Law:

Section:

Section 114 [omitted by the finance (no. 2) act, 1967, with effect from 1-4-1968 and reintroduced with material modifications in section 80T] of the Income-tax Act, 1961-Capital gains-Deduction in case of assessees other than companies-Assesses, a registered firm, derived long-term capital gains in assessment year 1965-66-ITO taxed amount of capital gains in the hands of assessee as well as in the hands of partners-Whether tribunal correct in holding that assessee not liable to pay any tax on capital gain under section 114-Held, on facts, no Facts During the accounting year relevant for the assessment year 1965-66, the assessee, a registered firm, derived long-term capital gains. The ITO taxed the said amount in the hands of the assessee-firm, at the minimum rate of 15 per cent. as well as in the hands of the partners, and the same was upheld by the AAC. On second appeal, the Tribunal, accepting the contention of the assessee that if at all any tax was payable by the assessee as well as the partners cumulatively it could not exceed 15 per cent. opined that if the orders of the lower authorities were upheld then in the case of a registered firm where the total income including capital gains was Rs. 20,000 or less, the registered firm on the basis of section 114 would have to suffer tax at the rate of 15 per cent in respect of capital gains included in its total income while the partners would also have to pay the same at 15 per cent minimum tax in respect of capital gains falling to their share and that this would amount to hardship and double taxation in the case of a registered firm, which could not have been the intention of the Legislature. It, accordingly, held that the assessee would not be liable to pay any tax on capital gains under section 114. On reference: Held A firm is included within the definition of '"person" in section 2(31) and if any tax or any other sum of money is payable by a firm, the firm would be an assessee in its own right. The position of assessment in respect of registered and unregistered firms under the 1922 Act underwent a change in 1956. As a result of the said change, income-tax at a special low rate came to be assessed on…

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