COMMISSIONER OF INCOME-TAX vs. ZARIR ADIE CONTRACTOR MINOR

ITR/367/1984HC GujaratGJHC24012032198423 April 1999Author: HONOURABLE MR. JUSTICE R.BALIA,HONOURABLE MR. JUSTICE ANIL R. DAVE2 pages
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What did the High Court hold?

The High Court held that the deduction of depreciation allowed to the deceased transferor is not permissible for reducing the cost of acquisition of a capital asset when computing capital gains in the hands of the successor. This applies when the asset falls within the provisions of sub-section (2) of Section 50 and the assessee has exercised the option to adopt the fair market value as on 1.1.51 as its cost of acquisition, in lieu of the written down value. The computation thereafter must follow the procedure provided in Section 50(2) and other relevant provisions of the Income Tax Act. The question referred to the High Court was answered in favor of the assessee and against the Revenue.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'A', referred a question of law arising from its order in I.T.A. No. 656/Ahd/82 for Assessment Year 1977-78. The assessee, Zarir Adie Contractor Minor, inherited an asset. The dispute concerns the computation of capital gains. The ITAT's order, dated 27.6.1983, was challenged by the Commissioner of Income-tax. The High Court of Gujarat at Ahmedabad was hearing this reference. The procedural history indicates that a similar question in the case of Mini Adi Contractor, arising from the same ITAT order, had already been decided by the High Court on 28/29-12-1998.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that depreciation allowed to the deceased, Adie Contractor (from whom the assessee inherited the asset), should not be taken into account and adjusted from the value as on 1.1.51 for the purpose of computing the cost of the asset for capital gains. Assessee's contention: The judgment does not explicitly record the assessee's arguments but implies they supported the ITAT's decision. The High Court's decision in a similar case (Mini Adi Contractor) was in favor of the assessee. Revenue's contention: The judgment does not explicitly record the Revenue's arguments but implies they contested the ITAT's conclusion. The High Court's decision in a similar case was against the Revenue.

Which sections of the Income-tax Act were involved?

Section 50

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 367 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question 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?

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The order continues below.

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