1994 (5) TMI 44

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....came to Rs. 2,24,000 leaving a balance of Rs. 97,80,484. In the return of income, assessee dealt with the abovementioned sum of Rs. 97,80,484 as follows:--- "Rs. 97,80,484 Less : Deduction under section 48(2): On first Rs. 10,000 100% 10,000 On balance 97,70,484 50% 48,85,242 48,95,242 ----------------- ------------------------- 48,85,242 Less: Exemption under section 53(b) 97,80,484 x 2,00,000 (Capital gains) (Value exempt under section 53) --------------------------------------------------------------------------------------- 1,01,64,484 1,92,437 (full value of consideration) 46,92,805 Less: Exemption under section 54. Cost of new residential house including stamp duty 46,76,350 ---------------....

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....ding the sequence of these two types of deductions - namely those under sections 53 and 54 on the one hand and under section 48(2) on the other hand. He very strongly urged that, to say the least, it was a highly debatable issue and hence not permitted for adjustment under section 143(1)(a). He relied very heavily on the Hon'ble Bombay High Court decision in the case of Khatau Junkar Ltd. v. K.S. Pathania [1992] 196 ITR 55 and specifically pointed out the relevant portion of the Headnotes on pages 56 to 59. He submitted that such a change in a computation of taxable part of long-term capital gains was not envisaged in the adjustments to be made under section 143(1)(a). He cited two subsequent decisions of the Hon'ble High Court of Bombay in....

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....t rest by the very specific provision in the Act itself by way of insertion of Explanation below section 53 vide Finance Act, 1987 w.e.f. 1-4-1988. He pointed out that the said Explanation was certainly operative for this case as the assessment year involved was 1991-92. He therefore submitted that the Assessing Officer had carried out adjustment under section 143(1)(a) for applying correctly the specific provision of the Act, and it was not the case of some disallowance being made. 6. In reply, the learned Advocate for the assessee again emphasised reliance on the principles laid down by the Hon'ble Bombay High Court in the case of Khatau Junkar Ltd. and specifically urged since no opportunity of being heard was envisaged under section ....

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....cumstances. So naturally, the question is that those deductions should be allowed from which figure of capital gains. This is relevant because up to section 48(1)(a) there is a prescribed mode of computation and deduction which is common to all types of capital gains. This is obvious also from the wording of the opening part of section 48(1) which says that "the income chargeable under the head "Capital gains" shall be computed.......". Then section 48(1)(b) lays down, in effect, that the long-term capital gains would be entitled to further deductions specified in section 48(2). Reverting to the Explanation below section 53 as extracted above, it is obvious that in sections 53 and 54, etc., the figure of capital gains from which deductions ....