COMMISSIONER OF INCOME TAX Vs. KRISHNAMURTHY S

JUDGEMENT

(1.) THIS is a case of capital gains assessment of a joint family of father and son. The father, by name Krishnamoorthy, purchased a house property in court-auction and made subsequent improvements thereto from out of his own separate funds, not utilising any joint family funds therefore. Subsequently, he threw this item of property into the joint family hotchpot. After some years, the property was sold at a profit by the joint family. In the hands of the joing family, the capital gains realized on the sale of the property was sought to be assessed. In the assessment, a controversy arose as to what was to be taken as the cost of acquisition of this property for the family. THIS cost had to be determined because the quantum of capital gains assessable under the Act has got to be ascertained by deducting from the total value of the sale consideration, the cost of acquisition. The ITO observed that, really speaking, there was no cost of acquisition at all for the assessee's family. According to him, when the property was thrown into the joint family hotchpot, the family got it for the nothing. Nevertheless, the ITO adopted Rs. 70,535 as the cost of acquisition to the family apparently because it represented the cost to Krishnamoorthy, who threw the property into the joint family hotchpot.

(2.) ON appeal by the assessee, the Tribunal took the view that the sum of Rs. 70,533 cannot be regarded as the cost acquisition of the property by the family but can only be regarded as cost of acquisition to the previous owner, Krishnamoorthy. The Tribunal pointed out that this was not a case in which under any special provisions of the statute, the cost to the previous owner could be regarded as the cost to the assessee for the purpose of computation of capital gains.

(3.) IN the present case, although Krishnamoorthy, who was original owner of the property, did have a cost of acquisition of the property, in that he spent his own money for purchasing the property as well as for improving it, so far as the assessee family was concerned, it acquired the property for nothing when it was thrown into the joint family hotchpot. The question is, how to reckon the cost of acquisition of this house property in the hands of the assessee's family ?