VYAS B N Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following two questions are referred to us for our opinion:

(2.) A few relevant facts need be noticed in order to appreciate the contentions urged on behalf of the assessee in support of this reference. The assessment years under reference are 1971-72 and 1972-73, the corresponding previous years being the years which ended on 31st March, 1971, and 31st March, 1972, respectively. The assessee had sold certain lands during the assessment year under reference and, therefore, one of the questions which arose for consideration of the ITO in the assessment proceedings for the said years was with regard to the inclusion of capital gains in the assessee's total income. The lands which the assessee sold were acquired by him as gift from the previous owner, one Shri N.N. Vyas, who was the father of the assessee, in July, 1966. These lands were acquired by the previous owner in 1961 and were converted into non-agricultural use as permitted by the Collector under s. 65 of the Land Revenue Code on 12th March, 1962. The assessee, while computing the capital gains, adopted the cost of the acquisition of the lands at Rs. 9 per sq. yard which was the market value as on the date of the gift, that is, in July, 1966. The capital gains thus computed were to the tune of Rs. 8,875 for the asst. yr. 1971-72 and Rs. 20,499 for the asst. yr. 1972-73.

(3.) THE assessee being aggrieved by the said order of the Commissioner, carried the matter in appeal before the Tribunal which by its order of 9th July, 1976, held that s. 49 was applicable to the facts of the case, and the cost of acquisition would be the cost at which the previous owner had acquired the lands, and such cost only could be deducted for computation of the capital gains. THE Tribunal, therefore, rejected the contention of the assessee that the cost should be taken as equivalent to the market value of the lands as on the date of the gift. On the alternative contention of the assessee that the cost of acquisition should be taken as the value of the land as on the date when it was allowed to be put to non-agricultural use, that is, 12th March, 1962, the Tribunal found that it was prima facie supported by instruction No. 88, dt. 1st Aug., 1969, issued by the Central Board of Direct Taxes to all CITs. Even then the Tribunal did not consider it advisable to accept this alternative contention of the assessee which rested on the instructions contained in the circular. However, while dismissing the appeal of the assessee, the Tribunal directed the ITO to take the circular into consideration while considering the cost of acquisition by the previous owner.