TaxTMI 
TaxTMI 
TaxTMI 
1996 (9) TMI 62
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....ng effect to the provisions of section 54E of the Income-tax Act ? " Reading the two questions, it would be at once clear that our answer to question No. 2 will determine the answer to question No. 1 because ultimately the process of computation of capital gains would follow the line of order as a result of our answer to question No. 2. After hearing counsel for both sides, in other words, if we answer question No. 2 in the affirmative, the consequence would be of justification of the order of the first appellate authority. If we answer otherwise, it would be of the order of the Tribunal with regard to the determination of the amount of capital gains as a result thereof. The assessee is a partner of V. V. George and Associates. The questi....
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....e following manner : (Rs.) (Rs.) " Sale consideration 20,25,000 Less : Brokerage 10,000 Other expenses in connection with the sale including the cost of demolition of the residential building 15,000 25,000 ----------------- ---------------------- Net consideration 20,00,000 Less : Cost of land as on April 1, 1974 1,69,375 Cost of other structures on the land including the office building 50,000 2,19,375 ------------------- ---------------------- Capital gains 17,80,625 Less : Exemption under section 54E 17,80,625 x 4,00,000 ----------------------------------- 20,00,000 3,56,125 ------------------ 14,24,500 Less : Deduction under section 48(2) Rs. 10,000+ 50 per cent. of 14,24,500 7,17,250 ----------------- Taxable....
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....the Tribunal has determined the taxable capital gains at Rs. 5,03,688. The process of calculation is as follows : (Rs.) (Rs.) " Sale consideration 20,25,000 Less : Deduction under section 48(1)(a) : Brokerage 10,000 Travelling, advertisement and demolition charges 15,000 25,000 ---------------- ---------------------- Net consideration in terms of Explanation 5 to section 54E 20,20,000 Less : Deduction under section 48(1)(a)(iii) : Cost of acquisition being market value as on April 1, 1974 2,29,375 Add : Cost of improvement 75,000 3,04,375 ------------------ -------------------- Capital gains 16,95,625 Less : Exemption under section 54E read with Explanation to section 53 3,39,125 Add : Deduction under section 48(2)(b) 16,....
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....ains chargeable to income-tax under the head " Capital gains " and gets a deeming situation to be the income of the previous year in which the transfer took place. Without entering into unnecessary details it would be worthwhile to mention that subsequent sections clarify the situation relating to the transfer of a capital asset in the context referred to therein. Section 46 of the Act (succeeding section) deals with the situation relating to distribution of assets by companies in liquidation, This situation need not detain us in any way. Section 47 thereafter specifies transactions not amounting to transfer and they are specified therein. This also need not detain us. Section 47A speaks of situations under which exemption gets withdrawn.....
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....in the very basis statutory provision of section 45, the provisions of sections 53 onwards (to be precise sections 53, 54, 54B, 54D, 54E, 54F and 54G) have been separated. They deal with the situations of exemptions with reference to the determination of capital gains. It is in the statutory provision of section 53 of the Act, the Explanation under consideration comes on the statute as a result of the Finance Act, 1987, with effect from April 1, 1987. The said Explanation is reproduced hereinbelow : " In this section and in sections 54, 54B, 54D, 54E, 54F and 54G, references to capital gain shall be construed as references to the amount of capital gain as computed under clause (a) of sub-section (1) of section 48. " In support of understa....
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....nsel in adopting the above submissions has taken justified resort to the observations in the commentary to the said Explanation as available in the Law and Practice of Income-tax, by Kanga and Palkhivala, 8th edition, Vol. I, at page 790. The submissions are with the required force, appreciating the pattern of the statutory provisions discussed by us hereinbefore. Considering the effect of the above process of reasoning, it would be difficult for us to sustain the approach of the Income-tax Appellate Tribunal, when the Tribunal has observed that both the facets operate simultaneously at the stage of the computation immediately after the provisions of section 48(1)(a) were given effect to. It would be also equally difficult for us to agree w....