C.I.T. vs. RAPTI INVESTMENT PVT.LTD.(IVL)

ITR/18/2003HC GujaratGJHC24025674200315 February 2006Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI4 pages
AI SummaryPartly Allowed

What were the facts?

This is an Income Tax Reference No. 18 of 2003 before the High Court of Gujarat at Ahmedabad. The applicant is the Commissioner of Income Tax (CIT), and the respondent is Rapti Investment Pvt. Ltd. (IVL). The matter was referred to the High Court by the Income Tax Appellate Tribunal (ITAT) under Section 256(1) of the Income Tax Act, 1961. The learned counsel for the applicant accepted notice and requested that the filing of the paper-book be dispensed with, as the issues referred were concluded by a prior judgment of the High Court in CIT v. Brahmi Investments Pvt. Ltd. The 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 10/2/2006 in 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, 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, in favour of the revenue and against the assessee. This means the Tribunal was not correct in holding that no capital gains were chargeable to tax despite Section 46(2), due to the benefit of Section 47(v). The ratio for the first question would be that the cost of acquisition for capital gains purposes, in cases covered by Section 49(1)(iii)(e), is indeed the cost to the previous owner. The ratio for the second question would be that the benefit of Section 47(v) does not necessarily negate the chargeability of capital gains under Section 46(2) in all circumstances. The reference was disposed of accordingly.

What were the issues?

The Income Tax Appellate Tribunal referred two questions of law to the High Court: 1. Whether the Appellate Tribunal is right in law and on facts in holding that, in view of section 49(1)(iii)(e), 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), 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? The assessee contended that the capital gains should be computed based on the cost in the hands of the previous owner as per Section 49(1)(iii)(e) and that no capital gains were chargeable due to the benefit of Section 47(v). The revenue's contentions are not explicitly recorded in the judgment, but their opposition is implied by the reference and the High Court's eventual findings.

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/18/2003 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 18 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 RAPTI INVESTMENT PVT.LTD.(IVL) - Respondent(s) ============================================================== Appearance : MR MANISH R BHATT 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 “Not

The order continues below.

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