M NACHIAPPAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN pursuance of the direction given by this court in T. C. P. Nos. 325 and 316 of 1981 dated August 23, 1982, the Tribunal referred the following question for the opinion of this court for the assessment years 1972-73 and 1973-74 under section 256(2) of the INcome-tax Act, 1961"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the principle in Bai Shirinbai K. Kooka's case 1963 AIR(SC) 477, 1962 (46) ITR 86, 1962 (S3) SCR 391(SC) would not apply?"The assessee is an individual and the assessment years involved in this reference are 1972-73 and 1973-74 for which the two previous years ended on June 30, 1971 and June 30, 1972 respectively. The assessee is a divided member of a Hindu undivided family of which M. L. M. Mahalingam Chettiar was the karta.

(2.) THE karta of the joint family purchased certain lands in Kodambakkam, Madras, prior to 1954. THEy were then agricultural lands. THEse agricultural lands were converted into house sites during the assessment year 1961-62. For the purpose of wealth-tax for that year the value offered was Rs. 2, 341 per ground. THE family was partitioned in 1968 and part of those house sites fell to the share of the assessee. In the account year relating to 1972-73, the assessee sold five grounds and 1, 320 sq. ft. for a sum of Rs. 55, 500. For the purpose of computing the capital gains, the assessee adopted the value of these lands as on January 1, 1954, at Rs. 6, 500 per ground on the basis of a valuer's report. THE Income-tax Officer determined the value as on January 1, 1954, at Rs. 2, 000 per ground and accordingly determined the capital gainsIn the year 1973-74, the assessee sold seven grounds and 800 sq. ft. for a total sum of Rs. 73, 334. In this assessment year also, the Income-tax Officer adopted the value as on January 1, 1954, at Rs. 2, 000 per ground as against Rs. 6, 500 claimed by the assessee.

(3.) THE land was acquired before 1954 and it was converted into house sites in the year 1961-62. While ascertaining the capital gain the cost of acquisition has got to be determined by taking into consideration the cost in the hands of the previous owner. According to learning standing counsel, several High Courts in their decision held that when the capital asset was acquired prior to the year 1954, the cost of acquisition has got to be ascertained as on January 1, 1954, for the purpose of determining capital gain, the statutory provisions cannot be ignored and the valuation of the land adopted on the date of conversion as contended by learned counsel for the assessee. According to learned standing counsel, the decisions in CIT v. Bai Shirinbai K. Kooka 1963 AIR(SC) 477, 1962 (46) ITR 86, 1962 (S3) SCR 391 (SC) and CIT v. Groz-Beckert Saboo Ltd. 1979 AIR(SC) 376, 1979 (116) ITR 125, 1979 (1) SCC 340, 1979 (2) SCR 371, 1979 UJ 88, 1979 (8) CTR 155, 1979 TaxLR 126, 1979 (8) CTR(SC) 155 (SC) would not be applicable to the facts of these cases where the capital assets were converted into stock-in-trade. For these reasons it was submitted that the Tribunal was correct in adopting the value of the lands in question at Rs. 2, 000 per ground as on January 1, 1954. We have heard both learned counsel for the assessee as well as learned standing counsel for the DepartmentTHE point for consideration is whether the principle in CIT v. Bai Shirinbai K. Kooka 1963 AIR(SC) 477, 1962 (46) ITR 86, 1962 (S3) SCR 391 (SC) would be applicable to the facts of these casesTHE lands in question were acquired by the karta of the joint family prior to 1954. In a partition a portion of the land fell to the share of the assessee herein. THE agricultural lands which were purchased by the karta of the joint family were converted into house sites during the assessment year 1961-62. For the purpose of wealth-tax for that year, the value offered was Rs. 2, 000 per ground.