Jayakumari and Dilharkumari (Executrixes and Trustees of Late H.H. Rajkuverba) vs Commissioner of Income Tax (No. 3)

Jagannatha Shetiy, Actg. C.J.

In this reference u/s 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following five questions :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the assessment made by the Income Tax Officer on the assessees u/s 168 of the Income Tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that both the instalment of principal amount and interest on annuity deposit are taxable under the provisions of the Income Tax Act, 1961?

(3) If the answer to the above second question is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the proportionate estate duty payable on the annuity deposit is not deductible from the annuity deposit assessable as income ?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal is right in confirming the assessment of capital gains arising out of the sale of jewellery ?

(5) If the answer to the above question is in the affirmative, whether the Tribunal was right in taking the cost of jewellery for the purpose of computation of capital gains as on January 1, 1954, and not as on April 1, 1973, the date on which they were declared to be capital assets ?"

The first three questions have been the subject-matter of other references before this court in Jayakumari and Dilharkumari v. CIT (supra pp. 787, 791) (See ITRC Nos. 14 and 15 of 1981). There, this court has answered the questions in the affirmative and against the assessee. Similar answers should follow for these three questions also.

With regard to questions Nos. (4) and (5), we may set out some facts :

The assessees had sold certain jewellery on August 8,1972. By the Finance Act, 1972, which was brought into force with effect from April 1, 1973, gold ornaments and jewellery were included in the definition of "Capital asset". The assessees contended before the authorities that there was no capital gains during the assessment year 1973-74, since the sale has taken place during the accounting year and not in the assessment year. All the authorities have rejected that claim. The Tribunal, in particular, has followed the decision of the Gujarat High Court in Maneklal Vallabhdas Parikh and Sons Vs. Commissioner of Income Tax, , to reject the claim of the assessees.

Mr. Bhat, counsel for the assessees, invited our attention to a recent decision of the Rajasthan High Court in Commissioner of Income Tax Vs. Laxman Singh, in support of his contention that the amendment, by the Finance Act, 1972, was not retrospective and, therefore, the capital gains which accrued on the sale of the jewellery before the amendment should not be bought to tax. It is true that the said decision of the Rajasthan High Court supports the contention urged by Mr. Bhat. But, with respect, we may point out that the view taken thereunder would be contrary to the well settled principles under the Income Tax Act.

Here, we may just refer to the following passage from Kanga and Palkhivala''s the Law and Practice of Income Tax, VII edition, Volume I, page 83 :

"Law to be applied is that in force in assessment year.--Though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year, unless otherwise stated or implied ; and any amendment which is in force at the beginning of the relevant assessment year must govern the case though the amendment is made after the income under assessment is earned. In other words, the Income Tax Act as it stands amended on the 1st April of a financial year must apply to the assessment for that year.".

That is also the view taken by the Gujarat High Court in Maneklal Vallabhdas Parikh and Sons Vs. Commissioner of Income Tax, . We do not think, therefore, that much discussion is necessary in the matter in view of the settled principle.

We, therefore, answer questions Nos. (4) and (5) also in the affirmative and against the assessees.