S. C. Agrawal, J. - (1.) Special leave granted in Special Leave Petition No. 10737 of 1981.
(2.) These appeals filed by the assessee involve the question whether the estate duty paid by the assessee under the provisions of the Estate Duty Act, 1953, to the extent it relates to the property that is transferred by the appellant, can be regarded as cost of acquisition of the said property or cost of improvement to the said property for the purpose of computation of capital gains under the Income-tax Act, 1961 (hereinafter referred to as the Act). Civil Appeals Nos. 6098-6101 of 1983 relate to assessment years 1966-67 to 1970-71, Civil Appeal No. 860 of 1988 relates to assessment year 1972-73 and Civil Appeal arising out of S. L.. P. (C) No. 10737 of 1981 relates to assessment year 1971-72.
(3.) Ramanathan Chettiar, who had considerable movable and immovable properties, died on January 26, 1958 leaving behind his wife, Smt. Umayal Achi and daughter, Smt. S. Valliammi as his legal heirs. On his death the said properties devolved upon the aforesaid heirs in equal shares and a partition was effected between them under which certain properties were given to Smt. Umayal Achi and the rest to Smt. S. Valliammi. Smt. Umayal Achi adopted the assessee as her son in April 1961. She later died on August 20, 1964 leaving a will bequeathing all her properties to the assessee as her adopted son. During the previous years relevant to the assessment years in question the assessee disposed of various properties of Ramanathan Chettiar that were bequeathed to him by Smt. Umayal Achi. In respect of the assessment years 1966-67, 1967-68, 1969-70 and 1970-71 the assessee offered Rs. 7,537/-, Rs. 1,84,480/-, Rs. 19,015/- and Rs. 32, 118/- respectively as capital gains arising from the said transfers. For that purpose, the assessee had taken the cost of acquisition of the capital assets concerned at their market value as on August 20, 1964, the date on which he became entitled to them under the Will from his adoptive mother. The assessee claimed that since estate duty had been paid consequent upon the death of Ramanathan Chettiar and Smt. Umayal Achi, the proportionate part thereof as is attributable to the value of the properties sold should be deducted in computing the capital gains. The Income-tax Officer rejected the said contention and computed the capital gains for the assessment years 1966-67, 1967-68, 1969-70 and 1970-71 at Rs. 80,050/-, Rs. 4,89,876/-, Rupees 55,758/- and Rs. 81,254/- respectively on the ground that under Explanation to S. 49(1) of the Act, Ramanathan Chettiar alone should be considered as the previous owner and that consequently the appellant would be entitled to adopt as the cost of acquisition of the properties sold their value as on January 1, 1954. Appeals filed against the said orders of assessment of the Income-tax Officer were rejected by the Appellate Assistant Commissioner as well as the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal). At the instance of the assessee, the Tribunal referred the following question to the Madras High Court:- "Whether in computing the capital gains on the sale of properties made by the assessee during the previous years relevant for the assessment years 1966-67, 1967-68, 1969-70 and 1970-71, proportionate estate duty paid on the death of Shri Ramanathan Chettiar and Shrimati Umayal Achi in respect of properties sold should be deducted - ;