TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 598
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....dditional ground:- "Under the facts and circumstances of the case no capital gains are taxable on sale of land when the same was awarded free of cost by the Government and accordingly the Learned Assessing officer has also taken the cost of acquisition at nill. Thus both the Learned Assessing and the learned CIT(A) have erred in taxing capital gains." 2. Admission of Additional ground:- The ld. AR of the assessee has submitted that this additional ground has been raised first time before the Tribunal as the same goes to the root of the matter and it is also purely legal in nature. For adjudication of this issue no facts are required to be examined but the facts already available on records are sufficient to decide the issue raised in the additional ground. Thus, the ld. AR has submitted that the additional ground raised by the assessee may be admitted for adjudication on merit. In support of his contention, he has relied upon the decision of Hon'ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383 and submitted that when the question of law arising from the facts available on record of the assessment proceedings the same should be considered for adjud....
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....e of cost of acquisition the charge under the head capital gain cannot be fasten to the full value consideration as capital gain cannot be equity with full value consideration. In support of his contention he has relied upon the decision of Hon'ble Supreme Court in case CIT Vs. B.C. Srinivasa Setty 128 ITR 294 as well as decision of Hon'ble Gujarat High Court in case of CIT vs. Mandharshingji P. Jadeja 281 ITR 19. The ld. AR has also relied upon the decision of Hon'ble MP High Court in case of CIT vs. H.H. Lokendra Singh 227 ITR 638 and submitted that the assessee being the original owner of land in question the machinery the provisions of capital gain fails and the receipt from the sale of land do not attract capital gain tax u/s 45 & 48 of the I.T. Act. The ld. AR has further submitted that relying on these decision of Hon'ble Supreme Court as well as Hon'ble High Courts the Coordinate Benches of this Tribunal in case of ITO vs. Achalanand vide order dated 03.11.2016 in ITA No. 901/JP/2012 has decided an identical issue in favour of the assessee. Thus, he has contended that the decision of the Coordinate Benches of this Tribunal is binding. He has also relied upon the decision of....
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....and therefore, the cost of acquisition in the hand of the assessee is nil. The ld. AR of the assessee has contended that since the cost of acquisition is nil, therefore, the computation of capital gain fails and no capital gain is chargeable on full receipt of sale of the land. He has relied upon the various decisions including the decision of Hon'ble Supreme Court in case of CIT Vs. B.C. Srinivasa Setty (supra). It is pertinent to note that all these decisions as relied upon by the assessees were rendered prior to the full bench decision of Hon'ble Punjab and Haryana High Court in case of CIT vs. Raja Malwinder Singh (supra) wherein the full bench of Hon'ble Punjab and Haryana High Court after considering the judgment of Hon'ble Supreme Court in case of CIT Vs. B.C. Srinivasa Setty (supra) as well as the decision of Hon'ble Gujarat High Court in case of CIT vs. Mandharshingji P. Jadeja(surpa) and the decision of Hon'ble of MP High Court in case of CIT vs. H.H. Lokendra Singh (supra) has decided thisissue against the assessee. we has further noted that even the decisions relied upon by the assessee of Coordinate Benches of this Tribunal as well as Pune Bench of the Tribunal were wi....
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....hat there are divergent views of Hon'ble High Courts on this issue particularly the interpretation and understanding of the decision of Hon'ble Supreme Court in case of CIT vs. B.C. Srinivasa Setty (supra). The issue before the Hon'ble Supreme Court in case of CIT vs. B.C. Srinivasa Setty was the taxability of capital gain on transfer of goodwill of a newly commenced business. The Hon'ble Supreme Court has observed that no business commenced for the first time possesses goodwill from the start. It is generated as the business is carried on and may be augmented with the passage of time. Therefore, goodwill in a newly commenced business is a self generated asset and in this said contest the Hon'ble Supreme Court has held that the cost of acquisition of self generated asset like goodwill is not possible. The relevant finding of the Hon'ble Supreme Court decision in case of CIT Vs. B.C. Shrinivasa Setty in paras 8 to 11 as held as under:- "8 The mode of computation and deductions forth in s. 48 provide the principle basis for quantifying the income chargeable under the head "capital gain". The section provides that the income chargeable under that head shall be computed by deducting ....
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....on. Nor can sub-s. (3) of s. 55 be invoked, because the date of acquisition by the previous owner will remain unknown. 11. We are of opinion that the goodwill generated in a newly commenced business cannot be described as an "asset" within the terms of s. 45 and, therefore, its transfer is not subject to income tax under the head "Capital gains". Thus it is clear that the ruling laid down by the Hon'ble Supreme Court is based on specific facts and nature of capital asset being goodwill which is self generated as it is not possible to determine the date when it comes into existence. The date of acquisition of the asset is a material factor as observed by the Hon'ble Supreme Court in applying the computation provisions pertaining to the capital gains. The Hon'ble Supreme Court has further observed that it is possible to say that the cost of acquisition as mentioned in section 48 implies a date of acquisition, and that inference is strengthened by the provisions of sub-section 49 and 50 as well as sub-section (2) of section 55. Thus while analyzing the term the cost of acquisition of capital asset as per section 48 of the Act the Hon'ble Supreme Court has held that what is contemp....
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....r or the fair market value of the asset on the [1st day of April, [1981]], at the option of the assessee ; (iii) where the capital asset became the property of the assessee on the distribution of the capital assets of a company on its liquidation and the assessee has been assessed to income-tax under the head "Capital gains" in respect of that asset under section 46, means the fair market value of the asset on the date of distribution ; (iv) [***] [(v) where the capital asset, being a share or a stock of a company, became the property of the assessee on- (a) the consolidation and division of all or any of the share capital of the company into shares of larger amount than its existing shares, (b) the conversion of any shares of the company into stock, (c) the re-conversion of any stock of the company into shares, (d) the sub-division of any of the shares of the company into shares of smaller amount, or (e) the conversion of one kind of shares of the company into another kind, means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived. Section 55 (3) "Where the cost for ....
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....ken to be equal to the market value on the date the asset was acquired by the previous owner. The Explanation to section 49(2), i.e., who acquires property otherwise than by way of gift, will or by succession. 6. In the present case, the assessee acquired the property by succession from the previous owner. According to the stand of the assessee, the cost of acquisition by the previous owner could not be ascertained. However, he failed to exercise the option of going either by the date of market value on the date of acquisition or by the cost of the previous owner in which case the only option available to the Assessing Officer was to proceed to compute capital gain by taking the cost of the asset to be the fair market value on the specified date, i.e., January 1, 1954 as per applicable provision for assessment year 1977-78 and as on January 1, 1964 for the assessment year 1978-79. Even in a case where the cost of acquisition cannot be ascertained, section 55(3) statutorily prescribes the cost to be equal to the market value on the date of acquisition. This being the position, capital gain is not excluded even on the plea that value of the asset in respect of which capital gain is....
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....specific fact of intangible asset being goodwill which is self- generated and therefore, it was not possible to determine the date when it came into existence. The Date of acquisition of the asset is a material factor as observed by the Hon'ble Supreme Court in applying the computation provisions pertaining to the capital gain. Thus, as per the provisions of section 48 the cost of acquisition has to be taken on the date of acquisition and in case of goodwill in a newly set up business is considered as self-generated asset and it is not possible to envisage the cost of acquisition. Thus, the decision of Hon'ble Supreme Court in case of CIT Vs. B.C. Srinivasa Setty (supra) is based on peculiar facts where a self-generated intangible asset is not capable of ascertaining cost of acquisition and therefore, when the cost of acquisition is not conceivable then the computation provision in respect of capital gain fails. In view of taken by the Hon'ble Punjab and Haryan High Court in case of CIT vs. Raja Malwinder Singh (supra) was reiterated by the Hon'ble Court in case of Thakur Dwara Shri Krishanji Maharaj Handiyaya, Barnala vs. CIT (supra) in para 5 to 7 as under:- "5. We are not impr....
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....l gain is to be charged was incapable of being ascertained. The view taken in Amrik Singh's case [2008] 299 ITR 14 (P&H) based on the assumption that where market value cannot be ascertained, capital gain cannot be applied, is not correct being against the statutory scheme. Similarly, the view taken by the Madhya Pradesh High Court in CIT v. H.H.Maharaja Sahib Shri Lokendra Singhji, [1986] 162 ITR 93 (MP) cannot be accepted. The said judgment also does not give effect to the mandate of section 55(3) which provides for a situation where value of the asset acquired could not be ascertained. If market value can be ascertained, it has to be taken to be equal thereto and if the value cannot be ascertained, it has to be equal to market value on a specified date at the option of the assessee. It is not the case of the assessee that land had no market value at all on the date of its acquisition. Contention that value was incapable of being ascertained, as already observed, the value in such case has to be taken as being equal to market value on a specified date." 6. Further, while concluding, it was held :- "Even where the cost of acquisition of capital asset cannot be ascertained ....