C.I.T. vs. CHINAB INVESTMENT PVT. LTD.

ITR/29/2003HC GujaratGJHC24025685200315 February 2006Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI4 pages
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What were the facts?

This case involves an Income Tax Reference (ITR) No. 29 of 2003 before the High Court of Gujarat at Ahmedabad. The applicant is the Commissioner of Income Tax (CIT), and the respondent is Chinab Investment Pvt. Ltd. The matter was referred by the Income Tax Appellate Tribunal (ITAT). The High Court noted that the notice was not received back, but the learned standing counsel for the applicant appeared and accepted notice, undertaking to file appearance. The applicant requested that the filing of the paper-book be dispensed with, as the issues referred were concluded by this Court's previous judgment in CIT v. Brahmi Investments Pvt. Ltd. dated 10/02/2006. Both parties agreed that the questions were concluded by the aforesaid decision. The Reference was taken up for final hearing and disposal.

What did the High Court hold?

The High Court, for the reasons stated in its judgment dated 10/02/2006 in the case of CIT v. Brahmi Investments Pvt. Ltd. (I.T.R. No.102 of 1995), answered the referred questions. Question No. 1 was answered in the affirmative, meaning in favour of the assessee and against the revenue. This implies the Tribunal was correct in holding that capital gains should be computed by taking the cost in the hands of the previous owner, as per section 49(1)(iii)(e). Question No. 2 was answered in the negative, meaning in favour of the revenue and against the assessee. This implies the Tribunal was incorrect in holding that capital gains chargeable to tax had not arisen despite section 46(2), considering the benefit of section 47(v). The Reference was disposed of accordingly, with no order as to costs. The ratio decidendi for the first question would be that the cost of acquisition for capital gains purposes, in the context of section 49(1)(iii)(e), is indeed the cost to the previous owner. For the second question, the ratio would be that the benefit of section 47(v) does not necessarily preclude capital gains taxation under section 46(2) in all circumstances.

What were the issues?

The Tribunal referred two questions of law for the High Court's decision: 1. Whether the Appellate Tribunal is right in law and on facts in holding that, in view of section 49(1)(iii)(e) of the Income Tax Act, 1961, capital gain should be computed by taking the cost in the hands of the previous owner, namely, KPPL? 2. Whether the Appellate Tribunal is right in law and on facts in holding that inspite of section 46(2) of the Income Tax Act, 1961, capital gains chargeable to tax had not arisen in this case in view of the fact that benefit of section 47(v) would be available to the assessee? Assessee's Contentions: The assessee argued that the issues were concluded by the High Court's decision in CIT v. Brahmi Investments Pvt. Ltd. (Income Tax Reference No. 102 of 1995). No specific arguments for the assessee were recorded beyond this reliance. Revenue's Contentions: The revenue, represented by the CIT, also agreed that the issues were concluded by the High Court's decision in CIT v. Brahmi Investments Pvt. Ltd. No specific arguments for the revenue were recorded beyond this agreement.

Which sections of the Income-tax Act were involved?

Section 49(1)(iii)(e),Section 46(2),Section 47(v),Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/29/2003 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 29 of 2003 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ============================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================================== C.I.T. - Applicant(s)

Versus CHINAB INVESTMENT PVT. LTD. - Respondent(s) ============================================================== Appearance : MR BB NAIK for Applicant MR RK PATEL for Respondent(s) : 1, ================================================================== CORAM :  HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 15/02/2006 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) 1.The Board shows the endorsement “Notice not

The order continues below.

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