Delhi High Court
Commissioner Of Income-Tax vs Ramesh Khanna on 4 January, 2001
Equivalent citations: (2001)169CTR(DEL)262, [2001]249ITR359(DELHI), [2001]117TAXMAN724(DELHI)
Author: Arijit Pasayat
Bench: Arijit Pasayat, D.K. Jain
JUDGMENT Arijit Pasayat, C.J.
1. At the instance of the Revenue, the following question has been referred by the Income-tax Appellate Tribunal, Delhi Bench-B ("the Tribunal" in short), under section 256(1) of the Income-tax Act, 1961 (in short, "the Act"), for the opinion of this court :
"Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that for the purpose of determining the income under the head 'Capital gains' the assessed was entitled to claim the previous year ending December 25, 1975, under the provisions of section 3(1)(c) ?"
2. The factual position in a nutshell is as follows :
The assessed was a partner in the firm, Jaipur Golden Transport Carriers, and also derived income from salaries, interest and dividend. For the assessment year 1976-77, the last date of the previous year for different sources of income as declared by the assessed was March 31, 1976. The assessed made a disclosure under the Voluntary Disclosure of Income and Wealth Ordinance, 1975. Disclosure was made in respect of a sum of Rs. 50,010 claimed to be representing the value of jewellery weighing 4,53 7 gms. Out of the said quantity of jewellery a part was sold on December 23, 1975, for Rs. 50,631 and for a further sum of Rs. 22,659 on December 22, 1975. The weight of the jewellery sold on these two dates was 1,580.600 gms. The rest of the jewellery was sold on December 29, 1975, for a sum of Rs. 69,792. In the return of income filed on July 30, 1976, the assessed disclosed capital gains of Rs. 55,744 so far as sale proceeds of Rs. 73,290 up to December 25, 1975, is concerned and claimed that only this amount should be included in the income of the year. The assessed's stand was that he was entitled to claim the previous year ending on December 25, 1975, for the purpose of capital gains under section 3(1)(b). The Income-tax Officer did not accept the stand and held that if the asses-see wanted to adopt the previous year ending December 25, 1975, for one of the sources of income he was required to take permission of the Central Board of Direct Taxes (in short "the Board"), under section 3(1)(c) of the Act. But since the permission had not been taken capital gains from the entire sale proceeds up to March 31, 1976, had to be taken into account. The assessed preferred an appeal before the Appellate Assistant Commissioner ("the AAC" in short). Reference was made to section 3(1)(b) of the Act which corresponds to section 2(11)(1)(a) of the Indian Income-tax Act, 1922 (in short, "the old Act"). It was submitted that there was no necessity to have either separate books of account in respect of income from separate sources or even to have a separate part of the book confined to income from that source. Since the assessed had maintained separate books for the purpose of sale of jewellery and these books were closed on December 25, 1975, his claim was in order. The Appellate Assistant Commissioner did not accept this stand and observed that the case would fall under section 3(1)(c) of the Act. The matter was carried in appeal before the Tribunal. With reference to section 3(1)(b) of the Act, the Tribunal held that the language of the said provision was clear and it entitles the asses-'see, at his option, to make up the accounts up to a date within the financial year immediately preceding the assessment year. Since the assessed had maintained separate accounts for the purchase and sale of jewellery and these accounts were closed on December 25, 1975, the assessed was within his powers to draw up the profit and loss account and balance-sheet for the period ending December 25, 1975, and the capital gains have to be computed till December 25, 1975. It was observed that section 3(l)(c) would apply only if clauses (a) and (b) of sub-section (1) of section 3 are not applicable.
3. On being moved for a reference, the question as set out above has been referred for our opinion.
4. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of service of notice.
5. Learned counsel for the Revenue submitted that the Tribunal lost sight of the requirement of section 3(1)(c) and, therefore, the income-tax Officer's as well as the Appellate Assistant Commissioner's view should have been accepted.
6.To appreciate the Revenue's stand it is necessary to take note of the provision. Section 3(1), as it stood at the relevant point of time and so far as relevant to the present case, reads as follows :
"3. 'Previous year' defined.-
(1) For the purposes of this Act, 'previous year' means-fa) the financial year immediately preceding the assessment year ; or
(b) if the accounts of the assessed have been made up to a date within the said financial year, then, at the option of the assessed, the twelve months ending on such date ; or
(c) in the case of any person or business or class of persons or business not falling within clause (a) or clause (b), such period as may be determined by the Board or by any authority authorised by the Board in this behalf; or"
7. Under section 3(1)(b) the assessed has been given an option to have a previous year different from the financial year as provided in section 3(1)(a). Such option can be exercised under the following conditions :
(a) if the assessed has made up his accounts ;
(b) such accounts have been made up to a date within the financial year immediately preceding the assessment year ; and
(c) the accounting year is a period of twelve months.
8. So far as capital gains are concerned, as evident from section 45, the same is deemed to be income of the previous year in which the transfer took place. If the conditions laid down in section 3(1)(b) exist, the ascertainment of the previous year has to be done in line with it.
9. In C/Tv. Lady Kanchanbai [1970] 77 ITR 123, the apex court while dealing with the provisions of section 2(11)(i)(a) of the old Act held that it was possible for an assessed to have different previous years for each separate source of income and profit and loss account. The position is no different under the Act as is clear from a bare reading of section 3(lXb) along with section 3(3). The assessed had the option to adopt a different previous year for each source of income. That being the position, the Tribunal was justified in its view. The question referred is, therefore, answered in the affirmative, in favor of the assessed and against the Revenue.
10. The reference stands disposed of accordingly.