Case Law Details
RELEVANT PARAGRAPH
19. We heard both sides in detail and considered the issue in the light of the facts of the present case and in the light of various judicial pronouncements relied on by the assessee as well was the Revenue. The assessee purchased the property in 1975. The Notification declaring the said property in the category of capital asset was made in 1994. The property was sold in 2006. Now the case of the assessee is that for the purpose of computing the Long Term Capital Gains, FMV of the property should be adopted as it stood on the conversion date; i.e. 06-01-1994 and not the FMV as issue of notice 1-4-1981, the law relating to the computation of Long Term Capital Gains (LTCG) provides that every asset so acquired prior to 01-04-1981. The FMV of the property has to be adopted as it stood on 1-4-1981. This date is a date declared by the statute for the purpose of computing the LTCG. It is not possible to ignore the statutory date embedded in the Act and adopt the conversion date as the bench mark date for finding out the FMV. The law itself has declared that on which date the FMV has to be found out in the case of properties purchased prior to 01-04-1981. There is no other provision in the law relating to the capital gains tax; which deals with the subject of the date on which the FMV has to be adopted. The Notification issued by the Central Government is not for changing the date on which the FMV has to be adopted; but, on the other hand, the Notification is for the purpose of changing the character of the asset. The Notification does not change the date of FMV. The Notification changes the character of the asset for the purpose of capital assets.
20. The nature of the property is relevant for deciding at the first instance whether the asset is a capital asset or not so that the proceedings for the purpose of levy of capital gains tax is lawful or not. The nature of the property has to be examined as on the date of transfer of the asset. In the present case, the transfer of the asset is dated 19-01-2006. Therefore, the nature of the property whether it is a capital asset or not has to be examined as on 19-1-2006. The Notification has already been made on 06-01-1994 holding the property as a capital asset. As already stated, the nature of the property is relevant only to decide the question of exigibility of capital gains tax and not for the quantum of computation of the LTCG liable for taxation. Whether an asset is liable for capital gains tax and the question as to what would be the amount of capital gains are two different things. The date of Notification is relevant only in deciding the nature of the property. It is necessary to complete the first stagee and not necessary to be carried over to the second stage. On the date of transfer once it is found that the asset is a capital asset exigible for capital gains tax, the relevance of the notification issued by the Central Government is complete. That part of exercise is over. It is the second stage to decide what should be the quantum of capital gains to be assessed. It is for the purpose of computation that the FMV is relevant. It is for finding out the FMV, the date of FMV is relevant. The FMV date is not relevant in deciding the character of the property.
21. Once the property is found to be a capital asset on the date of transfer, the transaction becomes liable for capital gains taxation and the date of notification cannot be used for any other purpose. The statutory date for the FMV cannot be substituted with a subsequent conversion date determined by the Central Government through a Notification. The Notification date cannot overtake the date embedded in the statute itself.
22. Therefore, the position is very clear inasmuch as the function and purpose of the Notification date is different and the function and purpose of the FMV date is different. The Notification date is for the purpose of deciding the nature of the asset and the statutory date is for the purpose of actual computation of the quantum of the capital gains. Once this distinction is understood, it is easy to come to a conclusion that argument of the assessee is not sustainable in law.
