SUSHILABEN KANTILAL SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following five questions are referred to this court by the Income -tax Appellate Tribunal at the instance of the assessee under section 256(1) of the Income -tax Act, 1961 :

(2.) THE main point, which arises for consideration an a result of these five questions, is covered by the decision of this court in CIT v. Ashwin M. Patel : [1983]144ITR566(Guj) which has been followed in CIT v. Chandrakant C. Gandhi [1993] 114 Taxation 41 (Guj) and Deepak Anubhai Shah v. CIT : [1993]201ITR577(Guj) . In Ashwin M. Patel's case : [1983]144ITR566(Guj) this court has held that for the purpose of working out capital gains on the transfer of a capital asset, which the assessee himself has not purchased, the correct method of finding out the cost of acquisition of the capital asset to the assessee is to ascertain the real value of the capital asset to the assessee at the time he acquired it. The real value of the capital asset to the assessee is the market value as on the date of acquisition. This court further held that the throwing of shares by a member of a Hindu undivided family into the family hotchpot is not a transfer in the strict legal sense. However, the substance of the transaction is that as a result of throwing shares into the common hotchpot, the Hindu undivided family acquires an absolute title to the shares. It is held that when shares are thrown by the karta of a Hindu undivided family into the family hotchpot, the cost of acquisition of the shares to the Hindu undivided family for the purpose of computing capital gains arising from the sale of those shares by the Hindu undivided family, would be the market value of the shares as on the date on which it acquired them, namely, the date on which they were thrown into the common hotchpot by the karta. In this case, we are concerned with land but the same reasoning would apply and, therefore, following the decision of this court in Ashwin M. Patel's case : [1983]144ITR566(Guj) we answer the questions as under : Question No. 1 is answered in the affirmative. So also question No. 2 is answered in the affirmative. Questions Nos. 3, 4 and 5 are answered in the negative. The said questions are answered by holding that the general doctrine of real profits or gains was attracted and that the basis for adopting the said general doctrine was the market value of the land in question as on the date on which the same was acquired by the Hindu undivided family. No order as to costs.