COMMISSIONER OF INCOME TAX vs. ROHITBHAI CHINUBHAI (HUF)

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ITR/18/1984HC GujaratGJHC24011693198421 September 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE2 pages
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What did the High Court hold?

The High Court held that the Tribunal was correct in its conclusion. The Court referred to its decision in a similar case, Income Tax Reference No. 420 of 1983, against the Revenue. In that case, the Court had ruled that when computing the cost of acquisition of shares of Rajesh Textile Mills Limited, which were issued in a 1:1 ratio to shareholders of Sayaji Mills Limited, the depreciation in the value of Sayaji Mills Limited shares (Rs. 108.75 per share) should be deducted. This deduction is to be factored into the working out of the cost of acquisition of the Rajesh Textile Mills Limited shares, especially given the arrangement between the two companies. The Court answered the referred question in the affirmative, in favour of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax against Rohitbhai Chinubhai (HUF). The reference was made under Section 256(1) of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal. The core issue pertains to the computation of capital gains realized by the assessee on the sale of 300 shares of Rajesh Textile Mills Limited. The Tribunal had previously directed that depreciation in the value of shares of Sayaji Mills Ltd. at Rs. 108.75 per share should be allowed when computing these capital gains. The Income Tax Officer was instructed to recompute the capital gains on this basis. The High Court of Gujarat at Ahmedabad is now providing its opinion on the question referred by the Tribunal.

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 in computing the capital gains realized on the sale of 300 shares of Rajesh Textile Mills Limited, depreciation in the value of shares of Sayaji Mills Ltd. at Rs. 108.75 per share should have been allowed, and that the capital gains should be recomputed by the Income-tax Officer on that basis? (Question of law/mixed law and fact, related to computation of capital gains under the Income Tax Act, 1961). Assessee's Contention: Not explicitly recorded in the judgment, but implicitly supported by the Tribunal's decision and the High Court's affirmation. Revenue's Contention: Not explicitly recorded in the judgment, but implicitly challenged by the filing of the reference and the question posed.

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 18 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI 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?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus ROHITBHAI CHINUBHAI (HUF) -------------------------------------------------------------- Appearance: MR B.B.NAIK with MR MANISH R BHATT for Petitioner MR JP SHAH for Respondent No. 1

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

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.R.DAVE Date of decision: 21/09/98

ORAL JUDGEMENT (Per R.K.Abichandani,J.)

The Income Tax Appellate Tribunal has referred the following question for the opinion of this Court under 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 coming to the conclusion that in computing the capital gains realised on sale of 300 shares of Rajesh Textile Mills Limited, depreciation in the value of share of Sayaji Mills Ltd. at Rs. 108.75 paise per share should have been allowed and that the capital gains should be recomputed by the Income-tax Officer on that basis?"

Similar question as the one which has been referred, has been considered and decided by us today in Income Tax Reference No. 420 of 1983 against the Revenue, by holding that while computing the cost of acquisition of the shares of Rajesh Textile Mills Limited which were offered in the ratio of 1:1 to the share-holders of Sayaji Mills Limited, the depreciation in the value of the shares of Sayaji Mills Limited, with which the issue of shares by Rajesh Textile Mills Limited was directly connected in view of the arrangement made between the two companies, of Rs. 108.75 paise per share suffered by the assessee who had acquired the right, was to be deducted and would go in to the working out of the cost of acquisition of the shares of Rajesh Textile Mills Limited. For the same reasons as have been given by us in our judgement in the said Income Tax Reference No. 420/83, we answer the question referred by the Tribunal in the affirmative against the Revenue and in favour of the assessee. The reference stands disposed of accordingly with no order as to costs. ---

*/Mohandas

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