Law:

Section:

Section 49(1)(iii) of the Income-tax Act, 1961 - Capital gains - Computation of cost with reference to certain modes of acquisition - By a High Court order a company 'B' amalgamated with assesses-company - Certain assets of 'B' which were taken over by assessee were sold during relevant year - Even after amalgamation identity of business was preserved and there was continuity of business - Whether said capital assets became property of assessee by succession within meaning of section 49(1)(iii) and cost of acquisition of impugned assets be computed accordingly -Held, yes Facts The assessee-company 'D' was renamed as 'BB'. By a High Court order another company 'B' amalgamated with the assessee with effect from 30-11-1961 and since then the assessee-company was again renamed as 'C'. For the assessment year 1963-64, in computing the taxable income of the assessee, the ITO found that some of the assets of 'B' which were taken over by the assessee on amalgamation had been sold before putting them to use. The ITO held that on sale of the said assets, long-term capital gains accrued in the hands of the assessee which were computed for the relevant assessment year. The claim of the assessee that in computing such capital gains, fair market value of the assets as on 1-1-1954, should be considered and not their actual cost, was rejected. On appeal, the Tribunal held that the capital assets became the property of the assessee by succession within the meaning of section 49(1)(iii) and that the cost of acquisition of the assets would be deemed to be the cost at which the previous owner of the property had acquired it. On reference : Held In the instant case, according to the finding of the Tribunal, the assets and business of 'B' were transferred to the assessee on amalgamation and the identity of the business was preserved and there was continuity of business. The decision in the case of CIT v.Budge Budge Amalgamated Mills Ltd. [1980] 122 ITR 561 (Cal.) in which it was held that where a transfer took place pursuant to an order of the Court it was a clear case of devolution by operation of law, was applicable to the instant case. Therefore, the impugned capital assets…

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