Law:

Section:

Section 49 of the Income-tax Act, 1961 - Capital gains - Cost with reference to certain modes of acquisition - Assessment years 1977-78 and 1979-80 - Whether when cost of acquisition of capital asset cannot be ascertained but asset has a market value, capital gain will be attracted by taking cost of acquisition to be fair market value as on 1-1-1954, or on a date statutorily specified or at option of assessee, on market value on date of acquisition - Held, yes FACTS The assessee was an individual. During the assessment years in question, the assessee sold certain plots of land on which tax under the head 'Capital gains' was sought to be levied. The assessee contested the levy by submitting that cost of acquisition by the previous owner was incapable of being ascertained. The previous owner was an ex-ruler of the Pepsu State and the asset was acquired under the instrument of annexation and, thus, its cost of acquisition could not be ascertained. This plea was rejected and the Assessing Officer proceeded to assess capital gain taking the cost of acquisition equal to the market value as on 1-1-1954/1-1-1964 depending on the dates specified under section 55(2) as applicable to the year of assessment. On appeal, the Commissioner (Appeals) also rejected the plea of the assessee that the cost of acquisition being incapable of ascertainment, no capital gain was attracted. However, the Tribunal reversed the said view following the of the Supreme Court in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294/5 Taxman 1. On revenue's appeal: HELD In the instant case, the assessee acquired the property by succession from the previous owner. According to the stand of the assessee, the cost of acquisition by the previous owner could not be ascertained. However, he failed to exercise the option of going either by market value on the date of acquisition or by the cost to the previous owner in which case the only option available to the Assessing Officer was to proceed to compute capital gain by taking the cost of the asset to be the fair market value on the specified date, i.e ., 1-1-1954 as per applicable provision for the assessment year 1977-78 and as on 1-1-1964 for the…

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