COMMISSIONER OF INCOME TAX Vs. NIRUPAMABEN P MODI

JUDGEMENT

(1.) BY his will dated August 29, 1952, Bhagubhai Chunilal had bequeathed the ground floor of his bungalow in favour of his widowed daughter -in -law, Subhadhrabai, and her daughter, Nirupamaben, and created a right of residence therein during their life time. After their death, the property was to go to his three sons. During the assessment year 1982 -83, the mother and the daughter surrendered their respective life interests in the said property in favour of the three sons of the testator for a consideration of Rs. 1,38,000 each. The Income -tax Officer determined the fair market value of the property at Rs. 10,000 as on January 1, 1964, and, after allowing permissible deductions, subjected the balance of Rs. 73,800 to capital gains tax in the case of the daughter. It may be stated that, so far as the mother's case is concerned, the mother had claimed exemption in her return and that case was accepted under section 143(1) of the Act.

(2.) THE assessee, i.e., daughter, preferred an appeal against that part of the order of the Income -tax Officer whereby the balance of Rs. 73,800 was treated as capital gains. The Commissioner of Income -tax (Appeals) allowed the appeal holding that it had cost nothing to the appellant, when she acquired the life interest. The Commissioner was also of the opinion that the Income -tax Officer erred in showing the market value at Rs. 10,000 as on January 1, 1964, as the market value of the life interest in 1964 was certainly more than its value in 1982 when it was surrendered.

(3.) THE Commissioner, aggrieved by that order, wanted the Tribunal to refer the following question to this court : 'Whether the Appellate Tribunal is right in law and on facts in deleting the capital gain of Rs. 73,800 ?'