ADDITIONAL COMMISSIONER OF INCOME TAX Vs. KUPPUSWAMY P S

JUDGEMENT

(1.) THESE three references have been made by the Income-tax Appellate Tribunal at the instance of the Additional Commissioner of Income-tax, referring the following two questions, which are common to all the three references :

(2.) THE facts in T.C. No. 278 of 1972, which gave rise to the above questions, are as follows: THE assessee, a Hindu undivided family, held 20 equity shares in M/s. Premier Transports (Private) Ltd. THEse shares had been acquired at a cost of Rs. 2,000 and were sold in the financial year 1967-68 for Rs. 15,000. THE assessee returned the capital gains of Rs. 13,000 with reference to the sale of these shares. Taking into account the balance-sheet of the company at or about the time of the transaction, the Income-tax Officer found that the break-up value of the said shares would be Rs. 2,079 per share. He, therefore, considered that since the sale price declared by the assessee was less than the market price ascertained by the break-up value method, the provisions of Section 52(2) of the Income-tax Act, 1961, were applicable and after obtaining the approval of the Inspecting Assistant Commissioner as required by the said provisions, he computed the capital gains to be Rs. 39,580 as against Rs. 13,000 returned by the assessee. THE appeal filed by the assessee before the Appellate Assistant Commissioner was unsuccessful and when the matter came before the Tribunal at the instance of the assessee, the assessee contended that the computation of the capital gains should be based on the actual consideration arising to the assessee from the transfer of the shares in question, and not on the basis of its fair market value and that Section 52(2) of the Act had no application to the facts. THE Tribunal held that the necessary ingredient for invoking Section 52(2) had not been established. It, however, set aside the assessment, observing that the correct computation of the capital gains had not been made by the Income-tax Officer.

(3.) WE now take up for consideration the first question. Section 52(2) of the Act, as it stood at the relevant time, ran as follows: