Section 45 of the Income Tax Act

Income-tax Act, 2025: s.67

Section 45 of the Income-tax Act, 1961 corresponds to section 67 (Capital gains) of the Income-tax Act, 2025.

Read section 67 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 45 is CIT v. B.C. Srinivasa Setty (128 ITR 294), cited in 628 of the 1,374 judgments on BharatTax that turn on this section.

Leading authorities on Section 45

CIT v. B.C. Srinivasa Setty
128 ITR 294 · 1981 · Supreme Court
628
citing judgments

When the cost of acquisition of a capital asset cannot be determined, the computation mechanism for capital gains fails, and thus no capital gains can be charged. This establishes a broader principle that a charging section cannot operate in the absence of specific machinery provisions for computation.

CIT v. Balbir Singh Maini
398 ITR 531 · 2017 · Supreme Court
228
citing judgments

A transfer of immovable property, for the purpose of capital gains under section 2(47)(v) of the Income-tax Act, occurs only when the agreement allowing possession in part performance of a contract is a registered instrument, as mandated by Section 53A of the Transfer of Property Act.

Chaturbhuj Dwarkadas Kapadia v. CIT
260 ITR 491 · 2003 · High Court
150
citing judgments

For capital gains purposes, a 'transfer' under section 2(47)(v) occurs and capital gains arise in the year when possession of the property is handed over in part performance of a contract, such as a joint development agreement. This was the settled position before the specific provisions of section 45(5A) were introduced.

CIT v. D.P. Sandhu & Bros.
273 ITR 1 · 2005 · Supreme Court
140
citing judgments

Surrender of tenancy rights is a transfer of a capital asset, and the consideration received is a capital receipt subject to capital gains tax. If the cost of acquisition cannot be determined, the transfer of such an asset was not taxable under capital gains prior to the amendment of Section 55(2) in 1995.

Venkataswami Naidu & Co. v. CIT
35 ITR 594 · 1959 · Supreme Court
133
citing judgments

A transaction is considered an adventure in the nature of trade, constituting business income, if there is a pre-determination to sell an asset at a profit. Conduct prior to purchase, as well as subsequent improvements, are relevant in determining the character of the transaction.

CIT v. Manjula J. Shah
355 ITR 474 · 2013 · High Court
113
citing judgments

For capital assets acquired by gift or will, the indexed cost of acquisition under Section 48 is computed with reference to the year the previous owner first held the asset. The period of holding for determining if an asset is long-term also includes the previous owner's holding period, as per Section 2(42A).

A. R. Krishnamurthy v. CIT
176 ITR 417 · 1989 · Supreme Court
85
citing judgments

The cost of acquiring leasehold rights can be determined, and the transfer of such rights, including mining leases, constitutes a transfer of a capital asset, making any surplus on such transfer taxable as capital gains.

CIT v. Chugandas and Co.
55 ITR 17 · 1965 · Supreme Court
83
citing judgments

When a taxpayer's sole source of income is from the letting out of properties, such rental income is to be assessed under the head 'Income from House Property'.

CIT v. George Henderson & Co. Ltd.
66 ITR 622 · 1967 · Supreme Court
82
citing judgments

The 'full value of consideration' for computing capital gains under Section 48 of the Income Tax Act, 1961 (or its predecessor, Section 12B of the 1922 Act), means the actual price bargained for and received or accrued by the parties. It does not refer to the market value or any notional value of the asset transferred.

CIT v. Hariprasad & Company Pvt. Ltd.
99 ITR 118 · 1975 · Supreme Court
78
citing judgments

The terms 'income' or 'profits and gains' are inclusive of losses, signifying that losses are 'minus income' to be factored into the computation of taxable income. Therefore, set-off and carry forward provisions for losses apply exclusively to taxable income or gains and cannot be pressed into service against non-taxable gains, such as those exempt under a DTAA or other specific provisions.

Judgments on Section 45

Vishnu Agarwal, Hyderabad vs. Income Tax Officer, Ward-4(4), Hyderabad

In the result, appeal of the assessee is allowed for statistical purposes

ITA 1419/HYD/2019[2011-12]Status: DisposedITAT Hyderabad04 May 2021AY 2011-12

Bench: Shri A. Mohan Alankamonya.Y. 2011-12 Vishnu Agarwal, Vs. Income Tax Officer, Hyderabad. Ward-4(4), Pan: Aedpa 4469 A Hyderabad. (Appellant) (Respondent) Assessee By: Shri M.V. Anil Kumar Revenue By: Shri Waseem Ur Rahman, Dr Date Of Hearing: 03/05/2021 Date Of Pronouncement: 04/05/2021 Order This Appeal Is Filed By The Assessee Against The Order Of The Ld. Cit(A)-1, Hyderabad In Appeal No. 10451/2018-19/Ito 4(4)/Cit(A)- 1/Hyd/2019-20, Dated 09/07/2019 Passed U/S. 143(3) R.W.S 147 & U/S. 250(6) Of The Act For The A.Y. 2011-12. 2. The Assessee Has Raised Six Grounds In His Appeal & They Are Extracted Herein Below For Reference: “1. The Order Passed By The Cit(A) Is Against The Facts & Circumstances Of The Appellant’S Case & Is Contrary To The Provisions Of The Act. 2. The Ld. Cit(A) Ought To Have Considered The Fact That The Notice Issued By The Ld. A.O. U/S. 148 Is Invalid & Bad In Law, Since The Approval Is Required To Be Obtained From One Of Them I.E., Either From Pcit Or From Cit But The Same Is Specifically Mentioned. Accordingly, The Assessment Order Passed Based On Invalid Proceedings U/S. 148 Of The Act Cannot Be Sustained.

For Appellant: Shri M.V. Anil KumarFor Respondent: Shri Waseem Ur Rahman, DR
Section 143(3)Section 148Section 250(6)Section 45Section 50C

Deputy Commissioner of Income Tax Circle-5(2)(1), Bangalore vs. M/S L K Trust, Bangalore

In the result, appeal by the Revenue is dismissed

ITA 1434/BANG/2017[2008-09]Status: DisposedITAT Bangalore19 Mar 2021AY 2008-09

Bench: Shri N.V. Vasudevan & Shri B R Baskaranassessment Year: 2008-09 The Dcit, Vs. M/S. L. K. Trust, Circle – 5(2)(1), #9, Seshadri Road, Bangalore – 560 009. Bangalore. Pan: Aaatl 0522 A Appellant Respondent Revenue By : Shri. Pradeep Kumar, Cit(Dr)(Itat), Bengaluru. Assessee By : Shri. V. Sridhar, Ca Date Of Hearing : 08.03.2021 Date Of Pronouncement : 19.03.2021 O R D E R Per N.V. Vasudevanthis Is An Appeal By The Revenue Against The Order Dated 30.03.2017 Of Cit(A)-5, Bangalore, Relating To Assessment Year 2008-09. 2. The Assessee Is A Charitable Trust. It Owned Residential Land Measuring About 11 Acres & 20 Guntas Situated In Nagashettyhally, Kasaba Hobli, Bangalore North Taluk (Hereinafter Referred To As ‘The Property’). The Assessee Together With One M/S. Kanyakumari Builders Pvt. Ltd., As Confirming Party No.1 & M/S. Khoday India Ltd., As Confirming Party No.2, Sold The Property For A Sale Consideration Of Rs.140 Crores By A Sale Deed Dated 31.01.2007 To M/S. Pebble Bay Developers Pvt. Ltd. In The Return Filed By The Assessee For Assessment Year 2007-08, The Assessee Declared Long Term Capital Gain On Sale Of The Property Only To The Extent Of 34% & Claimed That In Respect Of 66% Of The Property Sold, Capital Gain Page 2 Of 14 Cannot Be Regarded As Having Accrued To The Assessee. In The Course Of Assessment Proceedings For Assessment Year 2007-08, The Assessee Submitted A Letter Dated 31.03.2008 In Which The Assessee Gave The Reasons As To Why Only 34% Of The Capital Gain Is Declared In The Return Of Income For Assessment Year 2007-08. The Same Reads As Follows: Page 3 Of 14 The Ao Passed An Order Of Assessment On 31.03.2016 For Assessment Year 2007-08 Accepting Long Term Capital Gain To The Extent Of 34% Declared By The Assessee.

For Appellant: Shri. V. Sridhar, CAFor Respondent: Shri. Pradeep Kumar, CIT(DR)(ITAT), Bengaluru
Section 143(1)Section 143(3)Section 147Section 148