2005 (1) TMI 63

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....any regarding substitution of value as on January 1, 1954, for purposes of computation of capital gains?" The assessee is a limited company which was incorporated in the year 1943 for generation and supply of electricity in the town of Bhatinda (Punjab). The undertaking of the assessee was taken over by the Punjab State Electricity Board (for short, "the Board") in January, 1982 under section 6(1) of the Indian Electricity Act, 1910, as amended by the Indian Electricity (Amendment) Act, 1959, read with sub-clause (1) of clause (9) of the Bhatinda Electric Licence, 2003 (Bikrami). The dispute relating to compensation payable to the assessee became the subject-matter of an arbitration. By an award dated August 27, 1976, the arbitrator held t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....fit under section 41(2) nor any capital gains under section 45 of the Act accrued to the assessee in the year under consideration. That order was challenged by the Revenue before the Tribunal. By an order dated January 29, 1976, the Tribunal restored the matter to the Assessing Officer and directed him to compute the profits under section 41(2) and capital gains under section 45 in accordance with law. In the consequential proceedings drawn by him, the Assessing Officer determined the profits at Rs. 1,82,173 and capital gains at Rs. 2,71,795 for the purpose of tax. The Commissioner of Income-tax (Appeals) (for short, "the CIT(A)"), vide his order dated March 22,1983, partly allowed the appeal of the assessee and held that no taxable profit ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....depreciation as such has been allowed, and if depreciation on certain assets has been allowed, the same are not itemised, therefore, special provisions made under section 55 of the Act shall be applicable. The assessee is entitled to substitute the value as on January 1, 1954, of the undertaking as a whole for computation of capital gains. The Income-tax Officer will, therefore, after granting an opportunity to the assessee to substitute its value as on January 1, 1954, recompute the capital gains." Shri Rajesh Bindal relied on the judgment of the Supreme Court in Commonwealth Trust Ltd. v. CIT [1997] 228 ITR 1 and argued that the question referred by the Tribunal should be answered in favour of the Revenue. We have carefully gone through ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n section 50(1) and besides that the adjustments stated there are with reference to the written down value only, which has nothing to do with the fair market value. We conclude, therefore, that in the present case where the capital asset is depreciable and the assessee has availed of deduction on account of depreciation, the cost of acquisition shall have to be determined in terms of the provisions of section 50 read with section 48. All the High Courts including the Bombay High Court are of the view that section 50(2) does not apply to any capital asset other than that which has been acquired by any of the modes mentioned in section 49. It does not apply to the case of a person who has himself purchased the asset which has enjoyed the depr....