Law:

Section:

Section 48(ii) of the Income-tax Act, 1961-Capital gains-Cost of acquisition for computation of - Karta of assessee-HUF threw his personal shares into common hotch pot of joint family-Subsequently, assessee sold said shares-Whether in computation of capital gains, cost of acquisition of shares should be taken to be market value of shares as on date on which these were thrown into common hotch pot and not at nil as done by ITO-Held, on facts, yes Facts The karta of the assessee-HUF had purchased certain shares in his individual capacity. Subsequently, he threw the same in the common hotch pot of the HUF. During the accounting year relevant for the assessment year 1972-73, the assessee sold the shares and claimed that for the purpose of computation of capital gains, the cost of acquisition of these shares should be taken to be the market value of the shares as on the date on which the shares were thrown in the common hotch pot but the ITO took the cost of acquisition of these shares at nil on the ground that so far as the assessee was concerned, it did not have to incur any expenses for acquisitioning these shares. On appeal, the AAC allowed the assessee's claim and directed the ITO to compute capital gains, accordingly. On further appeal by the revenue, the Tribunal upheld the AAC's order. On reference: Held For the purpose of working out capital gains on transfer of a capital asset, which the assessee has not purchased, the correct method of finding out the cost of acquisition of the capital asset to the assessee is to ascertain the real value of the capital asset to the assessee at the time he acquired it and such real value of the capital asset to the assessee is the market value as on the date of acquisition. Accordingly, the cost of acquisition of the shares to the assessee was the market value of the shares as on the date on which these were thrown in the common hotch pot of the HUF by its karta. Case review CIT v. Solomon & Sons [1933] 1 ITR 324 (Rangoon), CIT v. A.V. Appu Chettiar [1962] 45 ITR 152 (Mad.) and Kalooram Govindram v. CIT [1965] 57 ITR 335 (SC) applied. Editor's note The position in law in such cases, as the present one, is different now…

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