TaxTMI 
TaxTMI 
2008 (2) TMI 28
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee was not liable to pay capital gains tax ?" 2 The brief facts, out of which the present reference has arisen, are as under: 3 The assessee-respondent filed a return declaring taxable income of Rs. 6,110 on December 13, 1977. In response to the notice under section 143(2), the assessee through his counsel attended the assessment proceedings; It is the case of the assessee that the assessee acquired the land through court decree dated January 12, 1972, and claimed that he got this land under the provisions of the Punjab Occupancy Tenants Act, 1952, and no amount was paid in lieu of the acquisition of land. It was contended that the rights of ownership of the land were, thus, acquired by the assessee by operation of law, name....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 256(1) of the Income-tax Act, with a prayer for referring the question mentioned in the application, said to be a question of law and arising out of the Tribunal's order dated September 1, 1981. 7 It has been contended by counsel for the Revenue that the profits or gains arising from the acquisition of the assessee's land is assessable under the head "Capital gains". Counsel for the Revenue has relied upon the judgments of the Gujarat High Court in the case of CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393 and the Calcutta High Court judgment in the case of K. N. Daftary v. CIT [1977] 106 ITR 998. 8 We have learned counsel for the applicant and perused the record. It is useful to reproduce section 45 of the Income-tax Act, 1961, as it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the head "Capital gains" suggests that they include an asset in the acquisition of which no cost at all can be conceived. 11 This court has also followed the above ratio of law in the case of CIT v. New Suraj Transport Corporation P. Ltd. [1992] 194 ITR 458. 12 A perusal of the facts of the present case would show that the assessee entered into an agreement with Sh. Surjan Singh vide agreement dated February 14, 1970, recognising him to be the occupancy tenant in respect of certain land. A declaratory decree was subsequently passed by the court on January 31, 1972, whereby the agreement dated February 14, 1970, was given the court's sanction in terms of section 3 of the Punjab Occupancy Tenants (Vesting of Proprietary Rights) Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....read with section 3 of the Punjab Occupancy Tenants (Vesting of Proprietary Rights) Act, 1952, without payment of anything. In other words, the cost of the acquisition of the land to the assessee was nil. When such a situation arises and an asset acquired by the assessee is sold, our view is that no capital gains is assessable to tax under the Act arising out of such a transaction." 14 From the above facts, it is clearly established that there is no record of any payment made for the acquisition of the land in question either by the assessee or his predecessor-in-interest. Therefore, the cost on acquisition this case has been rightly taken as nil. Even otherwise, the Revenue has never taken stand to say that the cost of acquisition of th....