TaxTMI 
TaxTMI 
1993 (1) TMI 65
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.... case relates to the " cost of acquisition " of certain land, which had been acquired by the Government under the Land Acquisition Act from the assessee for the purpose of computation of capital gains under the Income-tax Act, 1961 ( for short " the Act " ). To appreciate the real controversy in a proper perspective, it may be expedient to give a brief resume of the facts leading to the acquisition of the land by the assessee and the relevant provisions of the law. We set out the facts first : On March 22, 1961, four brothers including the karta of the assessee Hindu undivided family had purchased certain lands in Gujarat at the rate of rupee one per square yard. On March 25, 1970, the said four brothers impressed their respective shares in the said land with the character of Hindu undivided family property by throwing the same in the common hotchpotch of the bigger Hindu undivided family comprising all the four brothers (known as the Hindu undivided family of Rasiklal C. Shah). After three months, i.e., on June 26, 1970, there was a partial partition of the said bigger Hindu undivided family and all the members of the bigger Hindu undivided family including the assessee-Hind....
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....t in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the contention of the assessee that the cost of the land had to be taken to be the market value on the date of acquisition by the bigger Hindu undivided family. According to the Appellate Assistant Commissioner, the insertion of clause (iv) of subsection (1) of section 49 of the Act by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, had no application to the case of the assessee which pertains to the assessment year 1972-73. The appeal of the Revenue to the Tribunal was rejected. The Tribunal affirmed the finding of the Appellate Assistant Commissioner. It held that clause (iv) of sub-section (1) of section 49 having come into force from April 1, 1976, had no application to the case of the assessee. Hence, this reference at the instance of the Revenue. We may now briefly refer to the relevant provisions of the Act which deal with capital gains. Section 45 of the Act provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head " Capital gains " and shall be deem....
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.... or clause (iii) or clause (iv) of this sub-section. (2) Where the capital asset being a share or shares in an amalgamated company which is an Indian company became the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company." It may be mentioned that clause (iv) to sub-section (1) of section 49 was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. The words "or clause (iv)" in the Explanation were also inserted by the same amendment Act with effect from April 1, 1976. A plain reading of this section clearly goes to show that it contains certain exceptions to the general rule that the cost of acquisition would mean the cost of acquisition to the assessee. Under this section, in cases falling under it, the cost to the previous owner is deemed to be the cost of acquisition to the assessee. There are a number of other provisions dealing with various aspects relevant for computation of capital gains but we need not refer to the same as they have no relevance to ....
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.... however, did not agree with the meaning given by the Madras High Court to the word " devolution " in that case. It also appears that, in the instant case, it is not clause (iv) of sub-section (1) of section 49 which is attracted because, in this case, the assessee has not acquired the property by the mode referred to in that clause. It is the previous owner who has acquired it by that mode. So far as the assessee is concerned, he has acquired the land on partial partition of the bigger Hindu undivided family. That being so, it is not necessary in the present case to enter into the controversy regarding the fact of incorporation of clause (iv) with effect from April 1, 1976, as the same has no application to the case of the assessee. It may be observed that the normal mode of computation of capital gain is to deduct the cost of acquisition of the transferred asset in the hands of the assessee from the consideration received by him on transfer. In the instant case, the property having been received by the assessee on partial partition of the Hindu undivided family, admittedly, the cost of acquisition in the hands of the assessee was nil. Section 49 is an exception to the above rule ....