Mustafa Yakub, CHENNAI V. ITO, CHENNAI

CO 191/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8226 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: M RAZZACK
• Keywords: Capital asset; Gift; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO. 1872/MDS/2012 ASSESSMENT YEAR : 2009-10 THE INCOME-TAX OFFICER WARD VIII(2) CHENNAI VS SHRI MUSTAFA YAKUB NO.108, ANGAPPA NAICKEN STREET CHENNAI 600 001 [PAN AAIPM 4530 D] (APPELLANT) (RESPONDENT) C.O.NO. 191/MDS/2012 ASSESSMENT YEAR : 2009-10 SHRI MUSTAFA YAKUB NO.108, ANGAPPA NAICKEN STREET CHENNAI 600 001 VS THE INCOME-TAX OFFICER WARD VIII(2) CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI ANIRUDH RAI, CIT/DR ASSESSEE BY : SHRI M.RAZZACK, FCA DATE OF HEARING : 07-01-2013 DATE OF PRONOUNCEMENT : 11-01-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE AND TH E CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-IX, CHENNAI, DATED 31.7.2012. I.T.A.NO.1872/12 C.O 191/12 :- 2 -: 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPE AL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE ID. CIT (A) ERRED IN DIRECTING THE AO TO ADO PT COST OF INFLATION INDEX APPLICABLE TO F.Y. 81-82 I.E, 100 I NSTEAD OF 406 (F.Y.2000-01) AS ADOPTED BY THE AO WHO IS APPLY ING THE PROVISION OF EXPLANATION (III) TO SEC. 48 OF TH E IT. ACT. 3. THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E ASSESSEE'S FATHER SHRI. YAKUB ALI HUSSIAN BECAME EN TITLED TO HIS SHARE IN THE PROPERTIES ON 14.12.1985 ON THE DE MISE OF HIS FATHER LATE ALI HUSSAIN ABDUL KHADER AND THE AS SESSEE VIZ. SHRI MUSTAFA YAKUB, BECAME ENTITLED TO HIS S HARE IN THE PROPERTY BY VIRTUE OF MEMORANDUM DT. 4.10.2000 AND DECLARATION EXECUTED ON 30.10.2000 ONLY AND AS SUCH , THE MODE OF ACQUISITION OF A SHARE IN THE PROPERTY BY T HE ASSESSEE IS GOVERNED BY THE PROVISIONS OF SEC. 49(1 ) OF THE INCOME TAX, ACT 1961. 4.THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT PR OVISIONS OF CLAUSE (B) TO EXPLANATION 1 OF SUB-SEC. (42A) TO SE C. 2 OF THE INCOME TAX ACT, 1961, WHICH STATES AS UNDER:- 'IN THE CASE OF CAPITAL ASSET WHICH BECOMES THE PROPERTY OF THE ASSESSEE IN THE CIRCUMSTANCES MENTIONED IN [SUB-SECTION (1)] OF SECTION 49, THERE SHALL BE INCLUDED THE PERIOD FOR WHICH THE ASSET WA S HELD BY THE PREVIOUS OWNER REFERRED TO IN THE SAID SECTION.' 5. THE ID. CIT (A) OUGHT TO HAVE APPRECIATED AS PER EXPLANATION (III) TO SECTION 48 OF THE INCOME-TAX A CT, 1961 'INDEXED COST OF ACQUISITION' MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS C OST INFLATION INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEA R IN WHICH THE ASSET WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGI NNING ON THE 1ST DAY OF APRIL, 1981, WHICHEVER IS LATER. 6. THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT S INCE IN THE INSTANT CASE, ASSESSEE (THE PERSON WHO IS ULTIMATEL Y ASSESSED IN RESPECT OF THE PROFIT/LOSS ON TRANSFER OF PROPERTY) VIZ. SHRI. MUSTAFA YAKUB, BECAME ENTITLED TO HIS SH ARE IN THE PROPERTY BY VIRTUE OF MEMORANDUM DT. 4.10.2000 AND DECLARATION EXECUTED ON 30.10.2000 I.E. IN THE F.Y. 2000-01, THE COST INFLATION INDEX APPLICABLE TO F.Y.2000-01, BEING 406 I.T.A.NO.1872/12 C.O 191/12 :- 3 -: ONLY IS TO BE ADOPTED AS THE INDEX OF THE FIRST YEAR IN WHICH THE ASSESSEE HELD THE PROPERTY, AS AG AINST 100 APPLICABLE TO F.Y.1981-82 ADOPTED BY THE ASSESSEEE. 7. THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT T HE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN (2012) 204 T AXMAN 691 IN THE CASE OF CIT VS. MANJULA J SHAH HAS NOT B EEN ACCEPTED BY THE DEPARTMENT AND SLP FILED IN (CIVIL) NO.19924 OF 201 2 AGAINST THE DECISION OF THE HIGH COURT OF BOMBAY AND THE SA ME IS PENDING BEFORE THE HON'BLE SUPREME COURT. 8 . FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASI DE AND THAT OF ASSESSING OFFICER RESTORED. 3. THE CIT/DR SUBMITTED THAT THE ONLY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS THAT THE CIT(A) ERRED IN D IRECTING THE ASSESSING OFFICER TO ADOPT COST OF INFLATION INDEX APPLICABLE FOR FINANCIAL YEAR 1981-82 I.E 100, INSTEAD OF 406 FOR FINANCIAL YEAR 2000-01 AS ADOPTED BY THE ASSESSING OFFICER WHO WAS APPLYING T HE PROVISIONS OF EXPLANATION(III) TO SECTION 48 OF THE INCOME-TAX AC T, 1961. HE SUBMITTED THAT THE CIT(A) DID NOT APPRECIATE THAT T HE ASSESSEES FATHER SHRI YAKUB ALI HUSSAIN BECAME ENTITLED TO HIS SHARE IN THE PROPERTIES ON 14.12.1985 ON THE DEMISE OF HIS FATHE R LATE ALI HUSSAIN ABDUL KHADER AND THE ASSESSEE, SHRI MUSTAFA YAKUB BECAME ENTITLED TO HIS SHARE IN THE PROPERTY BY VIRTUE OF MEMORANDU M DATED 4.10.2000 AND DECLARATION EXECUTED ON 30.10.2000 ONLY AND AS SUCH, THE MODE OF ACQUISITION OF A SHARE IN THE PROPERTY BY THE ASSE SSEE IS GOVERNED BY THE PROVISIONS OF SECTION 49(1) OF THE ACT. THE CI T(A) DID NOT I.T.A.NO.1872/12 C.O 191/12 :- 4 -: APPRECIATE THE FACT THAT CLAUSE (B) TO EXPLANATION 1 OF SUB-SECTION (42A) TO SECTION 2 OF THE ACT PROVIDES AS UNDER: 'IN THE CASE OF CAPITAL ASSET WHICH BECOMES THE PROPERTY OF THE ASSESSEE IN THE CIRCUMSTANCES MENTIONED IN [SUB-SECTION (1)] OF SECTION 49, THERE SHALL BE INCLUDED THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER REFERRED TO IN THE SAID SECTION.' 4. HE FURTHER SUBMITTED THAT THE CIT(A) SHOULD HAVE APPRECIATED THAT AS PER EXPLANATION (III) TO SECTIO N 48 OF THE ACT, INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INFLATIO N INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 1981 WHICHEVER IS LATER. THE CIT(A) FAILED TO APPRECIATE THAT IN THE INSTANT CAS E, THE ASSESSEE, THE PERSON WHO IS ULTIMATELY ASSESSED IN RESPECT OF THE PROFIT/LOSS ON TRANSFER OF PROPERTY, SHRI MUSTAFA YAKUB, BECAME EN TITLED TO HIS SHARE IN THE PROPERTY BY VIRTUE OF MEMORANDUM DATED 4.10. 2000 AND DECLARATION EXECUTED ON 30.10.2000 I.E IN THE FINAN CIAL YEAR 2000-01, THE COST INFLATION INDEX APPLICABLE TO FINANCIAL YE AR 2000-01, BEING 406 ONLY IS TO BE ADOPTED AS THE INDEX OF THE FIRST YEA R IN WHICH THE ASSESSEE HELD THE PROPERTY, AS AGAINST 100 APPLICAB LE TO FINANCIAL YEAR I.T.A.NO.1872/12 C.O 191/12 :- 5 -: 1981-82 ADOPTED BY THE ASSESSEE. HE FURTHER SUBMI TTED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE DECISION OF TH E HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS MANJULA J SHAH [20 12] 204 TAXMAN 691, WAS NOT ACCEPTED BY THE DEPARTMENT AND SLP FIL ED IN (CIVIL) NO.19924 OF 2012 AGAINST THE DECISION OF THE HON'BL E BOMBAY HIGH COURT WAS PENDING BEFORE THE HON'BLE SUPREME COURT. 5. ON THE OTHER HAND, THE A.R RELIED ON THE DECISION O F HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS MANJULA J S HAH (SUPRA) AND THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ARUN SHUNGLOO TRUST VS CIT, IN I.T.A.NO. 116/2011, ORDER DATED 13.2.2012, IN SUPPORT OF THE ORDER OF THE CIT(A). HE FURTHER RELIED ON THE WRITTEN SUBMISSION PLACED AT PAGES 55 AND 56 OF THE PAPER BOOK WHICH READS AS UNDER: IT CANNOT BE SAID THAT THE GOVERNMENT BY ITS LEGIS LATION HAS PURPOSELY / DELIBERATELY WITHHELD THE BENEFITS/ ADVANTAGE GRANTED IN SEC 49 OF THE INCOME- TAX ACT FOR THE PURPOSE OF COMPUTATION THE INDEXED COST OF ACQUISIT ION. IT IS HUMBLY SUBMITTED THAT WHEREVER THE LITERAL MEANING OF STATUTE LEADS TO ANY ABSURDITY OR CONTRA DICTION TO THE PURPOSE OF STATUTORY PROVISIONS, THEN THE LI TERAL MEANING SHOULD BE AVOIDED AND THE BENEFIT OF DOUBT SHOULD WEIGH IN FAVOUR OF THE ASSESSEE AND NOT THE DEPARTMENT . THE PETITIONER HUMBLY SUBMITS THAT THE FOLLOWING DECISIONS OF VARIOUS JUDICIAL AUTHORITIES HAVE CATEGORICALLY CONFIRMED THAT THE COST OF ACQUISITIO N AND THE YEAR OF OWNERSHIP OF THE PREVIOUS OWNER WHO HAS ACQ UIRED THE SAME BY INHERITANCE, GIFT OR SETTLEMENT HAS TO BE ON THE SAME FOOTINGS. I.T.A.NO.1872/12 C.O 191/12 :- 6 -: 1. ARUN SHUNGLOO TRUST VS. CIT, ITA NO.116/2011, DE LHI HIGH COURT, DATED 13TH FEBRUARY 2012. (COPY ENCLOSE D) 2. DCIT VS. MANJULA ]. SHAH 2009/10 - TIOL -698- IT AT MUM-S8 3. CIT VS. LAXMI MACHINE WORKS, 290 ITR 667 (2007-T IOL -72 - SC- IT) 4. K.P. VARGHESE VS. ITO 131 ITR 597 = (2002 -TIOL- 128-SC-IT) 5. CIT VS. G. NARASIMHAN AND OTHERS 236 ITR 327 - 1 999 (SC) 6. CWS (INDIA) LTD VS. CIT, 208 ITR 649 - 1994 (SC) 7. SMT. MEENA DEVGAN VS. ITO, 117 TTJ 121 (CAL) 8. MRS. PUSHPA SOFAT VS. ITO 81 ITD 1 9. CIRCULAR NO.636 DATED 31/08/1992 REPORTED IN 198 ITR 1 (SC) THE PETITIONER HUMBLY SUBMITS THAT ORDER MAY KINDLY BE PASSED UPHOLDING THE DECISION OF THE HON'BLE COMMIS SIONER OF INCOME-TAX (APPEALS) IV, CHENNAI, IN ITA NO. 1872/CHNY- 2012 AND GRANT RELIEF AND RENDER JUSTICE . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETU RN OF INCOME ON 27.10.2009 DECLARING TAXABLE INCOME OF ` 6,94,571/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 29.12.2011 BY MAKING AN ADDITION OF ` 20,38,901/- UNDER THE HEAD LONG TERM CAPITAL GAINS TO THE INCOME RETURNED. WHILE DETERMINING THE LONG TERM CAPITAL GAINS, THE ASSESSEE HAD ADOP TED THE COST INFLATION INDEX APPLICABLE TO FINANCIAL YEAR 1981-8 2. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THIS AND COMPUTED THE CAPITAL GAINS BY ADOPTING THE COST INFLATION INDEX APPLICABLE TO THE FINANCIAL YEAR 2000-01. I.T.A.NO.1872/12 C.O 191/12 :- 7 -: 7. THE FOLLOWING PROPERTIES WERE SOLD BY THE ASSESSEE DURING THE YEAR ON WHICH CAPITAL GAINS WAS COMPUTED BY TAK ING THE COST INFLATION INDEX APPLICABLE FOR FINANCIAL YEAR 1981- 82. SI. NO. EXTENT OF LAND ADDRESS ASSESSEE'S SHARE 1. 7535 SQUARE FE ET N O.24& 25, JEHANGIR STREET, 879/7535 X OF LAND MUTHIALPET VILLAGE, CHENNAI 600001 (II LINE BEACH ROAD) 2. 3779 SQUARE FEET OF SQUARE NEW NO.93, OLD NO.47/49, IBRAHIMJI ONE- TWELFTH SHARE LAND & 8900 STREET, CHENNAI 600 001 SQUARE FEET OF BUILDING 3. 165 SQUARE FEET OF NO.128, OLD NO.7, ANGAPPA NAICK EN ONE-TWELFTH UD S OF 4350 STREET, CHENNAI 600001 SQUARE FEET - 1225 SQUARE FEET OF BUILDING. 4. 6534 SQUARE FEET OF NO.14, MOORE STREET, CHENNAI ONE-SIXTH LAND & 22000 600001 SQUARE FEET OF BUILDING 8. THE ASSESSING OFFICER EXPLAINED THE OWNERSHIP HISTO RY OF ALL THE ABOVE PROPERTIES AS UNDER: 'ORIGINALLY ONE LATE ABDUL KADER MOHAMED ALI AND HI S THREE SONS V IZ. (1) LATE BADRUDDIN ABDUL KHADER; (II) LATE ALI HUSSAIN ABDUL KHADER AND (III) LATE SAIJUDDEN ABDUL KHADER ACQUIRED THE PROPERTY MENTIONED IN SI . NO. (1) IN THE TABLE ABOVE BY VIRTUE OF THE DEED OF RELEASE DATED 12.1.1 959, BEARING DOC . NO . 265/1959. AFTER THE DEMISE OF LATE ABDUL KHADER MOHAMMED ALI, HIS THREE SONS ENJOYED THE PRO PERTY WITH ONE-THIRD SHARE EACH. LATE ALI HUSSEIN ABDUL K HADER DIED ON 14.12.1985. THERE WAS FAMILY ARRANGEMENT ON 20.12.1985 WHICH WAS LATER EXECUTED BY A MEMO DATED 15.5 . 1989, BY WHICH THE WIFE AND ALL THE DAUGHTERS OF LATE AL I HUSSAIN ABDUL KHADER RELINQUISHED THEIR RIGHTS IN T HE PROPERTIES TO HIS SONS VIZ. MR . YAKUB ALI HUSSAIN, MR . SIRAJ . ALI HUSSAIN AND MR. ZOYAB ALI HUSSAIN , GIVING THEM ONE-NINTH SHARE EACH IN . THE PROPERTY. HOWEVER , AS PER FAMILY ARRANGEMENT, THEY BECAME ENTITLED TO 879/7535 OR 11.67 PER CENT SHARE EACH IN THIS PROPERTY. I.T.A.NO.1872/12 C.O 191/12 :- 8 -: LATER, THE THREE BROTHERS AS PER MEMORANDUM DATED 4.10.2000 EXECUTED A SEPARATE DECLARATION DATED 30.10.2010 CONFIRMING 50% RIGHT, TITLE AND EXTENT OUT OF THEIR SHARE IN FAVOUR OF THEIR SONS VIZ . MR. MUSTAFA YAKUB, MR. AI AZHAR SIRAJ AND MR. TAYEER ZOYAB RESPECTIVEL Y. THUS, THE ASSESSEE BECAME ENTITLED TO A SHARE OF 879/7535 X 1/2 SHARE IN THE PROPERTY ON 30.10.2010 AND ACCORDINGLY THE ASSESSEE ADMITTED 5.83 SHARE OF CAPITAL GAINS FROM THIS PROPERTY. PROPERTIES MENTIONED IN (2)(3) AND (4) OF THE ABOVE TABLE . AFTER THE DEMISE OF LATE ABDUL KHADER MOHAMED ALI, HIS SONS ENTERED INTO AN AGREEMENT WHEREBY HIS SONS LATE BADRUDIN ABDUL KHADER AND LATE ALI HUSSAIN ABDUL KH ADER BECAME ENTITLED , TO 50 PER CENT SHARE IN THESE PROPERTIES. AFTER DEMISE OF LATE AII HUSSAIN ABDUL KHADER, HIS THREE SONS BECAME ENTITLED TO ONE-SIXTH SHARE EACH AND LA TER THEY CONFIRMED 50 PERCENT RIGHT TITLE AND EXTENT OUT OF THE RESPECTIVE ONE-SIXTH SHARE TO THEIR SONS VIZ. SHRI MUSTAFA YAKUB, SHRI ALI AZHAR SIRAJ AND SHRI TAHEER ZOYAB RESPECTIVELY. THUS, THE ASSESSEE, SHRI MUSTAFA YAK UB BECAME ENTITLED TO ONE-TWELFTH SHARE IN THESE PROPE RTIES ON 30.10.2010. LATER ON 23.3 . 2009 , MEMORANDUM OF RECORD OF PAST PARTITION BY FAM I LY ARRANGEMENT WAS E X ECUTED . AS PER THIS AGREEMENT 3350 SQ . FT. OU T OF 4350 SQ.FT. UNDIVIDED SHARE OF LAND TOGETHER WITH 15230 SQ .FT . OF BU I LT UP AREA AT 128 (OLD NO. 7), ANGAPPA NAICKEN STREET, CHENNA I WAS G I VEN T O SEEDS OF LATE ALI HUSSAIN ABDUL KHADER AND THE ENT I RE GROUND AND PREMISES MEASUR I NG 5 GROUNDS AND 1068 SQ . FT . (13068 SQ.F T ) AT NO. 14, MOORE STREE T, CHENNAI - 600 001, WAS TAKEN OVER BY THE SEEDS OF LATE BADRUDDIN ABDUL KHADER WITH A VIEW TO EQUALIZE THE VALUE OF THE PROPERTIES TAKEN OVER BY THE TWO FAMILIES I.E. RS. 2,22,50 , 000/ - WAS PAID BY ! THE SEEDS O F LATE BADRUDIN ABDUL KHADER TO THE SEEDS OF LATE ALI HUSSAIN ABDUL KHADER ( I .E . ASSESSEE AND 5 OTHERS). ' 9. THEREFORE, THE ASSESSING OFFICER ADOPTED THE COST I NFLATION INDEX APPLICABLE TO FINANCIAL YEAR 2000-01 IN PLACE OF THE COST INFLATION I.T.A.NO.1872/12 C.O 191/12 :- 9 -: INDEX OF 100 APPLICABLE FOR FINANCIAL YEAR 1981-82. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND SUBMITTED AS UNDER: 'AS YOUR GOODSELF IS WELL AWARE SEC . 48 OF THE I. T. ACT 1961 DEALS WITH THE MODE OF COMPUTATION OF LONG TERM CAPITAL GAINS WITH INDEXATION OF COST OF ACQUISITIO N . SUB SEC (1) OF SEC . 49 SPECIFIES THE MODE OF CALCULATION OF COST WITH REFERENCE TO CERTAIN MODES OF ACQUISITION SUCH AS G IFT, ETC. LIKEWISE EXPLANATION 1(I)(B) OF SEC. 2(42A) CLEARLY SPECIFIES 'IN THE CASE OF A CAPITAL ASSET WHICH BECOMES THE P ROPERTY OF THE ASSESSEE IN THE CIRCUMSTANCES MENTIONED IN [ SUB- SECTION (1)] OF SECTION 49, THERE SHALL BE INCLUDED THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER REFERRED TO IN SAID SECTION' . CIRCULAR NO. 636 OF CBDT DATED 31.8.1992 ALSO SPECIFIES THAT CUT OF DATE FOR ASSET S , HELD FOR PURPOSE OF INDEXATION IS TAKEN AS 1 . 4.1981 AND THAT FOR AN ASSET ACQUIRED BEFORE THIS DATE, ITS VALUE AS ON 1 . 4.1981 WILL BE TAKEN FOR INDEXATION . THE HON'BLE MEMBERS OF THE SPECIAL BENCH (SB) OF THE MUMBAI INCOME TAX APPELLANT TRIBUNAL (ITAT) IN ITA NO. 7315/MUM/2007 IN THE CASE OF DCIT VS MANJULA SHAH HAS LAID THAT THE INDEXATION BENEFIT IS AVAILABLE TO A DONEE FORM THE YEAR OF ITS ACQUISITION BY THE PREVIOUS OW NER. THE HON'BLE MEMBERS OF THE SPECIAL BENCH HAVE MENTIONE D IN THE SAID ORDER 'EXCLUSION OF THE HOLDING PERIOD B Y THE PERIOD BY THE PREVIOUS OWNERS, WHILE COMPUTING CAPI TAL GAINS IN THE HANDS OF THE SUCCESSOR, LEAD TO ABSURD ITY AND AN UNJUST RESULT'. I THEREFORE, MOST HUMBLY APPEAL TO YOUR GOODSELF TH AT ON BEING CONVINCED BY MY ABOVE SUBMISSIONS, PASS ORDERS DIRE CTING THE LEARNED INCOME TAX COMMISSIONER TO DELETE THE ADDITION OF RS. 20,38,901/- MADE TO THE INCOME UNDER THE HEAD LONG TERM, CAPITAL GAIN AND RENDER JUSTICE.' 10. THE CIT(A), AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, ALLOWED THE APPEAL, BY OBSERVING AS UNDER : 7. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORD ER, GROUNDS OF APPEAL, WRITTEN SUBMISSIONS AND THE ARGU MENT OF THE AR OF THE APPELLANT. IT IS SEEN THAT THE APPELL ANT HAS WORKED OUT THE LONG TERM CAPITAL GAIN BY ADOPTING THE MARKET VALUE AS ON 1.4.1981 AND INDEXED COST OF RS. 100/-. THE AO DID NOT ACCEPT THE COST INFLATION INDEX AT R S. 100 I.T.A.NO.1872/12 C.O 191/12 :- 10 -: INSTEAD OF THAT THE AO ADOPTED RS. 406 FOR F.Y. 2000-2001 COST INDEX STATING THE REASON THAT AS PER EXPLANATI ON (III) TO SECTION 48 OF THE INCOME TAX ACT, 1961, INDEXED COST OF ACQUISITION' MEANS AN AMOUNT WHICH BEARS TO THE COS T OF ACQUISITION THE SAME PROPORTION AS COST INFLATION I NDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE A SSESSEE OR FOR THE YEAR BEGINNING ON THE 1 ST DAY OF APRIL 1981 WHICHEVER IS LATER. 7.1 THE APPELLANT OBJECTED TO THE AO'S ACTION IN ADOPTI NG COST INFLATION INDEX FOR 2000-01. THE APPELLANT CONTENDED THAT THE PROPERTY WAS ACQUIRED BY HIM BY SETTLEMENT AND HENCE THE AO OUGHT TO HAVE ADOPTED THE COST INFLATI ON INDEX THAT PREVAILED ON THE DATE' ON WHICH THE PREVIOUS O WNER ACQUIRED. IN SUPPORT OF HIS ARGUMENT THE APPELLANT RELIED ON THE SPECIAL BENCH DECISIONS OF THE HON'BLE ITAT, MU MBAI IN THE CASE OF DCIT VS. MANJULA J. SHAH , 318 ITR (AT) 417 MUMBAI (SB) WHEREIN THE FACTS OF THE CASE ARE SIMIL AR TO THAT OF THE APPELLANT'S CASE. IN THIS CASE, THE HON 'BLE ITAT HELD THAT THE .APPELLANT WAS ENTITLED TO THE BENEFI T OF INDEXATION EFFECTIVE FROM THE DATE OF PREVIOUS OWNE R ACQUIRED THE PROPERTY AND THE SAME IS REPRODUCED HEREUNDER: 'FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY T HE ASSESSEE HAS TO BE DETERMINED TO WORK OUT THE INDEXED COST OF ACQUISITION AS ENVISAGED IN EXPLANATION (III) TO SECTION 48 AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER. IN THAT VIEW OF THE MATTER, WE HOLD THAT THE INDEXED COST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENCE, TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO US IN FAVOUR OF THE ASSESSEE A ND UPHOLD THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A.NO.1872/12 C.O 191/12 :- 11 -: 7.2 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE HON'BLE ITAT, SPECIAL BENCH, MUMBAI, THE AO IS DIRE CTED TO ADOPT COST INFLATION INDEX APPLICABLE TO F.Y. 1981- 82 ONLY I.E. 100 INSTEAD OF 406 AS ADOPTED BY THE AO. THERE FORE THE APPELLANT SUCCEEDS ON THIS GROUND. 11. THE FACTS AS RECORDED IN THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) ARE NOT IN DISPUTE BEFORE US. THE O NLY DISPUTE IS THAT WHETHER THE CIT(A) WAS JUSTIFIED IN ADOPTING COST I NFLATION INDEX FOR FINANCIAL YEAR 1981-82 IN PLACE OF 2000-01 ADOPTED BY THE ASSESSING OFFICER. WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE ORDER OF THE CIT(A) IS NOT ONLY COVERED BY THE DECI SION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S MANJULA J SHAH (SUPRA) BUT ALSO BY THE DECISION OF THE HON'BLE BOM BAY HIGH COURT IN THE CASE OF CIT VS MANJULA J SHAH (SUPRA) WHEREIN T HE HON'BLE HIGH COURT HAS HELD AS UNDER: 20. TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE WO RDS USED IN CLAUSE (III) OF THE EXPLANATION TO SECTION 48 OF THE ACT HAS TO BE READ BY IGNORING THE PROVISIONS CONTAINED IN SECTIO N 2 OF THE ACT RUNS COUNTER TO THE ENTIRE SCHEME OF THE ACT. SECTI ON 2 OF THE ACT EXPRESSLY PROVIDES THAT UNLESS THE CONTEXT OTHERWIS E REQUIRES, THE PROVISIONS OF THE ACT HAVE TO BE CONSTRUED AS P ROVIDED UNDER SECTION 2 OF THE ACT. IN SECTION 48 OF THE ACT, THE EXPRESSION 'ASSET HELD BY THE ASSESSEE' IS NOT DEFINED AND, TH EREFORE, IN THE ABSENCE OF ANY INTENTION TO THE CONTRARY THE EXPRES SION 'ASSET HELD BY THE ASSESSEE' IN CLAUSE (III) OF THE EXPLAN ATION TO SECTION 48 OF THE ACT HAS TO BE CONSTRUED IN CONSONANCE WIT H THE MEANING GIVEN IN SECTION 2(42A) OF THE ACT. IF THE MEANING GIVEN IN SECTION 2(42A) IS NOT ADOPTED IN CONSTRUING THE WORDS USED IN SECTION 48 OF THE ACT, THEN THE GAINS ARISING ON TR ANSFER OF A CAPITAL ASSET ACQUIRED UNDER A GIFT OR WILL BE OUTS IDE THE PURVIEW OF THE CAPITAL GAINS TAX WHICH IS NOT INTENDED BY T HE LEGISLATURE. THEREFORE, THE ARGUMENT OF THE REVENUE WHICH RUNS C OUNTER TO THE LEGISLATIVE INTENT CANNOT BE ACCEPTED. I.T.A.NO.1872/12 C.O 191/12 :- 12 -: 12. FURTHER, THE ORDER OF THE CIT(A) IS ALSO COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF ARUN SHUNGLOO TRUST VS CIT (SUPRA) WHEREIN THE HON'BLE HIGH COURT HAS OBSERVED AS UNDER: 14 . IF THE CONTENTION OF THE REVENUE IS ACCEPTED , THEN BENEFIT OF INDEXED COST OF ACQUISITION , WILL NOT AVAILABLE TO AN ASSESSEE IN A C A SE COVERED BY SECTION 49 FROM THE DATE ON WHICH THE ASSET WAS HELD BY THE PREVIOUS OW NER BUT ONLY FROM THE DATE THE CAPITAL ASSET WAS TRANSF ERRED TO THE ASSESSEE. THIS WILL LEAD TO A DISCONNECT AND CONTRADICTION BET WEE N 'INDEXED COST OF ACQUISITION' AND 'INDEXED COST OF IMPROVEMENT' IN THE CASE OF CAPITA L ASSETS WHERE SECTION 49 APPLIES. THIS CANNOT BE THE INTENTION BEHIND THE ENACTMENT OF SECTION 49 AND IT S EXPLANATION TO SECTION 48. THERE IS NO REASON OR GR OUND WHY THE LEGISLATIVE WOULD WANT TO DENY OR DEPRIVE A N ASSESSEE BENEFIT / ADVANTAGE OF THE PREVIOUS HOLDING FOR COMPUTING 'INDEXED COST OF ACQUISITION' WHILE ALLOW ING THE SAID BENEFIT FOR COMPUTING 'INDEXED COST OF IMPROVE MENT'. 13. THE CIT/DR COULD NOT POINT OUT ANY GOOD REASON WHY THE ABOVE SETTLED LAW APPLIED BY THE CIT(A) IN THE INST ANT CASE WAS ERRONEOUS. THE ONLY CONTENTION OF THE CIT/DR IS TH AT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS MANJULA J SHAH (SUPRA) AS THE DEPART MENT HAS FILED A SLP BEFORE THE HON'BLE SUPREME COURT AGAINST THE SA ID ORDER. HOWEVER, THE CIT/DR COULD NOT BRING ANY MATERIAL BE FORE US TO SHOW THAT THE HON'BLE SUPREME COURT HAS VARIED THE ORDER OF THE HON'BLE BOMBAY HIGH COURT OR EVEN STAYED THE OPERATION OF T HE ORDER. WE, ACCORDINGLY, DISMISS THE GROUNDS OF APPEAL TAKEN BY THE REVENUE. I.T.A.NO.1872/12 C.O 191/12 :- 13 -: 14. IN THE CROSS OBJECTION FILED BY THE ASSESSEE, THE A.R SUBMITTED THAT THE ASSESSEE HAS SUPPORTED THE ORDE R OF THE CIT(A). THERE BEING NO GRIEVANCE AGAINST THE ORDER OF THE C IT(A), THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS IN FRUCTUOUS. 15. IN THE RESULT, BOTH, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE, ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 11 TH OF JANUARY, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 11 TH JANUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR