TaxTMI 
TaxTMI 
1994 (9) TMI 14
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....red should be taken as the actual cost paid by the assessee for the asset and not its market value on the date of acquisition of the asset by the assessee by reduction of share capital?" These tax cases relate to various assessment years. The case of the assessee, Sri N. Govindarajan alias N. Ravi (in Tax Case No. 297 of 1981), for the assessment year 1971-72 may be taken as a typical case, which is common for all the assessees. He was a shareholder in Kasturi Estates Pvt. Ltd. The company effected a reduction in its share capital on May 8, 1962, after getting the requisite sanction of the High Court. The High Court, by order dated April 20, 1962, sanctioned the reduction of capital of the company as resolved on and effected by the speci....
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....sessment year 1971-72, the assessee sold the property at Ooty, item No. 4 above, for a sum of Rs. 1,30,000. He returned capital gains on the above sale by deducting the market value of the property at Rs. 75,000. The Income-tax Officer, however, relying on the fact that the value of the assessee's shareholding in respect of the 135 shares was reduced by Rs. 1,06,650 and in returning the reduced capital, a sum of Rs. 60,683 was adjusted in cash, computed the cost of the Ooty property at Rs. 19,550 on a proportionate basis. The capital gain was thus worked out at Rs. 1,05,485. On appeal, the Appellate Assistant Commissioner confirmed the Income-tax Officer's working. Likewise, for the assessment year 1974-75 in the case of the present assesse....
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....the capital gains should be adopted only by adopting the market value of the assets as in 1963 and also after taking into consideration the improvements. After hearing both the sides, the Tribunal held that from either point of view, the capital gains as computed by the Income-tax Officer cannot be said to be incorrect. Since a consolidated figure obtains as the value of the land, buildings, farm house, etc., the Income-tax Officer has adopted a proportional method for arriving at the value of the capital asset sold from year to year in the case of each of these assessees. In the absence of any other better method to compute this figure of capital gains, the method adopted by the Income-tax Officer has to be upheld. There is no dispute t....
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....sferred from one person to another, the transferor would not be liable to pay tax on capital gains. It was in that context that this court held that the shareholders have not transferred anything. It is on the contrary the company which has transferred a part of the share capital which they had earlier subscribed. In the absence of transfer by the shareholders, it was held that capital gains tax was not attracted. This case cannot, therefore, be an authority for the proposition that even where shareholders having received property from the company transferred the same to a third person the capital gains tax would not be attracted. Indeed, in such a case, the transfer would be by the shareholders to a third person and would attract the provi....
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....lue only. This, however, cannot go further and entitle them to benefits by changing the position as aforesaid. In the instant case, the value of the property in question has been clearly identified and stated in the resolution dated May 8, 1962. The argument of learned counsel for the assessee that they have only got what they have actually paid and, therefore, there is no cost of acquisition cannot really be accepted to a sum of Rs. 790 per share. Taking advantage of their own decision that this amount can be paid either in cash or in kind they have given its equivalent in terms of tangible assets. Under the circumstances, it is clear that they are getting the property in lieu of money to which they were really entitled as a result of redu....
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....our opinion, squarely govern this case and hence, there would be no justification for holding any other value except the one which has been shown in the resolution of the company transferring the property as the value of acquisition of the asset. Learned counsel for the assessees has relied on a decision of the House of Lords in Ex parte, Westburn Sugar Refineries Ltd. [1951] 1 All ER 881 to submit that reduction of paid-up share capital necessarily means not the book value of the assets received but the market value of the said asset. This was a case where the company has decided to reduce its paid-up share capital by two shillings, but, instead of returning the amount in cash, decided to part with these two shillings investment in anot....