ITO (OSD), CHENNAI V. Smt. J.Meenakshi, CHENNAI

ITA 1092/CHNY/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8195 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V D GOPAL
• Keywords: Capital asset; Gift; Cost of acquisition; Set aside; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE SHRI PRADEEP PARIKH, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 1091/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ITO (OSD) MEDIA CIRCLE I CHENNAI VS SMT.D.JOTHILAKSHMI 1A, RAMA RAO STREET OFF. BAZULLAH ROAD T. NAGAR, CHENNAI - 17 [PAN AAGPJ7593M] (APPELLANT) (RESPONDENT) I.T.A NO. 1092/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ITO (OSD) MEDIA CIRCLE I CHENNAI VS SMT. J. MEENAKSHI 1A, RAMA RAO STREET OFF. BAZULLAH ROAD T. NAGAR, CHENNAI - 17 [PAN AAMPM9950D] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P.JACOB RESPONDENT BY : SHRI V.D. GOPAL O R D E R PER HARI OM MARATHA, JM: THESE APPEALS OF THE REVENUE, FOR ASSESSMENT Y EAR 2007-08, IN RESPECT OF TWO DIFFERENT ASSESSEES, ARE DIRECTE D AGAINST SEPARATE ITA 1091 & 1092/10 :- 2 -: ORDERS OF THE LD. CIT(A)-VI, CHENNAI, DATED 26.3.20 10. AS IDENTICAL ISSUE IS INVOLVED IN THESE APPEALS, FOR THE SAKE OF CONVENIENCE AND BREVITY, WE PROCEED TO DECIDE THEM BY A COMMON ORDE R. 2. THE RELEVANT FACTS, IN BRIEF, ARE THAT DURING TH E PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08, SMT D.JOTHILAK SHMI AND HER DAUGHTER, SMT. J MEENAKSHI, BEING CO-OWNER, SOLD A PROPERTY SITUATED AT NO.32, SARANGAPANI STREET, T.NAGAR, CHENNAI-17, FOR A SALE CONSIDERATION OF ` 3 CRORES. THE CAPITAL GAIN WAS COMPUTED BY APPLYING THE INDEXATION WITH REFERENCE TO FINANCIAL YEAR 1980-81 ON THE REASONING THAT THE PROPERTY WAS ACQUIRED BY THE MOT HER OF SMT.D.JOTHILAKSHMI EVEN PRIOR TO 1981. BUT THE ASS ESSING OFFICER HAD A DIFFERENT OPINION AND APPLIED THE INDEXATION OF F INANCIAL YEAR 1991-92 BECAUSE ACCORDING TO HIM, THE PROPERTY WAS INHERITE D BY SMT.D.JOTHILAKSHMI ONLY DURING THAT YEAR. ON APPEA L BEFORE THE LD. CIT(A) THE ASSESSEE RELIED ON THE DECISION OF SPECI AL BENCH OF MUMBAI ITAT IN THE CASE OF DY. CIT VS MANJU J. SHAH IN I.T .A.NO. 7315/MUM/2007, ORDER DATED 16.10.2009 AND ALSO THE DECISION OF ITAT, CHENNAI IN THE CASE OF SHRI P.S. KALYANASUNDA RAM VS ITO IN I.T.A.NO. 1935/MDS/08. THE LD. CIT(A) FOUND THAT T HE ISSUE INVOLVED IN THESE APPEALS STANDS SQUARELY COVERED BY THESE D ECISIONS IN CONTRAST TO THE FINDING OF THE ASSESSING OFFICER WHO HAD NO T RELIED ON THOSE ITA 1091 & 1092/10 :- 3 -: DECISIONS. THE REVENUE HAS RAISED ALMOST SIMILAR G ROUNDS IN BOTH THESE APPEALS. FOR THE SAKE OF CONVENIENCE, WE REP RODUCE THE GROUNDS OF ONE OF THE APPEALS AS UNDER: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CO ST INDEX FACTOR IS TO BE APPLIED FOR THE BASE YEAR 198 1- 82 INSTEAD OF THE YEAR 1991-92, WHEN THE ASSESSEE BECAME THE OWNER OF THE PROPERTY. 3. THE ID CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THE ASSESSING OFFICER HAD RIGHTLY ADOPTED THE YEAR 1991 - 92 AS THE BASE YEAR BY APPLYING THE EXPLANATION TO SECTION 48(III) OF THE IT ACT. 4. THE ID CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT AS PER THE PROVISIONS OF SECTION 48(III) THE COST I NDEX NUMBER IS TO BE APPLIED FOR THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER. 5. THE ID CIT(A) ERRED IN HOLDING THAT AS PERIOD O F HOLDING BY THE PREVIOUS OWNER IS INCLUDED TO DETERMINE WHETHER THE ASSET IS A LONG TERM CAPITAL ASSET OR SHORT TERM CAPITAL ASSET SAME PERIOD OF HOLDING SHOULD BE CONSTRUED FOR FINDING THE INDEXED COST OF ACQUISITION ALSO. 6. THE ID CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE PERIOD OF HOLDING BY THE PREVIOUS OWNER IS INCLUDED ONLY TO DEEM THE ASSET AS LONG TERM CAPITA L ASSET AND NOT TO DEEM THE ASSESSEE AS THE OWNER OF THE ASSET. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA 1091 & 1092/10 :- 4 -: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. IT WAS SUBMITTED BY THE LD.AR A T THE VERY OUTSET OF THE HEARING OF THESE APPEALS THAT THE ISSUE INVOLVE D IN THESE APPEALS STANDS SQUARELY COVERED BY THE SPECIAL BENCH DECISI ON IN THE CASE OF DY. CIT VS MANJU J. SHAH (SUPRA). THE LD.DR ALSO C OULD NOT CONTROVERT THIS LEGAL POSITION. WE HAVE GONE THROUGH THE ABOV E DECISION AND ARE CONVINCED THAT THE FACTS OF THE SPECIAL BENCH DECIS ION ARE ALMOST SIMILAR TO THE FACTS OF THE APPEALS BEFORE US. THE RATIO OF THE SPECIAL BENCH DECISION IS THAT THE RELEVANT PROVISIONS DEAL ING WITH COMPUTATION OF INCOME FROM CAPITAL GAINS ARE CONTAINED IN SECTI ONS 45 TO 55A OF THE ACT. AS PER THE DEFINITION GIVEN IN EXPLANATION (I II) TO SECTION 48, THE 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 A SSESSEE OR FOR THE YEAR BEGINNING THE FIRST DAY OF APRIL 1981 WHICHEVE R IS LATER. THE DEFINITION OF SHORT TERM CAPITAL ASSET IS GIVEN IN SECTION 2(42A) AND EXPLANATION 1(B) IS ALSO RELEVANT IN THIS CONNECTIO N. A COMBINED READING OF BOTH THE AFORESAID PROVISIONS WHICH ARE RELEVANT IN THE PRESENT CONTEXT, CLEARLY SHOWS THAT THE IMPORTANCE IS ASSIGNED TO THE PERIOD OF HOLDING OF THE CAPITAL ASSET INASMUCH AS EXPLANATION (III) TO SECTION 48 REFERS TO THE FIRST YEAR IN WHICH THE AS SET WAS HELD BY THE ITA 1091 & 1092/10 :- 5 -: ASSESSEE WHEREAS EXPLANATION 1(B) TO SECTION 2(42A) PROVIDES FOR INCLUSION OF THE PERIOD FOR WHICH THE ASSET WAS HEL D BY THE PREVIOUS OWNER IN DETERMINING THE PERIOD FOR WHICH ANY CAPIT AL ASSET IS HELD BY THE ASSESSEE. HAVING REGARD TO THIS ASPECT AS WELL AS KEEPING IN VIEW THE FACT THAT THE DEFINITIONS GIVEN IN SECTION 2 AR E APPLICABLE FOR THE ENTIRE ACT, WE ARE OF THE VIEW THAT THE LEGISLATIVE INTENTION BEHIND ENACTING THESE PROVISIONS IS VERY CLEAR TO TREAT TH E DATE AS WELL AS COST OF ACQUISITION OF CAPITAL ASSET OF THE PREVIOUS OWN ER TO BE THE DATE AND COST OF ACQUISITION OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING CAPITAL GAINS IN TERMS OF SECTION 48. THE HON'BLE SPECIAL BENCH HAS FOUND THIS SCHEME OF THE ACT TO BE CORRECT. IT HAS BEEN FURTH ER HELD THAT THE TRANSACTION OF GIFT IS NOT BE REGARDED AS TRANSFER AND ACCORDINGLY, CAPITAL GAINS ARISING FROM SUCH TRANSFER IS NOT MA DE CHARGEABLE TO TAX U/S 45. KEEPING IN VIEW THE RATIO OF THE ABOVE DEC ISIONS, WE ARE OF THE CONSIDERED OPINION THAT THE FINDING OF THE LD. CIT( A) IS TO BE IN ORDER. THE LD. CIT(A) HAS ALSO RELIED ON THE DECISION OF I TAT CHENNAI BENCH RENDERED IN THE CASE OF SHRI P.S.KALYANASUNDARAM V S ITO (SUPRA), IN WHICH ALSO SIMILAR VIEW HAS BEEN TAKEN. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT (A) IN BOTH THESE CASES. THE LD.DR COULD NOT BRING TO OUR NOTICE ANY CONTRARY DECISIONS. CONSEQUENTLY, WE DISMISS BOTH THE APPEALS. ITA 1091 & 1092/10 :- 6 -: 4. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE STAN D DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 .9.10. SD/- SD/- (PRADEEP PARIKH) VICE-PRESIDENT ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 17 TH SEPTEMBER, 10 RD : COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR