COMMISSIONER OF INCOME TAX Vs. ASHOK KUMAR JALAN

JUDGEMENT

(1.) THIS reference has been made by the Tribunal under Section 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act" only), seeking the opinion of this court on the following question of law :

(2.) ADVERTING first to the relevant facts : The assessee is a Hindu undivided family. The case relates to the assessment year 1975-76. One of the coparceners of the family, Ashok Kumar Jalan, had purchased 23,750 shares in Hindustan Malleable and Forgings Ltd., for a consideration of Rs. 41,875. Thus the cost of acquisition of each share came to Rs. 1.76. On December 31, 1969, he threw the entire shares in the common stock of the assessee family. Out of the total shares acquired by the Hindu undivided family, during the assessment years 1971-72, 1972-73 and 1973-74, 4,500 shares had been sold or gifted. Thus during the assessment year 1974-75, only 19,250 shares were left in its hands. Against these shares, the Hindu undivided family was awarded 19,250 bonus shares thereby totalling the holding at 38,500 shares. These entire shares were sold during the present assessment year for a sum of Rs. 90,000. But the assessee did not show any income by way of capital gains in the return of income filed by it.

(3.) HAVING reached the aforesaid conclusion, it has to be next examined as to whether under the Act, there is any fiction created by the Legislature to evaluate any notional cost of assets which are thrown by the coparceners in the common stock of the family. Section 49(1) of the Act has set out certain transactions under which the assessee acquires the property in the capital assets without incurring any cost for the same. But by a fiction, the cost to the previous owner of such properties has to be taken as the cost of acquisition of the assessee. I may quote the relevant provisions of Section 49(1) of the Act :