order, the Tribunal has observed : As a result of the partition, the quondam coparceners would become exclusively entitled respectively to the properties allotted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider a similar question, namely, whether the market value as on a date subsequent to January 1, 1954, could be taken into account with reference to an asset which became the property of the assessee subsequent to that date in T.C. No. 174 of 1975--judgment dated 18th June, 1979 [Addl. CIT v. Govindoss Purushothamdoss.That case was with reference to a mode of acquisition not covered by s. 49. In that case, there was a partition of a HUF consisting of one Jumnadoss Dwarakadoss and his brother, Amichand Doss Dwarakadoss. As a result of the said partition, a fresh partnership deed came into existence on 14th November, 1959, between those two persons on the one hand and Purushothamdoss Gokuldoss and his son on the other. The property which was the subject-matter of consideration in the said case was taken out of the firm on April 1, 1964. The question was, whether the value as shown in the books of account at the time when the property was taken out of the firm and taken by the partnership was to be adopted or whether the market value as on April 1, 1964, of the said property was to be adopted. After referring to decided cases, it was pointed out : " We do not consider that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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