( 1 ) THE Income Tax Appellate Tribunal, Ahmedabad Bench "b" has raised the following identically worded question of law for the opinion of this Court in both the aforesaid References. "whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was liable to be taxed on capital gains on account of sale of his interest arising under the trust dated 16/5/1960 on the death of his mother Shakuntalaben ?"

( 2 ) ). As the facts and controversey are common we heard both the references together and dispose of by this common judgment. We have taken the facts from the Income Tax Reference No. 185 of 1986 wherein the assessee was represented by learned Advocate Shri J. P. Shah. Mr. K. H. Kaji, appearing for the assessee in Income Tax Reference No. 95 of 1987 has adopted the arguments advanced by Mr. J. P. Shah. Mr. Akil Qureshi, learned Standing Counsel for the revenue has appeared on behalf of the Commissioner of Income Tax in both the matters.

( 3 ) ). The assessees are individuals. The assessment year involved is 1980-81 and the relevant accounting period is calendar year ended on 31/12/1979.

( 4 ) ). There was a joint Hindu Family of Hargovandas Girdharlal which comprised of the Karta Hargovandas Girdharlal, his wife Lalitaben and Son Tulsidas Hargovandas. The Hindu Undivided Family was partitioned by registered deed on 8/4/1960. Shri Tulsidas Hargovandas received one Bungalow known as "tulsikunj" and other movable properties in the form of shares and securities on such partition. Aggregate value of the immovable and movable properties at that time was Rs. 1,70,500. 00.

( 5 ) ). ON 16/5/1960 Shri Tulsidas Hargovandas executed a trust deed whereby the properties received in partition were settled upon a trust. It appears from the record that Shri Tulsidas Hargovandas was unmarried and he was having a married sister by name of Shakuntalaben. The two assessees before us viz. Shri Chintan Parikh and Shri Vatsal Parikh are two sons of Shakuntalaben.

( 6 ) ). UNDER the trust deed dated 16/5/1960 Shri Tulsidas retained life interest in the properties along with right of residence for his parents till their death and thereafter settled the immovable property in favour of Shakuntalaben. In the event of death of Shakuntalaben the immovable property was to go to the surviving son or sons of Shakuntalaben.

( 7 ) ). SMT. SHAKUNTALABEN died on 12/10/1970. Therefore, in light of the terms of the trust deed the assessees became the owner of the intereset in the trust property and this interest in the remainderman of the properties was valued at Rs. 71,585. 00 as on 31/12/1970 for wealth tax purpose in hands of each of the assessees.

( 8 ) ). ON 29/12/1979 the assessees sold their respective interest in the remainderman of the property for a consideration of Rs. 1,76,000. 00 each. Both the brothers transferred their respective interest to two different trusts. The assessee claimed in income-tax return for the year under consideration that no capital gain was chargeable under section 45 of the Income Tax Act, 1961 (hereinafter referred to as the Act), by appending the following note in the computation of income. "2. I was having remaindermans interest in Tulsidas Hargovandas Trust which I have sold to Nishant Trust on 29/12/1979 for a consideration of Rs. 1,76,000. 00. It is submitted that as the aforesaid property did not cost anything to the assessee the capital gain is claimed exempt in view of the decision of Madras High Court in C. I. T. v/s. K. Ratnam Nadar, 71 I. T. R. 433. "

( 9 ) ). THE Income Tax Officer held that remaindermans interest was an asset and became property in the hands of Shakuntalaben when the property was settled upon a trust. It was therefore held by the Income Tax Officer that by virtue of provision of section 49 (1) of the Act,the cost of acquisition in the hands of the assessee was the cost in the hands of the previous owner and the last previous owner was t