| Case ID |
2ffdab65-bc7a-420e-9f8e-1efaa3a39311 |
| Body |
View case body. Login to View |
| Case Number |
IT REFERENCE NO. 122 OF 1976 |
| Decision Date |
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| Hearing Date |
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| Decision |
The court held that the cost of acquisition for computing capital gains in the case of a member of a Hindu Undivided Family (HUF) who throws his individual property into the family's hotchpot must be based on the original cost incurred by that member, rather than being nil. It was established that a profit or gain can only accrue when there is a cost of acquisition. The court ruled that the cost of acquisition of the property should be the amount spent by the member on its purchase and construction, as this would reflect the true value of the asset within the HUF, thus allowing the assessee's claim for capital gains based on the initial investment. |
| Summary |
This case revolves around the interpretation of Section 48 of the Income-tax Act, 1961, particularly concerning capital gains and cost of acquisition. The Delhi High Court examined whether the cost of acquisition for a property thrown into the hotchpot of a Hindu Undivided Family (HUF) should be considered as nil, based on the assertion that the HUF had not paid anything for the property. The facts indicated that the property was purchased by an individual and his wife before being incorporated into the HUF. The court concluded that the original cost incurred by the individual and his wife on the property, which amounted to Rs. 76,748, should be recognized as the cost of acquisition for the HUF. This decision clarifies the parameters for determining the cost of acquisition in such familial contexts, emphasizing that actual expenditures made prior to the transfer into the HUF must be acknowledged. This case is significant for tax practitioners and individuals involved in property transactions within HUFs, as it delineates the boundaries of capital gains taxation and the importance of accurately assessing the cost basis for capital assets. |
| Court |
Delhi High Court
|
| Entities Involved |
Not available
|
| Judges |
S.S. Chadha,
H.C. Goel
|
| Lawyers |
P.N. Monga,
K.K. Wadhera
|
| Petitioners |
D.K. Nanda & Sons
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1984 SLD 794,
(1984) 149 ITR 96
|
| Other Citations |
Addl. CIT v. Madan Lal Jain & Sons [1983] 140 ITR 200 (Delhi),
CIT v. N.S. Krishna Rao [1983] 144 ITR 347 (Mad.),
CIT v. Ashwin M. Patel [1983] 144 ITR 566 (Guj.)
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| Laws Involved |
Income-tax Act, 1961
|
| Sections |
48
|