KHARAWALA L B Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) : The petitioner is the legal representative of one B. T. Kharawala who died on March 28, 1974. B. T. Kharawala owned a piece or parcel of land bearing S. No. 340-341 (Part) situate in village Ghodasar, Taluka City, District Ahmedabad. Sometime in the year 1960, B. T. Kharawala constructed factory sheds on the said piece or parcel of land. In or about 1961, the factory sheds were separately let to Jeeka Industries, a partnership firm, and M/s Bhagwandas Tejaji Kharawala Pvt. Ltd. The rent per mensem was Rs. 600 in the case of Jeeka Industries and Rs. 300 in the case of Bhagwandas Tejaji Kharawala Pvt. Ltd.

(2.) THE cost of the land and superstructures was Rs. 1,70,000 as per the entries made in the books of account maintained by B. T. Kharawala. In the course of proceedings for his assessment to wealth-tax up to the asst. yr. 1967-68, the net wealth was computed on the basis of the valuation of the said asset as per the balance-sheet. In the course of proceedings for his assessment to income-tax, the taxable income was determined by including therein the aforesaid rental income received from the said property.

(3.) IN the course of proceedings for assessment to income-tax for the asst. yr. 1973-74, B. T. Kharawala claimed that the net result of the computation under the head "Capital gains" arising on the sale of the said property was a loss in the sum of Rs. 40,000. The claim was advanced on the footing that the cost of acquisition of the said property and that of improvements made thereon was Rs. 1,90,040, whereas the consideration received upon the transfer of the property was Rs. 1,50,000. The difference between the two amounts was claimed as a loss under the head " Capital gains". Before the assessment could be completed, B. T. Kharawala died and, therefore, the assessment proceedings were continued against the petitioner as the legal representative of the deceased. IN the course of a communication dated March 11, 1976, addressed by the petitioner to the ITO in charge of the assessment proceedings, the petitioner explained the basis on which the claim for loss in the sum of Rs. 40,040 under the head "Capital gain" was put forward on behalf of the assessee. The ITO, by his assessment order dated March 15, 1976, accepted the claim advanced on behalf of the assessee and completed the assessment on the footing that the net result of the computation under the head "Capital gains" was a loss in the sum of Rs. 40,040.