COMMISSIONER OF INCOME TAX Vs. B B VYAS

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'B', has referred the following question for the opinion of this Court under s. 256(1) of the IT Act, 1961 :

(2.) THE matter pertains to the asst. yr. 1971-72. THE assessee is an individual. In the assessment proceedings under s. 143(3), the ITO, while computing capital gains was of the opinion that thecost of land in question to the previous owner worked out at Rs. 1.10 per sq. yd. was to be given deduction for computation of the capital gain made by the assessee in respect of which the land which was sold during the assessment year in question. In the assessment proceedings, the assessee, while computing the capital gains, took cost of the acquisition of the land as their value on the date of the gift. THE lands were purchased as agricultural lands in 1961 and thereafter converted into non-agricultural land on 12th March, 1962, and gifted in July, 1966, when they were valued for the purpose of gift-tax at Rs. 9 per sq. yd. According to the assessee the land became capital asset on the date when converted into the non-agricultural land on 12th March, 1962, and, therefore, since it was not capital asset as defined under S. 2(14) at the time of their acquisition, its cost at the time of acquisition, cannot be taken into consideration for the purposes of computation of the capital gains. THE assessee placed reliance on the Circular dt. 1st Aug., 1969, issued by the CBDT. As per that circular, the assessee was entitled to determine the cost of the acquisition on the basis of the conversion of agricultural land into non-agricultural land. THE ITO rejected the claim of the assessee, which order was upheld by the AAC. THE Tribunal, however, held that the circular issued by the CBDT was of a benevolent nature and applied in the case of the assessee in respect of the asst. yr. 1971-72, because it was in force from the date of the assessment year, though later on it came to be withdrawn on 23rd Sept., 1971.