Is India's Capital Gain Tax broken?

India's capital gains tax, introduced in 1947, marked a significant departure from the prevailing British-inspired practice of treating capital gains as non-recurring receipts that did not constitute taxable income. The new CGT framework drew inspiration from the United States' Revenue Act of 1913, which embraced a broader conception of taxable income rooted in the Haig-Simons definition: income as the sum of consumption and changes in net worth. This contrasted sharply with the UK approach which viewed capital gains as akin to non-taxable windfalls.

While the United States has, over the decades, effectively implemented a cohesive system of capital gains taxation based on two core taxable events—sales and exchanges—India, more than three-quarters of a century later, continues to grapple with a fragmented and unwieldy framework. Despite an all encompassing definition of 'capital assets', and expanding the scope of taxable events to include not only sales and exchanges but also relinquishments, extinguishments, acquisitions compelled by law, etc., etc., India has yet to develop a structurally integrated and intellectually consistent approach to taxing capital gains.

The dissent to the Joint Select Committee Report on the Income-Tax and Excess Profits Tax (Amendment) Bill, 1947, aptly highlighted the "real difference in the American and British conceptions of [capital] receipts" and emphasized the distinct "psychological approach[es] to the entire problem [i]n these two countries."

If India's CGT framework was intended to align more closely with the American approach, could it's struggle to fully achieve that vision be the result of an Indian high judiciary that has failed to reorient itself to the new paradigm, and has instead chosen to remain anchored in the traditional British understanding of capital gains?