- (1.) This matter has been placed before this Bench in pursuance of order of reference dated October 1, 2010 as under: 1. The following question of law has been referred for opinion of this Court by the Income-tax Appellate Tribunal, Chandigarh, arising out of its order dated December 19, 1994 in I.T.A. Nos. 301/Chd/90 and 404/Chd/92 for the assessment years 1977-78 and 1979-80:Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assets which were the subject-matter of capital gains were acquired by the Assessee for nothing and that the same could not be subjected to capital gains ? 2. The Assessee sold certain plots for consideration and the income derived therefrom was sought to be taxed as capital gains. The Commissioner of Income-tax (Appeals) reversed the view taken by the assessing officer, holding that cost of acquisition of the property in question was nil and thus, no capital gain was attracted. The Tribunal upheld the said view, inter alia, relying upon the judgment of the Honble Supreme Court in CIT v. B.C. Srinivasa Setty, 1981 128 ITR 294. 3. We have heard learned Counsel for the parties. 4. Learned Counsel for the revenue submitted that the principle of excluding taxability of capital gains where an asset is not capable of being valued, such as goodwill, cannot extend to capital assets like land which are capable of being valued. The judgment of the Honble Supreme Court in B.C. Srinivasa Setty: (1981) 128 ITR 294 (SC) was not applicable to such a situation. Reliance has been placed on the judgment of the Honble Supreme Court in CIT v. D.P. Sandu Bros. Chembur P. Ltd., 2005 273 ITR 1 wherein the judgment in B.C. Srinivasa Setty, 1981 128 ITR 294was distinguished in its applicability to an asset which was capable of acquisition at a cost. The observations therein are as under (page 5): In other words, an asset which is capable of acquisition at a cost would be included within the provisions pertaining to the head Capital gains as opposed to assets in the acquisition of which no cost at all can be conceived... 5. Learned Counsel for the Assessee, on the other hand, submits that even in respect of land acquired without cost, no capital gain was attracted on the principle applied by the Honble Supreme Court in B.C. Srinivasa Setty, 1981 128 ITR 294. He relies on a judgment of this Court in CIT v. Amrik Sing, 2008 299 ITR 14and a judgment of the Madhya Pradesh High Court in CIT v. H. H Maharaja Sahib Shri Lokendra Singhji, 1986 162 ITR 93. 6. We are of the view that the principle applied to assets like goodwill for excluding taxability of capital gain cannot be applied to the assets like land which are clearly capable of being valued. The view taken by the Madhya Pradesh High Court and by this Court on the basis of the principle laid down in B.C. Srinivasa Setty: (1981) 128 ITR 294 (SC) may need reconsideration by a larger Bench in the light of the judgment in D.P. Sandu Bros. Chembur P. Ltd., 2005 273 ITR 1. 7. Accordingly, let the matter be placed before Honble the Chief Justice for constitution of an appropriate Bench.
(2.) The Assessee is an individual. For the assessment years in question, i.e., 1977-78 and 1979-80, the Assessee sold plots of land for consideration on which tax under the head of ''Capital gains'' was sought to be levied. The Assessee contested the levy by submitting that cost of acquisition by the previous owner was incapable of being ascertained. The previous owner was an ex ruler of the Pepsu State and the asset was acquired under the instrument of annexation and thus, its cost of acquisition could not be ascertained. Capital gain was attracted only when the cost of acquisition was capable of being ascertained. This plea was rejected and the assessing officer proceeded to assess capital gain taking the cost of acquisition equal to the market value as on January 1, 1954/January 1, 1964 depending on the dates specified under Section 55(2) of the Act as applicable to the year of assessment. On appeal, the Commissioner of Income-tax (Appeals) rejected the plea of the Assessee that the cost of acquisition being incapable of ascertainment, no capital gain was attracted. However, the Tribunal reversed the said view following the judgment of the honble Supreme Court in B.C. Srinivasa Settys case, 1981 128 ITR 294 and also earlier orders passed by the Tribunal in the cases of Amrinder Singh and Shiv Dev Inder:
(3.) Since at the time of hearing of the references before the Division Bench, 3 reliance was placed upon a judgment of this Court in Amrik Singhs case, 2008 299 ITR 14, prima facie, differing with the view taken therein, the.matter was referred to be heard by a larger Bench.;