1979 (4) TMI 16 - HC - Income Tax

Court upholds income-tax dept decision, assessee to pay costs. Mortgages not capital asset transfer. Interest not part of asset cost.

The court ruled in favor of the income-tax department, affirming the Tribunal's decision. The assessee was directed to pay the costs, including advocate's ... Capital Asset, Capital Gains Issues involved: The issue involves determining whether the assessee is liable to tax on capital gains u/s 45 of the Income Tax Act, 1961, arising from the court sale of properties mortgaged in 1934 and 1935.Summary:Issue 1: Transfer of property under Section 45 of the ActThe court analyzed the definition of 'transfer' u/s 2(47) of the Act, which includes sale, exchange, relinquishment, extinguishment of rights, or compulsory acquisition. The court emphasized that transfer involves the conveyance of the entire interest in the capital asset to the transferee. It was held that creating mortgages in 1934 and 1935 did not constitute a transfer of capital assets, and the actual transfer occurred in 1964 during the court sale. The court referred to the case law to support its interpretation.Issue 2: Inclusion of interest in cost of assetThe assessee contended that interest paid on the mortgages should be included in the cost of the assets, resulting in no capital gains tax liability. However, the court noted that this aspect was not raised before the Tribunal and, therefore, did not arise from the Tribunal's order. The court found no merit in this submission and held that the Tribunal's decision was legally sound.In conclusion, the court ruled in favor of the income-tax department, affirming the Tribunal's decision. The assessee was directed to pay the costs, including advocate's fee.