Commissioner Of Income-Tax vs A. And F. Harvey Ltd., Madurai on 29 March, 1990
In this context, yet another decision brought to our notice was that in CIT v. Inland Agencies P. Ltd. [1983] 143 ITR 186 (Mad), wherein while considering the provisions of section 45, 46(1), (2) and 48 of the Income-tax Actu 1961, this court pointed out that, in computing the capital gains under section 46(2) on amounts received by a shareholders on the liquidation of a company, the cost of acquisition of the capital assets, viz., the shares, and any cost of improvement thereto will have to be deducted. If the payment by the liquidator is made in instalments, the cost of acquisition cannot be deducted at every point of time when there is a receipt from the liquidators. It should be deducted from the earlier payments and once the cost of acquisition is wiped out, any further sum received would be completely liable to tax as capital gains. This decision is also an authority for the proposition that, before the coming into force of the Income-tax Act, 1961, the court is not concerned with the computation of capital gain as contemplated under section 46(2) of the Act.