TaxTMI 
TaxTMI 
1981 (10) TMI 36
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....red for the purpose of computation of capital gains under section 48 of the Income-tax Act, 1961 ? " Though there are some terminological variations in the questions formulated in the other references, the propositions, in substance, are the same and admit of being dealt with together. The assessments relate to the assessment year 1973-74. The assessees were co-owners of property No. 7/3, Sankey Road, Bangalore. Portions of this property abutting the main road were acquired by the Corporation, of the City of Bangalore for the construction of an under-bridge on, and widening of, the Sankey Road. The Land Acquisition Officer determined the market value of the acquired land at Rs. 100 per sq. yd. under the 1st head of s. 23(1) of the Land Acquisition Act. Included in the compensation finally awarded as compensation were sums calculated at the rate of Rs. 10 per sq. yd. in respect of unacquired portions of the property towards damage sustained by the owners by reason of the acquisition injuriously affecting that property. For the relevant assessment year, the ITO computed the capital gains taking into account only the market value of the land quantified under the first head....
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.... capital asset " inclusively as meaning " property of any kind held by an assessee whether or not connected with his business or profession ". Section 2(47) of the Act provides a statutory definition of the term " transfer ". It says : " 'Transfer', in relation to the capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law." Section 48 of the Act provides thus : " The income chargeable under the head 'capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely: (i) expenditure incurred wholly and exclusively in connection with such transfer ; (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto." Under s. 23(1) of the L.A. Act, though several criteria are referred to under the heads " First " to " Sixth " for quantifying compensation, however, the exercise is one of determination of compensation to be awarded for the land acquired under this Act. The acquisition is of all interests capabl....
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....owner and is Part of the purchase money, Purchase money and compensation being the same thing under different names." (vide Vol. 8, p. 225, para. 318) If this is so, the amount awarded as compensation qualifies for being considered as " full value of the consideration received or accruing as result of the transfer of the capital asset " within the meaning of s. 48 of the Act. We are unable to approve the first reason adopted by the Tribunal in support of a different view. Secondly, the Tribunal in reaching the conclusion that the award for injurious affection was not a part of the full consideration for the transfer, took into account, what according to it were, the ordinary business or commercial considerations, which should condition the approach to such matters. The Tribunal said: " ........ if we apply the standard of an ordinary man of business, then the compensation for injurious affection of the remaining land cannot be said to be compensation for the land transferred. A man of business is bound to view the two separately and differently." It is no doubt true that in working out capital gains or capital losses, the considerations that apply are those applicable g....
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....d in the question of law as formulated. We may, however, examine it as a cognate proposition. It is to be pointed out that a mere depreciation of the value of land, otherwise than in consequence of the transfer of a capital asset or extinguishment of a right therein, does not involve the concept of capital loss by the statutory standards, though in a commercial sense it could be said that there is a depreciation of value. The premise on which the Tribunal proceeds might indeed lead to anomalous results or corollaries. In a converse case, if a piece of land comes to enjoy an added importance owing to its location by the formation of a new promenade or by the improvement of the general tone of the neighbourhood, can there be a capital gain though there may be an appreciation of the value ? Amongst other things to occasion capital gain or loss there must be a transfer or extinguishment of the capital asset or any interest therein. In the present case, though under the 4th head of s. 23(1) some amount is quantified for the injurious affection of the unacquired portion, it is just another head of computation of the consideration payable for the transfer of the land acquired. We do no....
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....eme Court would show, this approach to the matter was approved. The Supreme Court, in holding that the assessee was entitled to the deduction of Rs. 37,630 in the capital gains, said (p. 654): "At the time of her transaction, her old shares were valued at Rs. 253 per share, so that the capital asset in her possession can be treated to be the cash value of 710 multiplied by Rs. 253 of the old shares plus this right to obtain new shares. After she had transferred this right to obtain new shares, the capital assets that came into her hands were the 710 old shares, which became valued at Rs. 198.75 per share, together with the sum of Rs. 45,262.50. The net capital gain or loss to the appellant obviously would be the difference between the value of the capital asset and the cash in her hands after she had renounced her right and realised the cash value in respect of it, and the value of the capital asset including the right which she possessed just before these new shares were issued and before she realised any cash in respect of the right by renouncing it in favour of some other person... Thus, the capital gain or loss would be worked out at Rs. 45,262.50 after deducting from it the....
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....s difference. 38,517.50 6,745.00 These figures demonstrate that, by the issue of new ordinary shares to the shareholders in the ratio of 1: 1 at the rate of Rs. 105 per share, with the right to renounce those shares in favour of any other person, which the appellant in that case got the right to purchase, or renounce for valuable consideration 710 " right shares ", at the same time it adversely affected the value of the original shares in that the value per share came down from Rs. 253 to Rs. 198.75. Having regard to these facts and circumstances, the Supreme Court held that the loss so suffered must be deducted from the consideration received from the person in whose favour the right to purchase 710 " right shares " was renounced by the appellant. After a careful consideration of the Matter, we find it difficult to apply the principle and analogy of Miss Dhun Dadabhai Kapadia's case [1967] 63 ITR 651 (SC), in the present context. The incidents of the concept of a composite capital asset, a part of which after the transfer stands qualitatively diminished, cannot be imported to the present case at all because all that has happened in this case is that out of a larger plot, ....