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

ITR/14/2003HC GujaratGJHC24025670200315 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 filed by the Commissioner of Income Tax (CIT) against Bhadra Investment Pvt. Ltd. (IVL) for Assessment Year(s) not specified. The reference challenges an order passed by the Income Tax Appellate Tribunal (ITAT). The procedural history indicates that notice was not initially received back, but the learned senior standing counsel for the applicant accepted notice and undertook to file appearance. The applicant requested dispensing with the filing of the paper-book, as the issues referred by the Tribunal were already concluded by a previous judgment of the High Court in the case of CIT v. Brahmi Investments Pvt. Ltd. The parties agreed that the questions were concluded by the aforesaid decision, and the reference was taken up for final hearing.

What did the High Court hold?

The High Court, for the reasons stated in its judgment dated 10/2/2006 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, in favour of the assessee and against the revenue. This implies that the Tribunal was correct in holding that capital gains should be computed by taking the cost in the hands of the previous owner, KPPL, in view of 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 capital gains chargeable to tax had not arisen despite section 46(2), due to the benefit of section 47(v). The reference was disposed of accordingly, with no order as to costs. The ratio decidendi for Question 1 is that the cost of acquisition for capital gains computation, under the specified circumstances of section 49(1)(iii)(e), is the cost in the hands of the previous owner. For Question 2, the ratio is that the benefit of section 47(v) does not preclude capital gains taxation under section 46(2) in the manner held by the Tribunal.

What were the issues?

The Tribunal had to decide the following two questions of law: 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? Contentions: Assessee: The assessee contended that the issues were concluded by the High Court's judgment in CIT v. Brahmi Investments Pvt. Ltd. (Income Tax Reference No.102 of 1995) dated 10/2/2006. Revenue: The revenue, through its counsel, accepted that the issues were concluded by the aforementioned judgment.

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/14/2003 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 14 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 BHADRA 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 “

The order continues below.

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