COMMISSIONER OF INCOME TAX vs. ASHABEN ROHITBHAI

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ITR/158/1984HC GujaratGJHC24011832198409 February 1999Author: HONOURABLE DR. JUSTICE J.N.BHATT,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
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What did the High Court hold?

The High Court referred to its earlier judgment in ITR No. 420/83 (CIT v. Suhashbhai Vadilal) and the Supreme Court's judgment in Miss Dhun Kapadia v. CIT (63 ITR 651). In view of these precedents and the similarity of facts, the High Court held that the ITAT was correct in allowing the depreciation in the value of Sayaji Mills Ltd. shares. Consequently, both questions referred to the Court were answered in the affirmative, meaning they were decided in favour of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the facts?

The assessee owned shares in Sayaji Mills Ltd. Based on this holding, she was allotted shares in Rajesh Textile Mills Ltd. Following the allotment of Rajesh Textile Mills shares, the market value of Sayaji Mills shares declined. When selling the Rajesh Textile Mills shares, the assessee claimed a deduction for this depreciation in the value of Sayaji Mills shares when calculating capital gains. The Income Tax Appellate Tribunal (ITAT) allowed this deduction. The Revenue, aggrieved by the ITAT's order, sought a reference to the High Court.

What were the issues?

1. Whether the Income Tax Appellate Tribunal was legally correct in holding that depreciation in the value of Sayaji Mills Ltd. shares at Rs. 108.75 per share should be allowed while calculating the cost of acquisition on the sale of Rajesh Textile Mills Ltd. shares? (Question of law) 2. Whether, on the facts of the case, the direction to the Income-tax Officer to compute capital gain by allowing deduction for depreciation in the value of Sayaji Mills Ltd. shares at Rs. 108.75 per share as part of the cost of shares sold is legally correct? (Question of mixed law and fact) Assessee's Contention: The assessee claimed a deduction for the depreciation in the value of Sayaji Mills Ltd. shares when calculating capital gains on the sale of Rajesh Textile Mills Ltd. shares. The ITAT allowed this claim. Revenue's Contention: The Revenue was aggrieved by the ITAT's order allowing the deduction for depreciation and sought a reference to the High Court.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 158 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE J.N.BHATT 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? 1 Yes 2 to 5 No -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus ASHABEN ROHITBHAI -------------------------------------------------------------- Appearance: MR BB NAIK with MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1

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CORAM : MR.JUSTICE J.N.BHATT and MR.JUSTICE A.R.DAVE Date of decision: 09/02/99

ORAL JUDGEMENT (per A.R. Dave, J.)

The Income Tax Appellate Tribunal, Ahmedabad Bench 'B' has referred for opinion of this Court the following questions of law under the provisions of sec. 256(1) of the Income-tax Act, 1961. "

1.

Whether the Income Tax Appellate Tribunal has been right in law in holding that while working out the cost of acquisition on sale of shares of Rajesh Textile Mills, depreciation in the value of shares of Sayaji Mills Ltd. at Rs. 108.75 per share required to be allowed?

2.

Whether, on the facts of the case, the direction to the Income-tax Officer to compute the capital gain by allowing deduction for depreciation in the value of shares of Sayaji Mills Ltd. at Rs. 108.75 per share as part of the cost of shares sold, is correct in law?"

2.

The circumstances in which the above-referred questions have been referred to this Court are as under:-

3.

The assessee was owner of certain shares of Sayaji Mills Ltd. and on the basis of her holding of Sayaji Mills Ltd. she was allotted shares of Rajesh Textile Mills Ltd. Upon allotment of shares of Rajesh Textile Mills Ltd., the market value of shares of Sayaji Mills Ltd. had declined and therefore in the matter of calculation of capital gain, while selling shares of Rajesh Textile Mills, the assessee had claimed deduction of depreciation in the value of shares of Sayaji Mills Ltd. The Tribunal was of the view that depreciation in value of the shares of Sayaji Mills Ltd. should be considered and therefore, being aggrieved by the said order, the Revenue had approached the Tribunal for making a reference.

4.

The questions referred to hereinabove are no more res integra in view of the judgment delivered by the Hon'ble Supreme Court in the case of Miss Dhun Kapadia v. CIT, reported in 63 ITR 651 and also in view of opinion rendered by this Court in ITR No. 420/83 in the matter of CIT v. Suhashbhai Vadilal.

5.

In view of the fact that similar questions were decided in favour of the assessee and as facts are same, in the instant case, following the judgments referred to hereinabove, we answer both the questions referred to us in affirmative, that is, against the Revenue and in favour of the assessee. The reference stands disposed of with no order as to costs.

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(hn)

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