Dy. CIT Circle-5, Pune V. Sh.Prakash B. Shah (HUF), Pune

ITA 1209/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56633 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 1209/PN/2010 : A.Y. 2007-08 DY. CIT CIR. 5, PUNE APPELLANT VS. PRAKASH B SHAH (HUF) 1499 SHUKRAWAR PETH, PUNE-411 002 PAN AAIJP 1592 G RESPONDENT APPELLANT BY: MS. NEERA MALHOTRA RESPONDENT BY: SHRI C.H. NANIWADEKAR DATE OF HEARING: 29-12-2011 DATE OF PRONOUNCEMENT : 30-12-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-III PUNE DATED 16-6-2010 FOR A.Y. 2 007-08 ON THE POINT OF DELETION OF ADDITION OF RS. 1,79,85 ,742/- TOWARDS LONG TERM CAPITAL GAINS. 2. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD SOLD LAND AT LOHGAON AND HAD SHOWN CAPITAL GAINS AF TER CLAIMING EXEMPTION U/S 54EC TOWARDS PURCHASE OF REC BONDS. THE ASSESSING OFFICER NOTICED THAT THE ASSES SEE HAD TAKEN COST OF ACQUISITION OF 1981 AND INDEXATION FR OM 1981 AND ARRIVED AT THE CAPITAL GAIN OF RS. 1,79,85,742/ -. ON APPEAL, THE CIT(A) AGREEING WITH THE CONTENTION MAD E ON BEHALF OF THE ASSESSEE, DIRECTED THE ASSESSING OFFI CER TO 2 ITA NO. 1209/PN/2010 PRAKASH B SHAH (HUF) A.Y. 2007-08 COMPUTE THE INDEXED COST OF ACQUISITION BY APPLYING INDEXATION FROM 1981. THE SAME HAS BEEN CHALLENGED BY THE REVENUE BEFORE US. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 4. WE FIND THAT THE ISSUE INVOLVED IN THIS APPEAL I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCI T VS. MANJULA SHAH (318 ITR 417) WHEREIN IT HAS BEEN HELD AS UNDER: WHEN THE COST OF ACQUISITION TO THE PREVIOUS YEAR AS O THE DATE OF ACQUISITION OF THE CAPITAL ASSET BY HIM IS TO BE ADOPTED AS THE COST OF ACQUISITION TO THE ASSESS EE, EVEN FOR THE PURPOSE OF WORKING OUT THE INDEXED COS T OF ACQUISITION AS PER THE MEANING GIVEN IN EXPLANATION (III) TO SECTION 48, IT IS NOT LOGICAL TO ADOPT THE COST OF INFLATION INDEX FOR THE YEAR IN WHICH THE CAPITAL A SSET BECAME THE PROPERTY OF THE ASSESSEE AND NOT, THAT F OR THE YEAR IN WHICH THE ASSET WAS ACQUIRED BY THE PREVIOUS OWNER. FOR THE PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAINS ARISING FROM THE TRANSFER O F A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER THE GIFT, THE FIRST YEAR IN WHICH TH E CAPITAL ASSET WAS HELD BY THE ASSESSEE HAS TO BE DETERMINED TO WORK OUT THE INDEXED COST OF ACQUISIT ION AS ENVISAGED IN EXPLANATION (III) TO SECTION 48 AFT ER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER. IN T HAT VIEW OF THE MATTER, THE INDEXED COST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENC E TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. FURTHER, HONBLE JURISDICTIONAL BOMBAY HIGH COURT I N THE CASE OF CIT VS. MANJULA J. SHAH IN INCOME-TAX APPEA L NO. 3378 OF 2010 HELD THAT THE TRIBUNAL WAS JUSTIFIED I N HOLDING THAT WHILE COMPUTING THE CAPITAL GAINS ARIS ING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSE E UNDER A 3 ITA NO. 1209/PN/2010 PRAKASH B SHAH (HUF) A.Y. 2007-08 GIFT, THE INDEXED COST OF ACQUISITION HAS TO BE DET ERMINED WITH REFERENCE TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASSESSEE . SIMILAR VIEW WAS TAKEN BY THE JURISDICTIONAL HIGH C OURT IN THE CASE OF JANHAVI INVESTMENTS P. LTD. (2008) 1 D TR (BOM) 374. RESPECTFULLY FOLLOWING THE AFORESAID JUD ICIAL HIERARCHY, WE HOLD THAT THE CIT(A) WAS JUSTIFIED I N DIRECTING THE ASSESSING OFFICER TO COMPUTE THE INDE XED COST OF ACQUISITION BY APPLYING INDEXATION FROM 1981 AND DELETING THE ADDITION OF RS. 1,79,85,742/- TOWARDS LONG TERM CAPITAL GAINS. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN ON ____ DECEMBER 2011. (D. KARUNAKARA RAO) ACCOUNTANT MEMBER SHAILENDRA KUMAR YADAV JUDICIAL MEMBER PUNE DATED THE ____ DECEMBER 2011. ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT III PUNE 4. CIT(A)-III PUNE 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, PUNE.