Court rules against assessee's fair market value claim under Income-tax Act.

The court held that the assessee was not entitled to opt for the fair market value as of 1st January, 1954, as the cost of acquisition for depreciable assets sold during the assessment year 1962-63. Section 50 of the Income-tax Act, 1961, was deemed a special provision that prevails over the general definitions in section 55(2)(i). Therefore, the Tribunal's decision was upheld in favor of the revenue, with each party bearing its own costs. Sudhindra Mohan Guha J. concurred with the judgment.

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Issues Involved:
1. Whether the Tribunal was right in holding that the assessee was not entitled to seek the aid of section 55(2)(i) of the Income-tax Act, 1961, for computing the profits under the head 'Capital gains' for depreciable assets acquired before 1st January, 1954.

Summary:

Issue 1: Applicability of Section 55(2)(i) for Depreciable Assets
The primary issue was whether the assessee could opt for the fair market value as of 1st January, 1954, as the cost of acquisition for depreciable assets sold during the assessment year 1962-63. The assessee argued that u/s 55(2)(i) of the I.T. Act, 1961, they were entitled to substitute the fair market value of the assets as on 1st January, 1954, for the cost of acquisition. The ITO, however, held that the matter fell within the purview of section 50(1) and that the assessee was not entitled to the option under section 55(2)(i). The AAC and the Tribunal upheld the ITO's view, stating that section 50 was a special provision that modified the general provisions of sections 48 and 49, and thus, the written down value should be taken as the cost of acquisition.

Legal Provisions and Interpretation
The court examined sections 45, 48, 49, 50, and 55 of the I.T. Act, 1961. Section 50 specifically deals with the computation of the cost of acquisition for depreciable assets and modifies the provisions of sections 48 and 49. The court noted that section 55(2)(i) defines 'cost of acquisition' for the purposes of sections 48 and 49 but does not extend to section 50. The court referred to judgments from the Allahabad and Gujarat High Courts, which held that section 50, being a special provision, prevails over the general definitions provided in section 55(2).

Conclusion
The court concluded that section 50 provides a special mode for computing the cost of acquisition for depreciable assets, and this special provision must prevail over the general definitions in section 55(2). Therefore, the Tribunal was right in holding that the assessee was not entitled to opt for the fair market value as on 1st January, 1954, as the cost of acquisition for depreciable assets. The question was answered in the affirmative and in favor of the revenue. Each party was ordered to bear its own costs.

Agreement
Sudhindra Mohan Guha J. concurred with the judgment.

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