TaxTMI 
TaxTMI 
2017 (10) TMI 1290
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.... (i) treating the land sold as a capital asset within the meaning of section 2(14) of IT Act. (ii) not allowing the deduction for cost of acquisition. (iii) not allowing the deduction u/s 54F on account of investment made." 2. The assessees have also filed additional grounds which are common in 7 appeals as under:- "1. The Ld. CIT(A) has erred on facts and in law in confirming the assessment of capital gain even when the land acquired by the forefathers of the assessee is without cost and thus, in the absence of cost of acquisition, no capital gain can be charged to tax. 2. The Ld. CIT(A) has erred on facts and in law in confirming the assessment of capital gain in the hands of the assessee even when the land is ancestral land and thus, not assessable in the individual hands of the assessee but assessable in the hand of HUF." 3. The assessees have also filed the applications for admission of additional evidence Rules 29 of the ITAT Rules, 1963. Since the additionals grounds raised by these assessees go to the root of the matters, therefore, these grounds are taken up first for the hearing and adjudication. 4. I have heard the ld. AR as well ....
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....s per the Rajasthan Land Reforms & Resumption of Jagirs Act, 1952 this land was allotted to Sh. Jeevan & Sh. Kanha. Thus the land was allotted without any cost of the consideration and therefore, there was no cost of acquisition of this land in the hand of the forefathers. Since the assessees have inherited this land being an ancestral property, therefore, as per provisions of section 49(1) the cost of acquisition of the asset in the hand of the assessee shall be deemed to be the cost for which the previous owner of the property acquired it. Further, as per the explanation to section 49(1) the cost of previous owner of the property will be considered as in the hands of the forefathers of the assesses who were allotted this land. The ld. AR of the assessee has further submitted that even as per the provisions of section 55 (2) read with section 55 (3) no cost can be imputed to this asset as there was no cost of acquisition. The ld. AR of the assessee has submitted that the provisions of section 55 are applicable only when there is a cost but which is not ascertainable whereas in the case of the assesse the cost is nil or no cost then the question of ascertaining the cost does not ar....
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....al on record. The land in question was acquired by the assessee by succession, therefore, the cost of acquisition of the land in question in the hand of the assessee would be taken as the cost in the hand of the previous owner of the land. The ld. AR of the assessee has contended that the land was allotted under the Rajasthan Land Reforms and Resumption of Jagir Act, 1952 without any consideration, therefore, the cost of acquisition in the hand of the previous owner is nil. Thus the ld. AR of the assessee has submitted that in view of the decision of Hon'ble Supreme Court in case of CIT Vs. B.C. Srinivasa Setty (supra), decision of Hon'ble Gujarat High Court in case of CIT vs. Mandharshingji P. Jadeja (supra) as well as CIT vs. H.H. Maharana Sahib Shri Lokendra Singhji the Jagir property gifted to the forefathers of the assessee has no cost of acquisition in the hand of the ancestors and therefore no capital gain accrued where the cost of acquisition is not ascertainable. It was also contended that the fair market price cannot be taken into consideration where the cost of acquisition was not ascertainable. On the other hand, the Full Bench decision of Hon'ble Punjab and Haryana Hig....
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....red by s. 49 and its cost, for the purpose of s. 48, is determined in accordance with those provisions. There are other provisions which indicate that s. 48 is concerned with an asset capital of acquisition at a cost. Sec. 50 is one such provisions. So also is such s s. (2) of s. 55. None of the provisions pertaining to the head "Capital gain" suggests that they include an asset in the acquisition of which no cost at all can be conceived. Yet there are assets which are acquired by way of production in which no cost element can be identified or envisaged. From what has gone before, it is apparent that the goodwill generated in a new business has been so regarded. The elements which create if have already been detailed. In such a case, when the asset is sold and the consideration is brought to tax, what is charged is the capital value of the asset and not any profit or gain. 9. In the case of goodwill generated in a new business there is the further circumstance that it is not possible to determine the date when it comes into existence. The date of acquisition of the asset is a material factor in applying the computation provisions pertaining to capital gains. It is possible....
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....ld not take such capital asset in the category that it will not possible to determine the cost of acquisition. Further, in case of self generated intangible asset like goodwill there is not acquisition by the transferor whereas in the case of land acquired by the transferor without any cost but is capable acquisition of cost and therefore the land which was acquired without cost cannot be put into category of the asset which is self generated and the determination of cost of acquisition is not possible. There may be two categories of capital asset where the cost of acquisition is nil. In first category no cost is paid by the person who has acquired it. In other case the asset is self generated in due course of time and it is not possible to ascertain the cost of acquisition and date of generation/acquisition. Therefore, the case of the assessee falls in the categories of the land in question carried/ possesses cost or monetary value though the forefathers of the assessee acquired it without any cost. In such a situation the provisions of section 55 (2)(b) would come into play. For reading reference section 55(2)(b) 55(3) are quoted as under:- Section 55 (2(b) "(b) in relat....
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....set become the property of the assessee or previous owner before 01.04.1981 the cost of acquisition means the cost of acquisition of the asset to the previous owner or fair market value of the asset on 01.04.1981 at the option of the assessee. Even in case where the cost for which the previous owner acquired the property cannot be ascertained the cost of acquisition to the previous owner means the fair market value on the date on which the capital asset becomes the property of the previous owner as provided under sub-section (3) of section 55. Since this case of the assessee is covered by provisions of section 55(2)(b) read with section 49(1) of the Income Tax Act therefore, the cost of the acquisition of the property for the purpose of computing the capital gain would be fair market value as on 01.04.1981. The full bench of Hon'ble Punjab and Haryana High Court after considering the decision of the Hon'ble Supreme Court in case of CIT vs. B.C. Srinivasa Setty (supra) as well as other decisions relied upon by the ld. AR on this point has observed in paras 5 to 7 as under:- "5. It is pointed out that the judgment in B.C. Shrinivasa Setty's case (supra) is distinguishable. I....
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.... for a situation where the value of the asset acquired could not be ascertained. If the 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 the market value on a specified date at the option of the assess. It is not the case of the assessee that land had no market value at all on the date of its acquisition. The contention that the 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. 7. We, thus, hold that even where the cost of acquisition of capital asset cannot be ascertained but the asset has a market value, capital gain will be attracted by taking the cost of acquisition to be fair market value as on January 1, 1954, or on date statutorily specified or at the option by the assessee, the market value on the date of acquisition. The Hon'ble Punjab and Haryana High Court reiterated this view in case of Thakur Dwara Shri Krishanji Maharaj Handiyaya, Barnala vs. CIT (supra). In view of the facts and circumstances of the case as well as the above discussion and following the full bench de....