1975 (12) TMI 12 - HC - Income Tax

Court rules in favor of assessee on capital gains tax for Lamington Cinema sale -61

The court ruled in favor of the assessee regarding capital gains taxation on the sale of Lamington Cinema for the assessment year 1960-61. The court held ... Previous Year Issues:Capital gains taxation on the sale of Lamington Cinema for the assessment year 1960-61.Analysis:The case involved a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the taxation of capital gains arising from the sale of Lamington Cinema. The property was part of a trust created by Khimchand Amarchand, with specific provisions for income distribution among beneficiaries. The trustees were to divide income into equal parts for the settlor and grandsons until their death, after which the property would be distributed among descendants and heirs. The property was sold in 1960, resulting in capital gains of Rs. 3,50,865. The Income-tax Officer allocated the gains between beneficiaries, while the Appellate Assistant Commissioner held trustees liable for capital gains at the maximum rate. The Tribunal upheld the capital gains estimate but directed taxation similar to beneficiaries, not at the maximum rate under section 41 proviso. The court sought clarification on beneficiaries' descendants during the relevant year, confirming one male child for Ashok. Following precedent (R. H. Pandit v. CIT), the court held that beneficiaries' shares were determinate, ruling against invoking section 41 proviso for maximum rate taxation.The judgment was delivered by VIMADALAL J., with agreement from S. K. DESAI J. The court answered the referred question negatively, in favor of the assessee, ordering the Commissioner to pay the assessee's costs.