SANJIV Vs. CIT

JUDGEMENT

(1.) THIS income-tax reference arises out of proceedings for the levy of capital gains tax on the assessee who is an individual. Pursuant to the direction given by this court in C.P. No. 40 of 1976, dated November 23, 1976, the following two questions of law have been referred for the opinion of this court by the Income-tax Appellate Tribunal, Bangalore Bench :

(2.) THE assessee had purchased a plot of 25,003 sq. yards. in the city of Bangalore for a sum of Rs. 3,55,000 from Indian Radiators Ltd., on August 25, 1959. In the year 1965-66, the assessee sold the property to three persons. THE particulars relating to the sale, the date of sale as also the market value of the property as on March 31, 1964, according to the valuation made by the valuers, in connection with the assessment to wealth-tax are as follows :

(3.) BEFORE considering the rival contentions urged for the parties, it is convenient to refer to the relevant provisions of the Act. Under s. 14E of the Act, capital gains are treated as a source of income liable to tax. Section 2(24) defines income as including capital gains chargeable to tax under s. 45 of the Act. Section 45 is the charging section as far as capital gains are concerned. It provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. Certain exemptions are provided under ss. 53, 54, 54B and 54D of the Act with which we are not concerned. Section 48 of the Act is the section which provides for the mode of computing capital gains. It provides that the income chargeable under the head "Capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset - (i) expenditure incurred wholly and exclusively in connection with such transfer; and (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto. Sub-sections (1) and (2) of s. 52 of the Act read as follows :