LexTHE COMMONWEALTH TRUST LTD. CALICUT, KERALA versus THE COMMISSIONER OF INCOME TAX, KERALA II, ERNAKULAM
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
THE COMMONWEALTH TRUST LTD. CALICUT, KERALA
A
v.
THE COMMISSIONER OF INCOME TAX, KERALA II,
ERNAKULAM
JULY 30, 1997
(S.C. AGRAWAL AND D.P. WADHWA, JJ.]
Income Tax Act, 1961.
B
Sections 32(1)(iii), 41(2), 43(6), 45, 48, 49, 50 and 55-Capital C
gailr-Depreciable capita/asset acquired before January, 1, 1954--Sale of said
capital asset after January 1, 1954--Assessee availing depreciation allowance
before the transfer of capital asset-Computation of cost of acquisition-Held,
cost of acquisition shall have to be determined in tenns of the provisions of
Section 50 read with Section 48-Assessee cannot avail the fair market value D
of the asset as on Janumy 1, 1954-Section 50( 1) has no dependence on the
provisions of Section 55(2)-If assessee not availing qepreciation allowance
in respect of the capital asset, Section 50 has no application.
Section 55(2)-Applicability of-When-Held, Section 55(2) would be
applicable to all assets, depreciable or non-depiciable, except to the extent E
nzod~{ied in tile .::1anrtP.f as stated itt Section 50 of the Act.
Words & Phrase~'Adjusted~ 'written down value', 'balancing (or ter-
minal) allowance', 'balancing charge', 'capital gain',
'cost of
acquisition'-Meaning of in the context of Income Tax Act, 1961.
Appellant·assessee during the assessment year 1971·72 accounting
year being 1970-71, sold its properties situated at Calicut and Mangalore
F
on which it had already claimed depreciation. Assessee sold its Calicut
Factory for Rs. 20,000, the original value of which was Rs. 10,000, and in
computing the capital gains the assessee showed a capital loss of Rs. 78 G
on the sale of the property. Calcutta property, the original adjusted cost
of which came to Rs. 76,680, was sold by the assessee for Rs. 2,25,000 and
the assessee showed capital gain at Rs. 44,713 on the sale. In both the
transactions, assessee revalued the property as on January 1, 1954.
The stand taken by the assessee was that it had the option under H
179
180
SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.
' A Section 55 (2)(i) of the Income Tax Act either to adopt the written down
value of the building or the value of the building as on January 1, 1954 and
it had chosen the latter. The Income Tax Officer, however, took the view
that the assessee did not have the right to substitute the value as on
January 1, 1954 because the assets were depreciable assets to which Section
B 50(1) applied which was a special provision in respect of depreciable assets
and the provision as contained in Section 55(2) (i) allowing option which
was a general provision was not applicable in the case of depreciable
assets. The Income Tax Officer, therefore, substituted the original value
and arrived at a capital gain of Rs. 9021 in the case of Calicut property
C and Rs. 1,46,320 in the case of Mangalore building. Appeal filed by the
assessee before the Appellate Assistant Commissioner was dismissed on
the ground that the assessee did not have the right to substitute the value
as on January 1, 1954 in respect of depreciable assets. Assessee's Appeal
before the Income Tax Appellate Tribunal was also dismissed but at the
instance of the assessee the Appellate Tribunal referred the question,
D whether on facts of the case the assessee did not have the right of sub-
stituting the market. value as on 1/1/54 in respect of depreciable assets, for
the decision of the High Court. High Court agreed with the view of the
Appellate Tribunal and decided the question in favour of the respondent-
Revenue. It held that though Section 55(2) gave an option to an assessee
E to choose one of the two values as the cost of acquisition for the purpose
of Section 48, but in a case to which Section 50 ap11lied, Section 48 had to
be read subject to the modification and, consequently, the option would
not to be available and that the cost of acquisition would have to be taken
in such a case as the written down value as defined in clause (6) of the
F Section 43. On Certificate being granted by the High Court under Section
261 of the Act, the present appeals have come before this Court.
Partly dismissing the appeal, the Court
G
HELD : 1. The Appellate Tribunal was not right in law in deleting
Rs. 1,260-towards house rent under Section 40(a) (v) of the Income Tax
Act, 1961. [184-B; DJ
Commissioner of Income Tax, Bombay and Ors. v. Mafatlal Gangabhai
H & Co. (P) Ltd. and Ors., [1996) 7 SCC 569, relied on.
-
COMMONWEALExcerpt shown. Read the full judgment & AI analysis in Lexace.