Bombay High Court
Kirti Babulal Shah vs Ito on 5 September, 2001
Equivalent citations: (2002)77TTJ(MUMBAI)30
ORDER
M.K. Chaturvedi, Vice President This appeal by the assessee is directed against the order of Commissioner (Appeals)-XXXIX, Mumbai, and relates to the assessment year 1997-98.
2. I have heard the rival submissions in the light of material placed before me. Intimation dated 4-8-1997, under section 143(1)(a) of the Income Tax Act, 1961 (hereinafter referred to as the Act), was sent to the assessee. The benefit of indexation cost of acquisition of units under UTI MEP-91 and UTI MEP-92 was denied while computing long-term capital gain on repurchase of the said units of the UTI. Assessee filed application under section 154, which was rejected, Commissioner (Appeals) confirmed the order of assessing officer. Being aggrieved of the order of the Commissioner (Appeals), assessee is in appeal before the Tribunal. The short question before the Tribunal is whether the benefit of indexation could be allowed to the assessee in respect of the capital gain arising on repurchase of units referred to in sub-section (2) of section 8OCCB of the Act.
3. Section 45(6) of the Act was inserted by the Finance Act, 1990, with effect from 1st April, 1991. This is reproduced here as under :
"45. (1) ...................
(6) Notwithstanding anything contained in sub-section (1), the difference between the repurchase price of the units, referred to in sub-section (2) of section 8OCCB and the capital value of such units shall be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place or the plan referred to in that section is terminated and shall be taxed accordingly.
Explanation : For the purposes of this sub-section, "capital value of such units" means any amount invested by the assessee in the units referred to in sub-section (2) of section 80CCB."
4. It transpires from the perusal of the said section that the difference between the repurchase price of the units referred to in section 80CCB(2) and the capital value of such units is to be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place or the plan referred to in section 8OCCB is terminated and is, for and from assessment year 1991-92, to be taxed accordingly. For this purpose capital value of such units means "any amount" invested by the assessee in the units referred to in section 8OCCB(2). This section prescribes for the charge of capital gain. But how the capital gains is to be computed is discussed in section 48 of the Act. The modus of computation is set out in this section. For the chargeability of capital gain in respect of units referred to in sub-section (2) of section 8OCCB of the Act, no separate modus is prescribed under the Act.
5. Section 48 as substituted by the Finance Act, 1992, with effect from 1st April, 1993, is operative for and from assessment year 1993-94. This is a special provision in relation to certain long-term capital gains. It is applicable in respect of long-term capital gain arising from the transfer of a long-term capital asset. It is not applicable in respect of the capital gain arising to a non-resident from the transfer of shares or debentures of, an Indian company referred to in the first proviso. According to the second proviso, for computing the long-term capital gains cost of acquisition "as stated in section 48(ii)", shall be taken to be indexed cost of acquisition. By Finance Act, 1997, with effect from 1-4-1998, third proviso was inserted to section 48. This reads as under :
"Provided also that nothing contained in the ' second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government. "
6. Second proviso to section 48 is, therefore, not applicable to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government. Units referred to in sub-section (2) of section 8OCCB are not being excluded under section 48. The procedure of computation is set out under section 48. Capital gain is to be calculated in the modus prescribed within that section.
7. For assessment years 1991-92 and 1992-93, a 100 per cent deduction was allowable under section 80CCB for investment in units under equity linked savings scheme up to Rs. 10,000. On repurchase or redemption, the principal amount which had been allowed as a deduction under section 8OCCB was exigible to tax as income by virtue of section 8OCCB(2). The premium on repurchase or redemption of such units is deemed to be a capital gain under section 45(6). Section 45(6) provides that the difference between the repurchase price of the units and the amount invested therein shall be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place, etc., and taxed accordingly. It is a trite law that if you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs in fact had existed, must inevitably have flowed from or accompanied it. By virtue of section 45(6) difference between the repurchase price of the units and the amount invested therein is deemed to be a capital gain. Once it is deemed to be a capital gain, all the provisions relatable to the computation of capital gain to be applied for ascertaining the true capital gain or loss. If other sub-sections of section 45 are analysed, it is seen that they are merely charging sections. From this it appears that section 45 lays down the tenets for the charge of capital gains tax. The computation of that tax is to be done in accordance with the modus prescribed under section 48. The benefit of indexation of cost of such units should thus be made available on repurchase or redemption of such units. No contrary decision was brought to my notice.
8. I am reminded of the dictum of approbate and reprobate. This is a phrase followed from Scot's Law, where it is used to express the principle embodied in the English doctrine of election that is, namely, that no party can accept and reject the same thing. Assessing officer cannot be permitted to blow hot and cold in the same stream. In order to make adjustment in the assessment, he took this as apparent error and for purposes of making rectification under section 154, it was taken as a debatable issue. If the issue is debatable, adjustment cannot be made in respect of the same under section 143(1)(a) of the Act.
9. Having regard to the facts and after taking into consideration the entire conspectus of the case I am of the opinion that the benefit of indexation of cost is allowable in respect of the computation of capital gains chargeable under section 45(6) of the Act. I direct the assessing officer to compute the capital gains accordingly.
10. In the result appeal of the assessee stands allowed.