ARUN SUNNY Vs. DEPUTY COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The point that arises for consideration in this appeal is as to what is the date on which the cost of acquisition/fair market value of the appellant's property has been computed. Is it the date of the notification, namely 6-1-1994, on which date the asset was notified as the capital asset or is it to be computed as on 1-4-1981 in terms of Section 55(2)(b) of the Income Tax Act.

(2.) The property held by the assessee became a capital asset as per the notification issued on 6-1-1994. But as per Section 55(2)(b), the cost of any improvement in relation to a capital asset means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset on or after 1-4-1981 by the previous owner or the assessee. Admittedly, the asset which was declared as capital asset by notification became the asset of the assessee long prior to 1-4-1981. Thus the Legislature while explaining the term of cost of acquisition has in express terms provided that it is the value of the assets acquired as on 1-4-1981 together with all such expenditure of capital nature incurred in making any additions or alterations to the said asset. Therefore, the contention of the assessee that the value of the asset should be as on the date of the notification when it became a capital asset cannot be accepted. In this connection a Bench decision of this Court reported in CIT v. Smt. M. Subaida Beevi, 1986 160 ITR 557 is directly on the point, wherein it was held that the cost of acquisition of a capital asset within the meaning of Section 48 is not the cost on the date on which the asset transferred became a capital asset. The incidence of levy under Section 45 is on the capital gains to be computed in the manner provided for in Section 48 read with Section 55(2) of the Act. The deduction permissible under Section 48 is the cost of acquisition of the capital asset transferred for consideration, whether or not it was a capital asset on the date of its acquisition. What is taxable under Section 45 are the "profits or gains arising from the transfer of a capital asset" and the charge of Income Tax on the capital gains is on income of the previous year in which the transfer took place. The only condition which must be satisfied in order to attract the charge to tax under Section 45 is that the property transferred must be a capital asset on the date of transfer and that it is not necessary that it should have been capital asset also on the date of its acquisition by the assessee. Thus this decision directly answers the question raised and concluded. This has been followed in a subsequent decision reported in CIT v. Karvalves Ltd., 1992 197 ITR 95. Therefore, the contention of the assessee was rightly rejected by the Tribunal and we find no ground to interfere with the same.

(3.) It was then contended that the valuation report of the expert was not accepted by the Tribunal. Admittedly the assessee did not seek any such reference either before the first appellate stage or before the Tribunal. It is only at the Appellate Tribunal stage that such a contention was raised. The Appellate Tribunal considered the matter and rejected the same. No substantial question of law, much less a substantial question of law arises for consideration in this appeal. We find no merit in the appeal and it is dismissed.