Income Tax Officer, Ward-4(1), Hyderabad V. Sri Anthati Bikshapathy, Hyderabad

ITA 1650/HYD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87209 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: SHRIB SHANTI KUMAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition
• Section: 143(3); 50C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1650/HYD/2013 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WARD 4(1 ), HYDERABAD SRI ANTHATI BIKSHAPATHY, HYDERABAD PAN ACYPA 3177 E (APPELLANT) (RESPONDENT) REVENUE BY SHRI RAJAT MITRA ASSESSEE BY SHRIB. SHANTI KUMAR DATE OF HEARING 10-12-2014 DATE OF PRONOUNCEMENT 07-01-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY DEPARTMENT IS AGAINST ORDER DATED 30 /08/13 OF LD. CIT(A)-V, HYDERABAD RELATING TO AY 2009-10. 2. AS CAN BE SEEN FROM THE GROUND RAISED, DEPARTME NT IS BASICALLY AGGRIEVED WITH THE DECISION OF LD. CIT(A) IN DELETI NG THE ADDITION OF RS. 70,45,443 MADE BY AO ON ACCOUNT OF LONG TERM CA PITAL GAIN (LTCG). 3. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, ASSESSEE AN INDIVIDUAL DERIVES INCOME FROM LIQUOR BUSINESS. FOR THE AY UNDER DISPUTE, ASSESSEE FILED HIS RETURN OF INCOME ON 30/ 09/2009 DECLARING TOTAL INCOME OF RS. 2,35,090. DURING THE ASSESSMENT PROCEEDING, AS NOTED BY AO, IT WAS SEEN THAT ASSESSEE EXECUTED A R ELEASE DEED ON 23/06/08 RELEASING HIS SHARE IN PROPERTY BEARING MUNICIPAL NO. 1-5- 2 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY 6/33 ADMEASURING 808.58 SQ.FT. COMPRISING OF GROUND AND FIRST FLOOR IN FAVOUR OF ONE SHRI BALARAJ GOUD, CHIKKADAPALLI. HE FURTHER NOTED THAT THE PROPERTY WAS PURCHASED BY ASSESSEE AND SHRI BAL ARAJ GOUD ON 23/06/04( FOR A CONSIDERATION OF RS. 15 LAKHS) FROM SMT. K. VIJAYA AND TWO OTHERS. HOWEVER, THE TRANSACTION WAS NOT RECORD ED IN THE BOOKS OF ASSESSEE. DURING THE ASSESSMENT PROCEEDING, ASSESSE E WAS SUMMONED AND A STATEMENT WAS RECORDED FROM HIM ON 1 9/12/09. WHEN ASSESSEE WAS ASKED TO EXPLAIN ON THE PURCHASE TRANSACTION OF THE PROPERTY IN QUESTION, IT WAS STATED BY HIM THAT THE PROPERTY WAS PURCHASED BY SHRI BALARAJ GOUD AND ASSESSEES NAME WAS INCLUDED IN THE TRANSACTION ONLY FOR THE PURPOSE OF SECURITY TO SHRI KRISHANA RAO KESAV, THE GPA HOLDER, THOUGH, ASSESSEE DID NOT PAY ANY AMOUNT. IT WAS STATED BY ASSESSEE, AFTER A PERIOD O F ONE YEAR OR THEREABOUT WHEN THE ENTIRE AMOUNT WAS PAID BY SHRI BALARAJ GOUD TO KRISHNA RAO KESAV, RELEASE DEED WAS EXECUTED IN FAV OUR OF SHRI BALARAJ GOUD WITHOUT ANY CONSIDERATION AND ENTIRE P ROPERTY WAS TRANSFERRED IN HIS NAME. IT WAS FURTHER STATED BY A SSESSEE THAT AS HE NEITHER MADE ANY PAYMENT TOWARDS PURCHASE OF THE PR OPERTY NOR HE RECEIVED ANY CONSIDERATION WHILE EXECUTING RELEASE DEED, HE DID NOT DISCLOSE THE TRANSACTION TO THE DEPARTMENT. AO, HOW EVER, DID NOT ACCEPT EXPLANATION OF ASSESSEE. ON EXAMINING THE SA LE DEED, AO NOTICED THAT THE TOTAL CONSIDERATION OF RS. 15 LAKH S WAS PAID ON DIFFERENT DATES THROUGH CHEQUES, DD AND ONE PAYMENT OF RS. 1 LAKH WAS MADE IN CASH. THUS, IT WAS FOUND BY AO THAT THE ENTIRE SALE CONSIDERATION WAS PAID BY PURCHASERS BEFORE EXECUTI ON AND REGISTRATION OF THE SALE DEED ON 23/06/04. HE, THER EFORE, CONCLUDED THAT ASSESSEES CLAIM THAT HIS NAME WAS INCLUDED IN THE DEED FOR SECURITY PURPOSE IS NOT ACCEPTABLE. ACCORDING TO AO , IT WOULD BE INCORRECT TO SAY THAT ASSESSEE HAS NO INTEREST IN T HIS TRANSACTION. AS FAR AS THE VALUE OF THE PROPERTY IS CONCERNED, AO O N PERUSING RELEASE DEED FOUND THAT ASSESSEE AS PER THE RELEASE DEED HA S RECEIVED AN AMOUNT OF RS. 20 LAKH. HOWEVER, THE STAMP DUTY AUTH ORITY OF THE STATE GOVT. HAS VALUED THE RELEASE DEED FOR STAMP DUTY PU RPOSE AT RS. 3 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY 82,04,375. AO, THEREFORE, INVOKING THE PROVISIONS O F SECTION 50C OF THE ACT, TREATED SRO VALUE AS SALE CONSIDERATION DE EMED TO HAVE BEE RECEIVED BY ASSESSEE AND ACCORDINGLY, COMPUTED LTCG AT RS. 70,45,443. ASSESSEE CHALLENGED THE COMPUTATION OF L TCG BY AO IN AN APPEAL PREFERRED BEFORE LD. CIT(A). 4. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , IT WAS SUBMITTED BY ASSESSEE THAT NO PART OF THE SALE CONS IDERATION WAS PAID BY ASSESSEE TO THE LAND OWNER AND THE ASSESSEES NA ME WAS MENTIONED IN THE SALE DEED ONLY FOR THE PURPOSE OF SECURITY. IT WA SUBMITTED THAT LATER ON FOR REGULARIZING THE OWNERS HIP IN THE NAME OF SHRI BALARAJ GOUD, A RELEASE DEED WAS EXECUTED THOU GH ASSESSEE DID NOT RECEIVE ANY MONEY. THE VALUE OF RS. 20 LAKH WAS MENTIONED IN THE DOCUMENT ONLY FOR REGISTRATION PURPOSES. IT WAS SUBMITTED THAT TO HELP AND SAFEGUARD INTEREST OF SRI KRISHAN RAO KESA V, WHO IS A FRIEND, ASSESSEE SIGNED RELEASE DEED TO ENSURE THAT SALE TR ANSACTION OF THE PROPERTY AS PER MOU DATED 03/06/2004 IS COMPLETED. IT WAS CONTENDED ON BEHALF OF ASSESSEE THAT IN THE MOU DAT ED 03/06/04, BETWEEN THE VENDOR SRI KRISHNA RAO KESAV AND VENDEE SHRI BALARAJ GOUD, ASSESSEE WAS NOT A PARTY. ALTERNATIVELY, IT W AS SUBMITTED BY ASSESSEE THAT THE ENTIRE SALE CONSIDERATION OF RS. 15 LAKH WAS PAID BY SHRI BALARAJ GOUD ALONE. IT WAS SUBMITTED THAT THIS WOULD BE EVIDENT FROM THE FACT THAT SALE CONSIDERATION OF RS. 15 LAK H ALONG WITH REGISTRATION CHARGES, TOTAL AMOUNTING TO RS. 19,47, 680 WAS CONSIDERED FOR ADDITION BOTH AT THE HANDS OF ASSESSEE AND SHRI BALARAJ GOUD. HOWEVER, IN AN APPEAL PREFERRED BY ASSESSEE, THE AD DITION MADE WAS DELETED AND THE ENTIRE SALE CONSIDERATION INCLUDING REGISTRATION CHARGES WAS TREATED AS INVESTMENTS BEING MADE BY SH RI BALARAJ GOUD ALONE AND IN FACT THE ENTIRE AMOUNT OF RS. 19,47,68 0 WAS ASSESSED AT THE HANDS OF SRI BALRAJ GOUD. THUS, IT WAS SUBMITT ED BY ASSESSEE THAT SINCE THERE IS NO COST OF ACQUISITION TO ASSES SEE AS THE ENTIRE SALE CONSIDERATION OF RS. 15 LAKH WAS PAID BY SHRI BALARAJ GOUD ALONE, COMPUTATION PROVISION FAILS, ACCORDINGLY CA PITAL GAIN CANNOT BE 4 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY ASSESSED AT THE HANDS OF ASSESSEE. IN SUPPORT OF SU CH CONTENTION, ASSESSEE RELIED UPON A DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. SHRI B.C. SRINIVASA SHETTY, 128 ITR 294. 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE LIGHT OF FACTS AND MATERIALS AVAILABLE ON RECORD, D ELETED THE ADDITION ON ACCOUNT OF LTCG AMOUNTING TO RS. 70,45,443 BY HO LDING AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBM ISSIONS. THE ISSUE FOR CONSIDERATION IS WHETHER THERE IS A T RANSFER ARISING OUT OF RELEASE DEED DATED 23/06/2008 EXECUTED BY AP PELLANT IN FAVOUR OF B. BALRAJ GOUD FOR THE PURPOSE OF CAPITAL GAINS. AS FAR AS INVESTMENT OF RS. 15 LAKH PLUS REGISTRATION CHAR GES IN ACQUISITION OF IMPUGNED PROPERTY ON 23/06/2004 IS C ONCERNED, THE SAME WAS ASSESSED BOTH IN APPELLANTS HANDS AS WELL AS IN HANDS OF B. BALRAJ GOUD EQUALLY. HOWEVER, SUBSEQUEN TLY, THE ASSESSMENT OF B. BALRAJ GOUND WAS REOPENED AND THE ENTIRE INVESTMENT WAS HELD TO BE MADE BY B. BALRAJ GOUD HI MSELF AND ASSESSED ACCORDINGLY. WHEN APPELLANT CONTESTED IN A PPEAL, THE ADDITION OF HALF OF INVESTMENT MADE IN HIS HANDS WA S DELETED VIDE ORDER IN ITA NO. 0227/ITO-4(1). V/2012-13 DATE D 31/05/2013 ON THE GROUND THAT THE WHOLE INVESTMENT WAS ASSESSED BY THE DEPARTMENT IN THE HANDS OF B. BALRA J GOUD. IN OTHER WORDS, ENTIRE COST OF ACQUISITION OF IMPUGNED PROPERTY ON 03/06/2004 WAS HELD TO BE MADE BY B. BALRAJ GOUD ON LY. NOW, THEREFORE, IT IS ONLY FOR CONSIDERATION WHETHER THE RELEASE IN THE PRESENT RELEASE DEED AMOUNTS TO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE IT AC, 1961. THE WHOLE APPELLA NTS ARGUMENTS CAN BE DEDUCTED TO I) WHETHER EXECUTION OF RELEASE DEED WAS NECESSITAT ED BY SECTION 17 OF REGISTRATION ACT, 1908, AND NOT FOR T HE PURPOSE OF SECTION 5 OF TRANSFER OF PROPERTY ACT, 1 882: AND II) WHETHER OR NOT THE IMPUGNED RELEASE IS REGARD ED AS A TRANSFER FOR THE PURPOSE OF CAPITAL GAINS, WHEN COS T OF ACQUISITION TO APPELLANT IS NIL AND WHEN THERE IS N O COST OF ACQUISITION, WHETHER CAPITAL GAIN ARISES. 7. AFTER CAREFULLY GOING THROUGH THE FACTS OF THE C ASE, THE ARGUMENTS PUT FORTH BY THE AR AND VARIOUS JUDICIAL PRONOUNCEMENTS SUPRA, I AM OF THE OPINION THAT THE COST OF ACQUISITION TO APPELLANT BEING NIL IN THE IMPUGNED PROPERTY, CAPITAL GAIN DOES NOT ARISE IN APPELLANTS HANDS IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. B.C. SRINIVASA SHETTY [1981] 128 ITR 294. FURTHER, THE R ATIO APPLIED 5 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY IN THE DECISION OF THE SUPREME COURT WAS ALSO FOLLO WED BY ITAT, PUNE AND HONBLE HIGH COURT OF GUJARAT. THERE FORE, THE ADDITION OF RS. 70,45,443 UNDER THE HEAD CAPITAL GA IN IS DELETED. 6. LD. DR SUBMITTED BEFORE US THAT BY EXECUTING REL EASE DEED SINCE ASSESSEE HAS RELINQUISHED/EXTINGUISHED HIS RI GHTS OVER THE PROPERTY, THERE IS A TRANSFER OF CAPITAL IN TERMS W ITH SECTION 2(47) OF THE ACT. IT WAS SUBMITTED THAT SINCE SRO HAS VALUED THE PROPERTY AT RS. 82,04,375, PROVISIONS OF SECTION 50C GETS ATTRA CTED AND SRO VALUE IS TO BE DEEMED TO BE THE SALE CONSIDERATION RECEIVED BY ASSESSEE. 7. LD. AR, ON THE OTHER HAND, REITERATING THE SUBMI SSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES CONTENDED THAT IN THE SALE DEED ASSESSEES NAME WAS MENTIONED ONLY FOR SECURITY PUR POSE, BUT, IN REALITY ASSESSEE NEVER PAID ANY SALE CONSIDERATION TO THE VENDOR. IT WAS SUBMITTED THAT MOU DATED 03/06/04 CLEARLY ESTAB LISHES THIS FACT AS IN THE MOU, ASSESSEE IS NOT MADE A PARTY AND ONL Y SHRI B. BALARAJ GOUD IS A PARTY. IT WAS SUBMITTED BY LD. AR THAT SH RI B. BALARAJ GOUD ALONE HAS PAID ENTIRE SALE CONSIDERATION OF RS. 15 LAKH ALONG WITH REGISTRATION CHARGES IS PROVED FROM THE FACT THAT N OT ONLY THE ENTIRE INVESTMENT HAS BEEN ASSESSED AT THE HANDS OF SHRI B . BALARAJ GOUD, BUT, 50% OF SALE CONSIDERATION ASSESSED AT THE HAND S OF ASSESSEE WAS DELETED IN APPEAL BY LD. CIT(A). IT WAS SUBMIT TED THAT FROM THE AFORESAID FACTS, IT IS CLEARLY PROVED THAT THE PROP ERTY WAS PURCHASED BY SHRI B. BALARAJ GOUD ALONE AND ASSESSEE WAS MERE LY A NAME LENDOR FOR SAFETY PURPOSE. LD. AR SUBMITTED THAT ON LY FOR REGULARIZING OWNERSHIP OF THE PROPERTY IN THE NAME OF SHRI B. BA LARAJ GOUD, RELEASE DEED WAS EXECUTED BY MENTIONING THE SALE CO NSIDERATION OF RS. 20 LAKH, EVEN THOUGH IN REALITY, ASSESSEE DID N OT RECEIVE THE AMOUNT. THEREFORE, LD. AR SUBMITTED THAT AS THERE I S NO COST OF ACQUISITION TO ASSESSEE, LTCG CANNOT BE ASSESSED AT THE HANDS OF 6 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY ASSESSEE. IN SUPPORT OF SUCH CONTENTION, HE RELIED ON THE DECISION OF CIT VS. SHRI B.C. SRINIVASA SHETTY (SUPRA). 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. UNDISPUTEDLY, A REGISTERED SALE DEED WAS EXECUTED O N 23/06/04. FROM THE SAID SALE DEED IT APPEARS, ASSESSEE ALONG WITH SHRI B. BALARAJ GOUD HAVE PURCHASED THE PROPERTY IN QUESTION ON PAY MENT OF RS. 15 LAKH ALONG WITH REGISTRATION CHARGES OF RS. 4,47,68 0, TOTALING TO RS. 19,47,680. HOWEVER, IT IS A FACT ON RECORD THAT WHI LE COMPLETING ASSESSMENT IN CASE OF ASSESSEE FOR AY 2005-06, AO M ADE ADDITION OF RS. 9,73,839 BEING ASSESSEES SHARE IN THE INVEST MENT MADE TOWARDS PURCHASE OF THE PROPERTY. HOWEVER, IN AN AP PEAL PREFERRED BEFORE LD. CIT(A) BY ASSESSEE, THE ADDITION MADE BY AO WAS DELETED BY TAKING NOTE OF THE FACT THAT IN AN ASSESSMENT OR DER PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT FOR THE AY 2005-06, ENTIRE INVESTMENT OF RS. 19,47,680 WAS ASSESSED AT THE HAN DS OF SHRI B. BALARAJ GOUD. THIS FACT REMAINS UNCONTROVERTED. THA T BEING THE CASE, THE ENTIRE INVESTMENT IN PURCHASE OF PROPERTY HAVI NG BEEN MADE BY SHRI B. BALARAJ GOUD AND ASSESSEE HAVING NOT MADE A NY INVESTMENT, THERE IS NO COST OF ACQUISITION IN SO FAR AS ASSESS EE IS CONCERNED. THEREFORE, EVEN ASSUMING ASSESSEE HAS RECEIVED THE AMOUNT OF RS. 20 LAKHS ON EXECUTING RELEASE DEED, HE CANNOT BE CH ARGED TO LTCG AS THERE IS NO COST OF ACQUISITION TO ASSESSEE. IN CASE OF CIT VS. B.C. SRINIVASA SHETTY (SUPRA), THE HONBLE SUPREME COURT HELD AS UNDER: 7. SEC. 45 CHARGES THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET TO INCOME-TAX. THE ASSET MUST BE ONE WHICH FA LLS WITHIN THE CONTEMPLATION OF THE SECTION. IT MUST BEAR THAT QUA LITY WHICH BRINGS S. 45 INTO PLAY. TO DETERMINE WHETHER THE GOODWILL OF A N EW BUSINESS IS SUCH AN ASSET, IT IS PERMISSIBLE, AS WE SHALL PRESENTLY SHO W, TO REFER TO CERTAIN OTHER SECTIONS OF THE HEAD 'CAPITAL GAINS'. SEC. 45 IS A CHARGING SECTION. FOR THE PURPOSE OF IMPOSING THE CHARGE, PARLIAMENT HAS ENAC TED DETAILED PROVISIONS IN ORDER TO COMPUTE THE PROFITS OR GAINS UNDER THAT HEAD. NO EXISTING PRINCIPLE OR PROVISION AT VARIANCE WITH THEM CAN BE APPLIED FOR DETERMINING THE CHARGEABLE PROFITS AND GAINS. ALL TRANSACTIONS ENCOMPASSED BY S. 45 MUST FALL UNDER THE GOVERNANCE OF ITS COMPUTATION P ROVISIONS. A TRANSACTION TO WHICH THOSE PROVISIONS CANNOT BE APPLIED MUST BE REGARDED AS NEVER 7 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY INTENDED BY S. 45 TO BE THE SUBJECT OF THE CHARGE. THIS INFERENCE FLOWS FROM THE GENERAL ARRANGEMENT OF THE PROVISIONS IN THE IT ACT, WHERE UNDER EACH HEAD OF INCOME THE CHARGING PROVISION IS ACCOMPANIE D BY A SET OF PROVISIONS FOR COMPUTING THE INCOME SUBJECT TO THAT CHARGE. TH E CHARACTER OF THE COMPUTATION PROVISIONS IN EACH CASE BEARS A RELATIO NSHIP TO THE NATURE OF THE CHARGE. THUS, THE CHARGING SECTION AND THE COMPUTAT ION PROVISIONS TOGETHER CONSTITUTE AN INTEGRATED CODE. WHEN THERE IS A CASE TO WHICH THE COMPUTATION PROVISIONS CANNOT APPLY AT ALL, IT IS E VIDENT THAT SUCH A CASE WAS NOT INTENDED TO FALL WITHIN THE CHARGING SECTION. O THERWISE, ONE WOULD BE DRIVEN TO CONCLUDE THAT WHILE A CERTAIN INCOME SEEM S TO FALL WITHIN THE CHARGING SECTION THERE IS NO SCHEME OF COMPUTATION FOR QUANTIFYING IT. THE LEGISLATIVE PATTERN DISCERNIBLE IN THE ACT IS AGAIN ST SUCH A CONCLUSION. IT MUST BE BORNE IN MIND THAT THE LEGISLATIVE INTENT IS PRE SUMED TO RUN UNIFORMLY THROUGH THE ENTIRE CONSPECTUS OF PROVISIONS PERTAIN ING TO EACH HEAD OF INCOME. NO DOUBT THERE IS A QUALITATIVE DIFFERENCE BETWEEN THE CHARGING PROVISION AND A COMPUTATION PROVISION. AND ORDINARI LY THE OPERATION OF THE CHARGING PROVISION CANNOT BE AFFECTED BY THE CONSTR UCTION OF A PARTICULAR COMPUTATION PROVISION. BUT THE QUESTION HERE IS WHE THER IT IS POSSIBLE TO APPLY THE COMPUTATION PROVISION AT ALL IF A CERTAIN INTERPRETATION IS PRESSED ON THE CHARGING PROVISION. THAT PERTAINS TO THE FUN DAMENTAL INTEGRALITY OF THE STATUTORY SCHEME PROVIDED FOR EACH HEAD. THE POINT TO CONSIDER THEN IS WHETHER IF THE EXPRES SION 'ASSET' IN S. 45 IS CONSTRUED AS INCLUDING THE GOODWILL OF A NEW BUSINE SS, IT IS POSSIBLE TO APPLY THE COMPUTATION SECTIONS FOR QUANTIFYING THE PROFIT S AND GAINS ON ITS TRANSFER. 8. THE MODE OF COMPUTATION AND DEDUCTIONS SET FORTH I N S. 48 PROVIDE THE PRINCIPAL BASIS FOR QUANTIFYING THE INCOME CHARGEAB LE UNDER THE HEAD 'CAPITAL GAINS'. THE SECTION PROVIDES THAT THE INCO ME CHARGEABLE UNDER THAT HEAD SHALL BE COMPUTED BY DEDUCTING FROM THE FULL V ALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET : '(II) THE COST OF ACQUISITION OF THE CAPITAL ASSET . . .' WHAT IS CONTEMPLATED IS AN ASSET IN THE ACQUISITION OF WHICH IT IS POSSIBLE TO ENVISAGE A COST. THE INTENT GOES TO THE NATURE AND CHARACTER OF THE ASSET, THAT IT IS AN ASSET WHICH POSSESSES THE INHERENT QU ALITY OF BEING AVAILABLE ON THE EXPENDITURE OF MONEY TO A PERSON SEEKING TO ACQ UIRE IT. IT IS IMMATERIAL THAT ALTHOUGH THE ASSET BELONGS TO SUCH A CLASS, IT MAY, ON THE FACTS OF A CERTAIN CASE, BE ACQUIRED WITHOUT THE PAYMENT OF MO NEY. THAT KIND OF CASE IS COVERED BY S. 49 AND ITS COST, FOR THE PURPOSE O F S. 48, IS DETERMINED IN ACCORDANCE WITH THOSE PROVISIONS. THERE ARE OTHER P ROVISIONS WHICH INDICATE THAT S. 48 IS CONCERNED WITH AN ASSET CAPABLE OF AC QUISITION AT A COST. SEC. 50 IS ONE SUCH PROVISION. SO ALSO IS SUCH S S. (2) OF S. 55. NONE OF THE PROVISIONS PERTAINING TO THE HEAD 'CAPITAL GAINS' S UGGESTS THAT THEY INCLUDE AN ASSET IN THE ACQUISITION OF WHICH NO COST AT ALL CAN BE CONCEIVED. YET THERE ARE ASSETS WHICH ARE ACQUIRED BY WAY OF PRODU CTION IN WHICH NO COST ELEMENT CAN BE IDENTIFIED OR ENVISAGED. FROM WHAT H AS GONE BEFORE, IT IS APPARENT THAT THE GOODWILL GENERATED IN A NEW BUSIN ESS HAS BEEN SO REGARDED. THE ELEMENTS WHICH CREATE IT HAVE ALREADY BEEN DETAILED. IN SUCH A CASE, WHEN THE ASSET IS SOLD AND THE CONSIDERATIO N IS BROUGHT TO TAX, WHAT IS CHARGED IS THE CAPITAL VALUE OF THE ASSET AND NO T ANY PROFIT OR GAIN. 8 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY 9. IN THE CASE OF GOODWILL GENERATED IN A NEW BUSINES S THERE IS THE FURTHER CIRCUMSTANCE THAT IT IS NOT POSSIBLE TO DETERMINE T HE DATE WHEN IT COMES INTO EXISTENCE. THE DATE OF ACQUISITION OF THE ASSET IS A MATERIAL FACTOR IN APPLYING THE COMPUTATION PROVISIONS PERTAINING TO C APITAL GAINS. IT IS POSSIBLE TO SAY THAT THE 'COST OF ACQUISITION' MENTIONED IN S. 48 IMPLIES A DATE OF ACQUISITION, AND THAT INFERENCE IS STRENGTHENED BY THE PROVISIONS OF SS. 49 AND 50 AS WELL AS SUB-S. (2) OF S. 55. 10. IT MAY ALSO BE NOTED THAT IF THE GOODWILL GENERATE D IN A NEW BUSINESS IS REGARDED AS ACQUIRED AT A COST AND SUBSEQUENTLY PAS SES TO AN ASSESSEE IN ANY OF THE MODES SPECIFIED IN SUB-S. (1) OF S. 49, IT WILL BECOME NECESSARY TO DETERMINE THE COST OF ACQUISITION TO THE PREVIOUS O WNER. HAVING REGARD TO THE NATURE OF THE ASSET, IT WILL BE IMPOSSIBLE TO D ETERMINE SUCH COST OF ACQUISITION. NOR CAN SUB-S. (3) OF S. 55 BE INVOKED , BECAUSE THE DATE OF ACQUISITION BY THE PREVIOUS OWNER WILL REMAIN UNKNO WN. 9. THE PRINCIPLE OF LAW AS CAN BE CULLED OUT FROM T HE AFORESAID DECISION OF THE HONBLE SUPREME COURT IS CHARGING S ECTION AND COMPUTATION OF PROVISION TOGETHER CONSTITUTE A INTE GRATED CODE. WHEN THERE IS A CASE TO WHICH COMPUTATION PROVISION CANN OT APPLY AT ALL, IT IS EVIDENT THAT SUCH A CASE WAS NOT INTENDED TO FAL L WITHIN THE CHARGING SECTION. ON A READING OF COMPUTATION PROVI SION AS CONTAINED U/S 48 OF THE ACT, IT IS CLEAR THAT WHILE COMPUTING CAPITAL GAIN, THE COST OF ACQUISITION HAS TO BE REDUCED. THE COST OF ACQUI SITION TO ASSESSEE IN THE PRESENT CASE CANNOT BE ARRIVED AT U/S 49 OF THE ACT AS THE TRANSACTION ENTERED INTO BY ASSESSEE DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED THEREIN. EVEN THE COST OF ACQU ISITION CANNOT BE TAKEN TO BE NIL IN TERMS WITH SECTION 55(2) OF TH E ACT, AS IT IS NOT COMING WITHIN THE CATEGORY OF TRANSACTION MENTIONED THEREIN. IN THE AFORESAID FACTS AND CIRCUMSTANCES, WHEN UNDISPUTEDL Y, THERE IS NO COST OF ACQUISITION TO ASSESSEE, THE COMPUTATION PR OVISION FAILS, ACCORDINGLY, CAPITAL GAIN CANNOT BE COMPUTED. IN TH E AFORESAID VIEW OF THE MATTER, ASSESSEE, IN THE PECULIAR FACTS AND CIR CUMSTANCES OF THE CASE, CANNOT BE CHARGED TO LTCG ON THE VALUE OF CON SIDERATION DEEMED TO HAVE BEEN RECEIVED ON EXECUTION OF RELEAS E DEED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF LD. CIT(A), WHICH IS UPHELD. 9 ITA NO. 1650/HYD/2013 SRI ANTHATI BIKSHAPATHY 10. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 07/01/2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 7 TH JANUARY, 2015 KV COPY TO:- 1) ITO, WARD 4(1), 5 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) SRI ANTHATI BIKSHAPATHY, 1-3-183/40/128, SBI COL ONY, GANDHINAGAR, HYDERABAD. 3) CIT(A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.