The main legal point established in the judgment is the interpretation and application of the provisions of section 52(2) and section 47(iii) of the Income-tax Act, 1961 in determining the taxability of capital gains.

SETHURAMAN J.

At the instance of the Commissioner of Income-tax, the following two questions have been referred to this court

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in invoking the provisions of section 52(2) of the Income-tax Act, 1961, to arrive at the capital gains and assess under section 45 of the Income-tax Act, the sum Rs. 2, 26, 417 ? and

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that a sum of Rs. 2, 26, 417 is not taxable to capital gains in view of section 47(iii) of the Income-tax Act, 1961, as gift-tax has been levied on the assessee under section 4(a) of the Gift-tax Act, 1958, on the very same transfer ?" *

The assessee, who is an individual, admitted capital gains of Rs. 47, 500 on the sale of property in Mount Road for the assessment year 1970-71, for which the previous year ended on March 31, 1970. In this property, the assessee had 38/72 shares. The property was sold for Rs. 5, 00, 000. The fair market value of the property as on January 1, 1954, was claimed to be Rs. 4, 00, 000 and the assessee claimed an additional sum of Rs. 10, 000 as brokerage. It is on this basis the return was filed. The Income-tax Officer, however, took the view that the fair market value of the property as on the date of sale was much more and in the estate duty assessment of the assessee's father, the Tribunal had fixed the (market) value of the same property at Rs. 8, 39, 000. The Income-tax Officer, therefore, applied the provisions of section 52(2) of the Income-tax Act, 1961 an identical question of applicability of section 52(2) has been considered and that the answer in the light of that decision should be against the Department. We, therefore, answer the first question in the affirmative and in favour of the assessee

The second question does not really call for an answer in view of the answer given above. The point raised is whether the exemption under section 47(iii) of the Income-tax Act, 1961, would be available. This question has been considered in T.C. No. 220/75 and T. C. No. 221/75 in our judgment dated February 16, 1979 (CIT v. Bharani Pictures and if an answer to this question is called for, it would have to be answered in the negative and against the assessee. The reference is answered accordingly. There will be no order as to costs.