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

DCIT, Circle-11(1), Kolkata vs. M/S Kalamkari Designs Pvt.Ltd., Kolkata

In the result, the appeal of the Revenue is dismissed

ITA 47/KOL/2017[2004-05]Status: DisposedITAT Kolkata04 Dec 2018AY 2004-05

Bench: Sh. P.M.Jagtap & Sh. S.S.Viswanethra Ravidcit, M/S. Kalamkari Designs Vs Circle-11(1), P-7, Pvt.Ltd., 138, Beliaghata Chowringhee Square, Square, Kolkata-700015. Kolkata-700069. Pan-Aabck2117N (Appellant) (Respondent) Appellant By Sh. Soumesh Dash, Addl. Cit Dr Respondent By Sh. D.S.Damle, Fca Date Of Hearing 06.09.2018 Date Of Pronouncement 04.12.2018 Order Per S.S. Viswanethra Ravithis Appeal Filed By The Revenue Against The Order Dated 17.10.2016 Passed By Cit(A)-10, Kolkata For Ay 2004-05. 2. The Assessee Is A Company & Is A Manufacturer & Exporter Of Garments. 3. Ground No.1 Raised By The Revenue Challenging The Action Of The Cit(A) In Deleting The Addition Made On Account Of Long Term Capital Gain As Against The Income From Other Sources Held By The Ao. 4. According To Ao, The Assessee Earned Profit Of Rs.49,85,861/- On Sales Of Shares & Booked The Same As “Other Income”. The Same Has Been Shown As Long Term Capital Gain In The Computation Of Total Income & Sought Set Off Against Forwarded Long Term Capital Loss. 5. The Ao Treated The Said Profit As Income From Other Sources & Denied Set Off Against The Forwarded Loss By The Reasons As Under: A. “The Auditor Had Qualified In The Tax Audit Report That The Investments Were Held In The Name Of The Director Of The Company.