Commissioner of Income Tax vs Pushpraj Singh

A.K. Mathur, C.J.—This is an application u/s 256(2) of the income tax Act, 1961 (''the Act'') at the instance of the revenue. The revenue has raised the following two questions of law for answer by this Court by calling for the statement of the case : 1. Whether, on the facts and in the circumstances of the case, the Tribunal had jurisdiction to allow the assessee to raise different grounds of appeal, particularly in view of the facts that the issues were not raised before the Commissioner (Appeals) and the Commissioner (Appeals) had not considered the issue in his order?

Whether the Tribunal was right in law in holding that the rights did not vest with the assessee on the shares and securities and, therefore, surplus arising out of their sale by the assessee was not exigible to tax?

Brief facts giving rise to this reference are that the respondent-assessee in respect of the assessment year 1981-82 had offered capital gains arising out of the sale of shares and securities for taxation. In his written reply dated 1-3-1984, the assessee had mentioned that these shares were coming down since before the merger of the State but the Government took over and later on gradually transferred them to him. It was, therefore, opted that value as on 1-1-1964 should be taken as cost of the asset for the purpose of computation of capital gains. Subsequently, the assessee filed a written reply again on 20-3-1984 stating that the shares were received by him from the Government of India in 1971-72 and their cost price for the purpose of capital gains may be taken as on the date of receipt from the Government of India. It was further offered that the value of the bonds should be taken at the original cost, i.e., face value and the respondent/assessee himself offered for taxation the capital gains arising out of shares and securities and during the course of assessment proceedings, he never disputed the ownership of the shares and securities. The ITO, accordingly, assessed the capital gains at Rs. 27,70,931 as shown by the assessee.

The respondent/assessee filed an appeal before the Commissioner (Appeals) and raised a ground that determination of capital gains on sale of shares at Rs. 27,70,931 was not justified and was excessive. The Commissioner (Appeals) dismissed the appeal of the assessee. The assessee, therefore, filed an appeal before the Tribunal and before the Tribunal it was for the first time agitated that the levy of capital gains of Rs. 27,18,931 on sale of foreign shares was unjustified and excessive as the shares were received from the Government ex gratia and not by way of any gift and did not cost anything to the assessee and, therefore, no capital gain was chargeable. The revenue objected before the Tribunal that this ground could not be adjudicated as the same was not raised nor decided before the Commissioner (Appeals) but the Tribunal rejected the objection of the revenue. However, the Tribunal held that no capital gain is exigible in the transfer of shares and bonds on the ground that the assets in the form of shares and bonds belonged to the Government of India and subsequently half of the shares were transferred to the respondent/assessee not as a right but only by way of graceful moral gesture on its part and according to the Tribunal, the respondent/assessee did not become the owner of the assets. The Tribunal held that the cost of acquisition of shares and securities was nil to the respondent/assessee and, therefore, no capital gain could be levied thereon. Against this order of the Tribunal, the revenue filed an application for making a reference to the High Court of the aforesaid two questions of law. The application was rejected by the Tribunal on the ground that the appeal had been decided on the basis of the opinion of the High Court of Madhya Pradesh in the case of Commissioner of Income Tax Vs. H.H. Maharaja Sahib Shri Lokendra Singhji,

So far as the first question is concerned, the Tribunal held that this is a question of fact. As regards the second question, the Tribunal has decided the matter in the light of the decision of this Court. The Tribunal has, therefore, rejected the application u/s 256(2) of the Act. Hence, this application u/s 256(2) has been moved by the revenue on the aforesaid two questions of law.

We have considered the matter and after going through the record, we find that the Tribunal has correctly approached the matter and rightly held in the light of the decisions in the cases of H.H. Maharaja Sahib Shri Lokendra Singhji''s case (supra) and Commissioner of Income Tax Vs. Markapakula Agamma, . Therefore, no question of law arises for answer by this Court as the questions which have been agitated in this reference have already been answered by this Court. Application u/s 256(2) for calling for the statement of case on the aforementioned questions of law is rejected.