BHUPENDRA S SHAH vs. COMMISSIONER OF INCOME-TAX

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ITR/94/1986HC GujaratGJHC24010718198619 June 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages
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What did the High Court hold?

The High Court held that both questions referred to it were to be answered in the affirmative, meaning against the assessee and in favour of the Revenue. The primary reasoning was based on the submission by both learned advocates that the main question had already been decided by the Hon'ble Supreme Court in the case of Singhai Rakeshkumar Vs. Union of India and others, reported in 247 I.T.R. 150. The Supreme Court's decision in that case was that capital gains arising from the sale of agricultural land were indeed liable to tax under Section 45 of the Income-tax Act, 1961. Consequently, the second question, which was contingent on the first being answered affirmatively, was also answered in the affirmative. This implies that the assessee was not entitled to substitute the fair market value as on 1st April 1970, as the land was considered a capital asset from that date for the purpose of capital gains tax. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

This case involves an Income Tax Reference No. 94 of 1986 before the High Court of Gujarat at Ahmedabad. The reference was made at the instance of the assessee, Bhupendra S. Shah, by the Income-tax Appellate Tribunal, Ahmedabad Bench "A". The dispute concerns the taxability of capital gains arising from the sale of agricultural land. The assessee is challenging the Tribunal's decision that the capital gain was taxable under Section 45 of the Income-tax Act, 1961, and that the assessee was not entitled to substitute the fair market value as on 1st April 1970 for the computation of capital gains. The matter was referred to the High Court for its opinion on specific questions of law.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the capital gain arising from the sale of agricultural land was liable to tax under Section 45 of the Income-tax Act, 1961? 2. If the reply to the first question is in the affirmative, whether the Tribunal was right in law in holding that the assessee was not entitled to substitute the fair market value as on 1st April 1970 for the reason that from that day the agricultural land was included in the definition of 'capital asset'? Assessee's Contention: The assessee, through its learned Advocate Mr. Manish J. Shah, argued that the capital gain from the sale of agricultural land should not be taxable and that the fair market value as on 1st April 1970 should be considered. The assessee relied on the principle that agricultural land was not a capital asset prior to its inclusion in the definition. Revenue's Contention: The Revenue, represented by its learned Advocate Shri B.B. Nayak, contended that the capital gain was indeed taxable under Section 45 and that the fair market value as on 1st April 1970 was not applicable. The Revenue's position was that once agricultural land became a capital asset, any gain arising from its sale would be subject to capital gains tax.

Which sections of the Income-tax Act were involved?

Section 45,Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 94 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- BHUPENDRA S SHAH Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance: MR MANISH J.SHAH FOR MR.J.P.SHAH for Applicant. MR B.B.NAYAK FOR MR MANISH R BHATT for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE D.A.MEHTA

Date of decision: 19/06/2001

ORAL JUDGEMENT (Per : MR.JUSTICE A.R.DAVE)

1.

At the instance of the assessee, the Income-tax Appellate Tribunal, Ahmedabad Bench "A" has referred to this Court for its opinion the following questions of law under the provisions of Section 256(1) of the Income-tax Act,1961. "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the capital gain arising from sale of agricultural land was liable to tax u/s.45?

If the reply to the above question is in the affirmative, whether Tribunal was right in law in holding that the assessee was not entitled to substitute the fair market value as on 1/4/1970 for the reason that from that day the agricultural land was included in the definition of 'capital asset'?"

Mr.Manish Shah, learned Advocate has appeared for the applicant assessee whereas Shri B.B.Nayak, learned Advocate has appeared for the Revenue.

2.

Learned Advocates appearing for the parties have fairly submitted that the main question which has been referred to this Court has already been decided by the Hon'ble Supreme Court in the case of Singhai Rakeshkumar Vs. Union of India and others, reported in 247 I.T.R. 150. The said question has been replied in the affirmative i.e. against the assessee and in favour of the Revenue.

3.

As the first question has been replied in the affirmative, the second question is also replied in the affirmatrive, i.e. against the assessee and in favour of the Revenue.

4.

This Reference stands disposed of accordingly with no order as to costs. (A.R.Dave, J) (D.A.Mehta,J

m.m.bhatt

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