Actual transfer consideration governs capital loss computation; book value cannot replace proved sale price for unquoted shares.

For computation of capital gains under section 48 of the Income-tax Act, actual consideration received on transfer governs, and book value cannot be substituted on a notional basis where the share transfer is duly evidenced. The assessee's long-term capital loss on sale of unquoted shares was supported by cheque payments, executed transfer deeds, and completion of transfer formalities by the issuing company. On those facts, the restriction of loss to book value was held unjustified, and the declared loss was accepted.

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Issues: Whether the assessee's long-term capital loss on sale of unquoted shares was liable to be restricted on the basis of book value instead of the actual sale consideration.

Analysis: The shares were purchased and sold through cheques, the transfer deeds were duly executed, and the issuing company completed the formalities relating to allotment and transfer. The Assessing Officer's approach rested on the assumption that the shares should not have been sold below book value, but section 48 of the Income-tax Act, 1961 permits computation of capital gains with reference to the actual sum received on transfer. The facts were identical to those in the brother's case, where the same transaction pattern had already been accepted and the loss claimed had been upheld.

Conclusion: The restriction of the loss on the basis of book value was not justified, and the assessee's declared long-term capital loss was able.

Final Conclusion: The departmental challenge to the allowance of the long-term capital loss failed, and the assessee retained the benefit of the relief granted by the appellate authority.

Ratio Decidendi: For computation of capital gains under section 48, the actual consideration received on transfer governs, and a notional substitution of book value is not warranted where the transfer is duly supported by evidence.

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