Tenancy right without ascertainable cost of acquisition falls outside chargeable capital gains on transfer.

Tenancy right, on the facts considered, had no ascertainable cost of acquisition, so its transfer did not attract chargeable capital gains on that footing. The Calcutta HC followed B. C. Srinivasa Setty and consistent High Court authority applying the same principle, holding that where an asset lacks an ascertainable cost of acquisition, the capital gains charge cannot be computed in the usual manner. The reference was answered in favour of the assessee.

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Issues: Whether tenancy right had any cost of acquisition so as to attract capital gains tax on its transfer.

Analysis: The reference arose under section 256(1) of the Income-tax Act, 1961 for the assessment year 1976-77. The Court accepted the view that tenancy right, in the circumstances considered, had no ascertainable cost of acquisition and followed the Supreme Court decision in B. C. Srinivasa Setty, along with consistent decisions of other High Courts applying the same principle.

Conclusion: The question was answered in the affirmative, holding that there was no cost of acquisition of the tenancy right, and the issue was decided in favour of the assessee.

Ratio Decidendi: Where an asset has no ascertainable cost of acquisition, its transfer does not give rise to chargeable capital gains on that footing.

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