- (1.) Civil Appeal No. 2042 of 1984: This appeal is preferred against the judgment of the Patna High, Court answering the question referred to it in favour of the Revenue and against the assessee. The reference was made at the instance of the Revenue. The question as stated by the Tribunal read as follows: "Whether on the facts and in the circumstances of the case, the amount of Rs. 34,040/- was assessable in the hands of the assessee under the head Capital Gains."
(2.) With a view to bring out the issue incontroversy more clearly, the High Court refrained the question in the following terms: "Whether on the facts and in the circumstances of this case; the sum of Rs. 34,040/could be held to have been rightly included in the capital gain of the assessee under S. 46 read with Ss. 48 and 49 of the Income-tax Act, 1961' -
(3.) The assessee was a shareholder in a Private Limited Company. The Company went into liquidation. In those proceedings, the assessee received certain assets towards the shares held by him. In the assessment proceedings relating to the relevant years, question arose whether the assets so received by the assessee can be treated as his income by way of capital gains. The I.T.O placed his own value on the said assets and levied the tax. Assessee's contention was that inasmuch as there was no transfer of property and since the income did not arise from any such transfer, no capital gains could be said to have arisen. This plea was negatived by the I.T.O. When the matter ultimately reached the High Court, it ruled against the assessee relying upon the specific provisions contained in sub-sec. (2) of S. 46. Section 46 of the Income-tax Act reads as follows: "Capital gains on distribution of assets by companies in liquidation. 46. (1) Notwithstanding anything contained in S. 45, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the purposes of S. 45. (2) Where a shareholder on the liquidation of a company receives any money or other assets from the company, he shall be chargeable to income-tax under the head "Capital gains", in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of sub-clause (c) of clause (22) of S. 2 and the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of S.48.";