Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the computation of the profits under the head 'Capital gains' in respect of the depreciable assets which had become the assessee's property before 1st January, 1954, and which were sold by it during the previous year relevant to the assessment year, it was not entitled to seek the aid of Section 55(2)(i) of the Income-tax Act, 1961, and opt for and substitute their fair market value as on 1st January, 1954, as the cost of acquisition thereof in place of their written down value ?'
2. The assessee is a company and the assessment year involved is 1962-63 with the financial year ending on 31st March, 1962, as its corresponding accounting period. Under a registered document dated 15th March, 1962,the assessee sold its Mil] No. 3 with attached lands, factory, buildings, etc., to Madura Company Ltd. for a consideration of Rs. 10 lakhs The question of capital gains arising out of the transaction came' up for consideration in the course of the assessment proceedings of the year. It was not disputed that the assets so sold, except the lands taken therein, were depreciable assets, in respect of which the assessee had obtained depreciation in the earlier years. It was also not disputed that those assets had become the property of the assessee before 1st. January, 1954. Before the ITO, the assessee contended that under Section 55(2)(i) of the I.T. Act, 1961, the assessee was entitled to opt for and substitute the fair market value of those capital assets as obtaining on 1st January, 1954, for the cost of acquisition of the assets and that only the difference between such a market value and the consideration received for the transfer was to be brought to tax under the head 'Capital gains'. According to the assessee, there being no appreciable change in the market value of the assets as on 1st January, 1954, and 15th March, 1962, there was no amount available by way of difference for the tax levy as capital gains.
3. The ITO, however, held that the matter came within Section 50(1) of the Act and the assessee was not entitled to seek the aid of Section 55(2)(i) for exercising any option as regards the mode of determining the cost of acquisition of the assets. According to the ITO, Section 50 provided the machinery for taxing capital gains on the transfer of depreciable assets and the section clearly restricted the operation otherwise of the provisions of Sections 48 and 49 and also totally excluded the operation of any other section in the sphere of its own reign. In his view, the expression 'cost of acquisition' in Section 55(2) could not be used for the present purpose for the reason that the very wording of the section specifically indicated that the definition given therein was only for the purpose of Sections 48 and 49 and not also of Section 50. ,The ITO expressed the view that the meanings given in that section for the expressions 'adjusted' and 'cost of improvement' were specified for the purposes not only of Sections 48 and 49 but also of Section 50. It was further his view that Section 50 was a self-contained provision modifying and restricting the operation of Sections 48 and 49. In that view, the ITO held that the 'cost of acquisition' of the assets in question was their written down value as provided by Section 50(1) of the Act. Accordingly, he refused the option claimed by the assessee under Section 55(2)(i) of the Act.
4. The assessee went up in appeal before the AAC. The AAC agreed with the view of the ITO that the definition of 'cost of acquisition' in Section 55(2) was limited for the purpose of Sections 48 and 49 only and that inasmuch as Section 50 was a special provision laying down that in the case of capital assets in respect of which deduction on account of depreciation had been obtained in any previous year, the provisions of Sections 48 and 49 should bemodified and the written down value should be taken as the cost of acquisition, the said special provision was necessarily to prevail over the general. However, the AAC held in favour of the assessee on the point that land being not a depreciable asset its value as on 1st January, 1954, had to be substituted for the cost of acquisition thereof and, accordingly, directed the ITO to consider this point and adopt for the cost of acquisition for the land its value as on 1st January, 1954.
5. The assessee went up in further appeal before the Tribunal and it was contended on its behalf that there was no warrant for restricting the meaning given to Section 55(2)(i) in the manner contended for by the revenue and it was further contended that all these sections should be read together and those should form an integral part of the whole. It was further highlighted, as it was highlighted before us, that Section 55(2)(i) of the Act did not specifically exclude depreciable assets on which the assessee was entitled to opt for the original cost. It was, therefore, urged, as it was urged before us, that such a limited application of Section 55(2)(i) would create anomalies. It was further urged that if the meaning contended for on behalf of the revenue was adhered to, then persons who had acquired the assets by purchase and suffered depreciation would be at a considerable disadvantageous position than the persons who acquired the assets by other modes contemplated by those sections and also obtained the benefit of depreciation and such anomalous situations should be avoided by a proper and harmonious construction of all the sections taken together. Learned advocate for the assessee emphasised this point by handing over to us a chart of the anomalies tbat would be created if the stand of the revenue was accepted on this point. Learned advocate for the assessee also submitted before us, as it had been submitted before the Tribunal, that there could not be any question of applying Section 49 or 50 unless Section 48 was initially applied. He submitted before us, as was done before the Tribunal, that when no other provision made a reierence to Sections 48 and 49, necessarily Section 50 was also included. It was submitted that Section 48 was applicable to all assets whatever be the character of the assets, whatever be the manner of acquisition and whatever be the date of its acquisition. If that was so, it was urged, it would be improper to restrict the meaning of Section 55(2)(i) to the assets which had been acquired before 1954 and which had the benefit of depreciation in the hands of the assessee. After considering the rival contentions and the relevant provisions of the Act, the Tribunal concurred with the view of the revenue and negatived the assessee's contention on this aspect. In the premises, the question as indicated before has been referred to us.
6. Before we consider this question it is necessary to refer to the relevant provisions of the Act. For this purpose, it would be necessary to refer to Sections 45, 48, 49, 50 and 55 of the said Act. Capital gains and how itshould be assessed are dealt with in Sections 45 to 55 in Chap. IV of the I.T. Act, 1961, under the sub-heading 'E--Capital gains'. Section 45 provides that any profits or gains arising from the transfer of capital assets in the previous year, save as otherwise provided in certain specified sections, with which we are not concerned, should be chargeable to income-tax under the head 'Capital gains' and should be deemed to be the income of the previous year in which the transfer takes place. Section 46 deals with the capital gains on distribution of assets by companies in liquidation and we need not deal with that section. Section 47 deals with certain transactions which are not to be regarded as transfer, viz., the distribution of capital assets on the total or partial partition of an HUF or any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons or any transfer of a capital asset under a gift or will or by an irrevocable trust or any transfer of a capital asset by a company, to its subsidiary company or any transfer of a capital asset by a subsidiary company to the holding company or such other connected transfers to the companies. Section 48 is important and it is necessary to set out the section. It provides the mode of computation and deduction. The said section reads as follows :
'48. Mode of compulation and deductions.--The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :--
(i) expenditure incurred wholly and exclusively in connection with such transfer ;
(ii) the cost of acquisition of the capital asset and the cost of any improvement thereto.'
7. Section 49 is also important which deals with cost with reference to certain modes of acquisition. It provides that if capital assets become the property of the assessee either on the distribution of the assets on the total or partial partition of an HUF or under a gift or a will or by succession, inheritance or devolution, then, in such a situation the cost of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, has increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. We need not consider, for our present purpose, either the Explanation or Sub-section (2) of Section 49. Section 50 is relevant for our purpose because it deals with a special provision for computing the cost of acquisition in the case of depreciable assets. The said section reads as follows :
'50. Special provision jor computing cost of acquisition in the case of depreciable assets.--Where the capital asset is an asset in respect of which a deduction on account of depreciation has been obtained by the assessee inany previous year either under this Act or under the Indian Income-tax Act, 1922, or any Act repealed by that Act, or under executive orders issued when the Indian Income-tax Act, 1886, was in force, the provisions of Sections 48 and 49 shall be subject to the following modifications :--
(1) The written down value, as defined in Clause (6) of Section 43 of the asset, as adjusted, shall be taken as the cost of acquisition of the asset.
(2) Where under any provision of Section 49, read with Sub-section (2) of Section 55, the fair market value of the asset on the 1st day of January, 1954, is to be taken into account at the option of the assessee, then, the cost of acquisition of the asset shall, at the option of the assessee, be the fair market value of the asset, on the said date, as reduced by the amount of depreciation, if any, allowed to the assessee after the said date, and as adjusted.'
8. Section 51 deals with advance money received and we are not concerned with the same. Section 52 deals with consideration for transfer in cases of under statement with which also we are not concerned. Section 53 deals with capital gains exempt from tax. Section 54 deals with profit on sale of a property used for residence. Sections 54A and 54B were introduced after the relevant year and we need not detain ourselves with those. Section 55 is important and, though there have been certain changes, those changes do not really affect the question with which we are concerned. Section 55(2) provides as follows :
'55. Meaning of 'adjusted', 'cost of improvement' and 'cost of acquisition'.---
(1)For the purposes of Sections 48, 49 and 50,--...
(2) For the purposes of Sections 48 and 49, 'cost of acquisition' in relation to a capital asset,--
(i) where the capital asset became the property of the assessee before the 1st day of January, 1954, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee ;
(ii) where the capital asset became the property of the assessed by any of the modes specified in Sub-section (1) of Section 49, and the capital asset became the property of the previous owner before 1st day of January, 1954, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee ;
(iii) where the capital asset became the property of the assessee on the distribution of the capital assets of a company on its liquidation and the assessee has been assessed to income-tax under the head 'Capital gains' in respect of that asset under Section 46, means the fair market value of the asset on the date of distribution ;.....
(v) where the capital asset, being a share or a stock of a company, became the property of the assesses on-
(a) the consolidation and division of all or any of the share capital of the company into shares of larger amount than its existing shares,
(b) the conversion of any shares of the company into stock,
(c) the reconversion of any stock of the company into shares,
(d) the sub-division of any of the shares of the company into shares of smaller amount, or
(e) the conversion of one kind of shares of the company into another kind,
means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived.
(3) Where the cost for which the previous owner acquired the property cannot be ascertained, the cost of acquisition to the previous owner means the fair market value on the date on which the capital asset became the property of the previous owner.'
9. Section 55A, apart from its being a subsequent amendment, deals with reference to Valuation Officer and that is not relevant for our present purpose.
10. This question, with which we are concerned, was considered by the Allahabad High Court in the case of CIT v. Upper Doab Sugar Mills : 116ITR240(All) . There, Justice Satish Chandra, as the learned Chief Justice then was, observed that it was well settled that in a taxing statute one was to look at what was clearly said and there was no room for any intendment. There was no equity about a tax and there was no presumption as to a tax. Nothing was to be read in it and nothing was to be implied. The language used made it clear that Section 50 of the I.T. Act, 1961, applied to cases of depreciable assets and the provisions thereof were mandatory. It would prevail over Section 55(2), according to the learned Chief Justice, firstly, because it expressly modified the provisions of Section 48 and, in the next place, it was a special provision for depreciable assets. Section 55, on the other hand, was only a definition section. The definition of 'cost of acquisition' given by Sub-section (2) was only for the purpose of Sections 48 and 49. Section 55(2) did not apply to Section 50 and could not prevail over it. In other words, the cost of acquisition of a depreciable asset had to be computed in accordance with Section 50 even though the capital asset might also, on facts, be within the purview of Sub-section (2) of Section 55. This construction was fortified by the provisions of Sub-section (2) of Section 50. In the case of depreciable assets owned by the assessee from before the 1st January, 1954, were to be governed by Section 55(2) then there was no occasion or need to enact Sub-section (2) of Section 50. Under Sub-section (2) a special provision had been made for capital assets which were covered by Section 49 as well as Section 55(2), viz., the assets indirectlyacquired and which were owned by the previous owner from before 1st January, 1954, For, depreciable assets which were owned by the assessee as the original owner under Sub-section (1) of Section 50 applied, even though the assets might have been owned by the assessee from the 1st day of January, 1954, and in such cases, Section 50(1) did not contemplate that the assessee could treat the fair market value of the assets as on 1st January, 1954, as the cost of acquisition. The written down value of the assets had to be taken as the cost of acquisition. This view of the Allahabad Division Bench was reiterated again by another decision of the same Division Bench of the Allahabad High Court in the case of Prime Products P. Ltd. v. CIT : 116ITR473(All) . This question also came up for consideration before a Division Bench of the Gujarat High Court in the case of Rajnagar Vaktapur Ginning, Pressing and . v. CIT : 99ITR264(Guj) . The decision disposed of a writ application under Article 226 of the Constitution as well as a reference. The writ application challenged the validity of certain sections with which we are not concerned and the question referred to the High Court was as follows :
'Whether, on the facts and in the circumstances of the case, the applicant was entitled to substitute the value as on 1st January, 1954, as the cost of acquisition of the building and machinery ?'
11. The facts were more or less identical. We are not concerned with the decision on the merits so far as the validity of the sections are concerned as that is not relevant for our present purpose. But it is significant to note that repelling the contention that there was discrimination, Mr. Justice B. K. Mehta of the Gujarat High Court, with whom Chief Justice Divan concurred, observed that there was a proper classification on rational basis. His Lordship further observed that where the assessee who was owning and had acquired depreciable assets from his own fund and had earned and enjoyed the depreciation allowance on the said asset, while in the case of a successor, in any of the modes mentioned in Section 49, the assessee had not enjoyed the depreciation of such assets, as that depreciation allowance might have been enjoyed by the previous owner. Therefore, it was observed, that in the case of an exchange of property the transferee might not have enjoyed the depreciation allowance himself and even then he did not get the benefit of option of substituting the market value as on 1st January, 1954, or its original price or the cost of acquisition to its original owner as the persons acquiring depreciable assets in any of the modes mentioned in Section 49 got. His Lordship repelling this argument said that by this fortuitous circumstance alone, it could not be said that this classification was bad or that there was no reasonable relationship with the object of the impugned provisions contained in the legislation, viz., the capital gains. We are not concerned whether on these reasoningshis Lordship was right because it is not an issue before us. We may, however, point out that his Lordship found that the basis of the different treatment given to this larger class of assessees owning depreciable assets which had been classified into two groups, viz., the assessees acquiring depreciable assets themselves and the assessees acquiring depreciable assets as successors in any of the modes under Section 49 appeared to be that the assessee in the first group had earned or enjoyed the depreciation themselves, while the assessees in the second group, who were in the nature of successors had not enjoyed the depreciation allowance and the property might have come to them not of their own volition, and, therefore, they could not be placed on the same footing and that some benefit should be given to them in the nature of giving an option to them to select as to whether they should adopt for the purposes of computation of capital gains the basis of either the fair market value as on 1st January, 1954, or the original cost of acquisition to the previous owner as adjusted by the depreciation, if any, earned by the assessee. So far as the reference was concerned, their Lordships on the construction of the section held that it was only those assessees who had acquired those depreciable assets in any of the modes prescribed under Section 49 that had the benefit of the option to select either the fair market value of the assets on January, 1, 1954, or the cost of acquisition by the previous owner. Their Lordships, therefore, answered the question in favour of the revenue. We respectfully agree with the views expressed by the Gujarat and the Allahabad High Courts. We can only add that it is significant as was mentioned by the learned judges of the two High Courts that Section 48 deals with the general mode of the computation and deduction and for Section 50 the heading is significant and provides for 'Special provision for computing cost of acquisition in the case of depreciable assets'. If a special mode is provided, then the general meaning given by Sub-section (2) of Section 55 could not apply. Furthermore, this well-settled canon of construction that the definition in a section provided in a certain provision of an Act must be limited to the purposes indicated in that sub-section and it could not be extended by construction unless there is a clear implication to that effect. In this case, it is significant that Sub-section (2) of Section 55 does not mention that for the purpose of. 'this chapter' or 'this group of sections' the cost of acquisition in relation to the capital assets should be as indicated in the different clausevS as indicated in Sub-section (2) of Section 55 but limits the purposes of the different clauses only to Sections 48 and 49 and thereby excluding the operation of 'the special provision of computing cost of acquisition of depreciable assets'. Where there is a special provision dealing with a particular provision, the special provision must prevail. This was the view expressed by the Allahabad High Court and this view is fortified by the observation of theKerala High Court in the case of v.. Radhakrishna Eradi v. TRO : 105ITR30(Ker) . There the learned single judge has referred to several decisions in favour of this contention and including the observation in Craies on Statute Law. This proposition was also not disputed before us.
12. We may also mention that reliance was also placed on certain observation of a Division Bench judgment, of the Madras High Court in the case of CIT v. Stones Motors (South India) Ltd. : 105ITR289(Mad) . There, the assessee transferred to its wholly owned subsidiary company a building valued at Rs. 38,661 and on which the assessee had been given initial depreciation in a sum of Rs. 6,098. The ITO brought this sum of Rs. 6,098 to charge under Section 41(2) of the I.T. Act, 1961. The AAC allowed the assessee's appeal and deleted the amount from assessment in the view that Section 47(iv) was applicable. The Tribunal also held that the assessee was entitled to the relief in view of the applicability of Section 47(iv) arid also because of the Explanation to Section 34(2)(i). On a reference, the Division Bench of the Madras High Court held that a reading of Section 41(2) and Section 50 of the Act showed that the balancing charge and capital gain could not overlap and it was only the amount which was in excess of the balancing charge that would be attracted to capital gains under Section 50. Section 50 was intended to take out a transaction relating to a depreciable asset, which would otherwise fall within Section 45, from the purview of that section when the same fell within Section 32(1)(ii) or Section 41(2). Reliance was placed on the observations appearing at p. 292 as would be apparent from the narration of the facts and the controversy in that case that the said decision was rendered in a different context and it will not be proper for us to rely on the said decision for our present purposes.
13. Our attention was also drawn to certain observations of the Supreme Court in the case of CIT v. Bipinchandm Maganlal & Co. : 41ITR290(SC) and reliance Was placed on certain observations appearing at p. 295 of the report. For our present purpose, it is not necessary to refer to the said decision in greater detail.
14. For our present purpose, it is sufficient to observe that two different classes had been treated separately, i. e. to say, those which had acquired depreciable assets themselves before 1954 and have obtained the benefit of the depreciation and those who have acquired depreciable assets before 1954 and not by acquisition directly but by other modes contemplated by Section 49, and if the Legislature has provided a special mode for computing depreciable assets and limited the operation of the definition of Section 55(2) or Section 55, then, in our opinion, it would be improper to extend that meaning of the definition in Section 55(2) so as to exclude the operation of the special mode of computation in Section 50 for depreciable assets which had been acquired by the assessee.
15. There is another reason. This is an all India statute and while inthe case of fundamental difference a High Court would be free to take adifferent view provided an aspect was not considered, we find that thisaspect was fully considered by the Division Bench of the two High Courtsexhaustively and their reasonings appeal to us. In that view of thematter, we would adhere to these views.
16. In the premises, we answer the question in the affirmative and in favour of the revenue.
17. Each party will pay and bear its own costs.
Sudhindra Mohan Guha, J.
18. I agree.