Law: Income Tax Act, 1961

Section: 32,45,48,49,50,55

(a) Income-tax-----Capital gains---Computation of capital gains---Cost of acquisition--¬Capital asset in respect of which depreciation has been obtained---Scope of S.50(1)---Option of substituting fair market value on prescribed date is not available to such a person---Indian Income Tax Act, 1961, Ss.32, 45, 48, 49, 50 & 55. (b) Income-tax-- ----Business expenditure---Disallowance---Expenditure resulting in benefit, amenity or perquisite to employee---Payments in cash are not covered by S.40(a)(v)---Indian Income Tax Act, 1961, S.40(a)(v)---[Goculdas Dossa & Co. v. J.P. Shah (1995) 211 ITR 706 (Bom.) overruled and CIT v. Commonwealth Trust Ltd. (1982) 135 ITR 19 reversed]. . In commercial parlance computation of capital gain would mean, the actual gain measured by the difference between the sale price and the cost of acquisition. It is the "cost of acquisition" that is required to be determined under the provisions of sections 48, 49, 50 and 55 of the Income Tax Act, 1961. Both under sections 48 and 49, cost of acquisition will have to be determined and adjusted as provided in sections 50 and 55. Section 55(2) gives an option to both kinds of assessees, that is, those who have purchased the capital asset as well as those who have acquired it by any of the modes mentioned in section 49 to substitute for the actual cost of acquisition, the fair market value of the asset as on January 1, 1954. Section 55(2) will have application, only if one of the two classes of assessees exercises his option. Section 55(2), however, makes it clear that the option is available only for the purposes of sections 48 and 49 and it is not available for a case falling under section 50. Though the provisions of section 55(2) would be available to every kind of capital asset whether the same has enjoyed the depreciation allowance or not, whether in the hands of the assessee or the previous owner, in the case of the assessee in whose case depreciation allowance has been availed of before the transfer of the capital asset the meaning of "cost of acquisition" as stated in sections 48 and 49 would appear to have been modified in the manner stated in section 50. Thus, where the…

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