HUF of H.H. late Sir J. M. Scindia v. ACIT
A.Y. : 1997-98. Dated : 22-8-2007
The assessee HUF was issued a notice requiring to show
cause as to why for the purpose of computation of capital gains, value for the
purpose of wealth tax was taken as the value of the plot of land, instead of
the value determined by the Government- approved valuer.
The Scindia Family had acquired the land on the occasion of
marriage of one of the forefathers of J. M. Scindia to one ‘Chimanibai’,
daughter of the then ruler of Deccan, i.e., the Peshwa. The said
property was given to Chimanibai as ‘choli bangdi’ according to the
custom prevailing in those days amongst the royal families.
It was further submitted that neither of the then rulers,
the Peshwas, nor the Scindias incurred any cost for acquiring this property.
In view of this, it was evident that the said plot did not have any cost of
acquisition and therefore it fell outside the purview of capital gains. The
claim of the assessee was rejected by the AO who computed the capital gains
taking Rs.1,50,404 as the cost of acquisition of the land. It was also
contended that the said land was recorded in the old Revenue records as ‘Inam’
land.
On appeal, the CIT(A) did not accept the assessee’s
contention and confirmed the action of the AO. On appeal before the Tribunal,
it was held :
(1) The CIT(A) has recorded the fact that the land was
received in gift by the forebears and inherited by their progeny and its
cost was nil. In support of this proposition, the assessee produced old
Revenue records obtained from Government Archives, which showed that the
said plot of land was recorded as ‘Inam’ land. The extracts furnished stated
that ‘Inam’ documents in respect of the said land were not available, and
the assessee’s stand was rejected by the CIT(A) on that count alone.
Further, in absence of any evidence to show that the land was purchased by
paying cash, the assessee’s contention which was based on factual and
historical background was to be accepted.
(2) It is also settled principle that in order to make
this transaction liable for capital gains tax, it is for the Revenue to show
that the assessee had incurred a cost in acquiring the said plot of land.
(3) As per the decision of the Madhya Pradesh High Court
in the case of CIT v. H.H. Maharaja Sahib Shri Lokendra Singhji,
(1986) 162 ITR 93, it was clearly held that the liability to pay tax on
capital gains would arise only in case of those capital assets in the
acquisition of which an element of cost is actually present or is capable of
being reckoned and not in case of those assets where the element of cost is
altogether inconceivable.
In the light of the above discussion, the ITAT held that
the capital gain on the transfer of said land was not exigible to tax.
