(a) Income-tax---

----Reference---Question decided by High Court cannot be referred---Indian Income Tax Act, 1961, S.256.

(b) Income-tax---

----Reference---Capital gains Assets transferred to assessee by Government as a moral gesture---No cost of acquisition of assets---Tribunal correct in holding that no capital gains arose on transfer of such assets No question of law arose---Indian Income Tax Act, 1961, Ss.45 & 256.

Held, dismissing the application for reference, that the Tribunal held that no capital gain was exigible on the transfer of shares and bonds on the ground that the assets in the form of shares and bonds belonged to the Government of India and subsequently half of the share:, were transferred to the assessee not as a right but only by way of a moral gesture on its park and according to the Tribunal, the assessee did not become the owner of the assets. The Tribunal held that the cost of acquisition of shares and securities was nil to the assessee and, therefore, no capital gains tax could be levied thereon. The Tribunal had approached the matter and rightly held in the light of decisions in the case of CIT v. H.H. Maharaja Sahib Lokendra Singhji (1986) 162 ITR 93 and CIT v. Markapakula Agamma (1987) 165 ITR 386. No question of law arose from its order as the question which had been agitated in this reference had already been answered by the Madhya Pradesh high Court.

CIT v. H. H. Maharaja Sahib Shri Lokendra Singhji (1986) 162 ITR 93 (MP) and CIT v. Markapakula Agamma (1987) 165 ITR 386 (AP) applied.

Abhay Sapre for Appellant.

H.S. Shrivastava for Respondent.

JUDGMENT

A. K. MATHUR, C.J.---This is an application under section 256(2) of the Income Tax Act,1961, at the instance of the Revenue. The Revenue has raised the following two questions of law for answer by this Court by calling for the statement of the case.

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal had jurisdiction to allow the assessee to raise different grounds of appeal, particularly in view of the .fact that the issues were not raised before the Commissioner of Income-tax (Appeals) and the Commissioner of Income-tax (Appeals) had not considered the issue of his order?

(2)Whether the Tribunal was right in law in holding that the rights did not vest with the assessee in the shares and securities and, therefore, surplus arising out of their sales by the assessee was not exigible to tax? "

The brief facts giving rise to this reference are that the respondent assessee in respect of the assessment year 1981-82 had offered capital gains arising out of sale of shares and securities for taxation. In his written reply dated March 1,1984, the assessee had mentioned that these shares were coming down since before the merger of the State but the Government took over and later on gradually transferred to him. It was, therefore, opted that the value as on January 1,1964, should be taken as the cost of the asset for the purpose of computation of capital gains. Subsequently, the assessee filed a written reply again on March 20,1984,stating that the shares were received by him from the Government of India in 1971-72 and their cost price for the purpose of capital gains may be taken on the date of receipt from the Government of India. It was further offered that the value of bonds should be taken at the original cost, i.e., face value, and the respondent assessee himself offered for taxation the capital gains arising out of shares and securities and during the course of assessment proceedings, he never disputed the ownership of the shares and securities. The Income-tax Officer accordingly assessed the capital gains at Rs.27,70,931 as shown by the assessee.

The respondent/assessee filed an appeal before the Commissioner of Income-tax (Appeals) and raised a ground that determination of capital gains on the sale of shares at Rs.27,70,931 is not justified and is excessive. The Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee. The as assessee, therefore, filed an appeal before the Tribunal and before the Tribunal it was for the first time challenged that the levy of capital gains of Rs.27,18,931 on the sale of foreign shares is unjustified and excessive as the shares were received from the Government ex gratia and not by way of any gift and did not cost anything to the assessee and, therefore, no capital gain was chargeable. The Revenue objected before the Tribunal that this ground cannot be adjudicated as the same was not raised nor decided before the Commissioner of Income-tax (Appeals), but the Tribunal rejected the objection of the Revenue. However, the Tribunal held that no capital gain is exigible on the transfer of shares and bonds on the ground that the asset in the form of shares and bonds belong to the Government of India and subsequently half of the shares were transferred to the respondent/assessee not as a right but only by way of a graceful moral gesture on its part and according to the Tribunal, the respondent/assessee did not become the owner of the assets. The Tribunal held that the cost of acquisition of the shares and securities was nil to the respondent/assessee and therefore, no capital gain could be levied thereon. Against this order of the Tribunal, the Revenue filed an application for making a reference to the High Court of the aforesaid two questions of law. The application was rejected by the Tribunal on the ground that the appeal has been decided on the basis of the opinion of the High Court of Madhya Pradesh in the case of CIT v. H..H. Maharaja Sahib Shri Lokendra Singhji (1986) 162 ITR 93.

So far as the first question is concerned, the Tribunal held that this is a question of fact. As regards the second question, the Tribunal has decided the matter in the light of the decision of this Court. The Tribunal has, therefore, rejected the application under section 256(2) of the Act. Hence, this application under section 256(2) of the, Act has been moved by the Revenue on the aforesaid two questions of law.

We have considered the matter and after going through the record, we find that the Tribunal has correctly approached the matter and rightly held in the light of the decision in case of CIT v. H H. Maharaja Sahib Shri Lokendra Singhji (1986) 162 ITR 93 (MP) and CIT V. Markapakula Agamma (1987) 165 ITR 386 (AP). Therefore, no question of law arises for answer by this Court as the questions which have been agitated in this reference have already been answered by this Court.

Application under section 256(2) of the Income Tax Act, 1961,for calling for, the statement of case on the aforementioned questions of law is rejected.

M.B.A./3267/FCApplication rejected