Sekaripuram Ramamurthi Venkateswaran, CHENNAI V. ITO, CHENNAI

ITA 1296/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8716 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH J
• Assessee Lawyers: MAYA J NICHANE
• Keywords: Capital asset; Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! , ' #$ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1296/MDS./2016 / ASSESSMENT YEAR : 2012-13 SHRI SEKARIPURAM RAMAMURTHI VENKATESWARAN, 23,GANESH STREET,GOPALPURAM, CHENNAI. VS. INCOME TAX OFFICER, INTERNATIONAL TAXATION-II, CHENNAI-34. [PAN AFXPV 5380 C ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SMT.MAYA J NICHANE ADVOCATE /RESPONDENT BY : SHRI A.V.SREEKANTH,JCIT,DR / DATE OF HEARING : 20 - 07 - 201 6 / DATE OF PRONOUNCEMENT : 22 - 07 - 2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-16, CHENNAI DATED 28.03.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO HOLDING THAT IN THE CASE OF INHERITANCE OF PROPERTY THE ASSESSEE WA S ENTITLED TO COST OF ITA NO.1296/MDS./16 :- 2 -: INFLATION INDEX, ONLY FROM THE YEAR OF INHERITANCE OF PROPERTY AND NOT FROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES FATHER ACQUIRED THE PROPERTY IN 1980 AND THAT HE DIED IN FEBRUARY 2011, LEAVING THE ASSESSEE AND HIS TWO BROTHERS AS HIS LEGAL HEIRS. THE PROPER TY AT NO. 240A, ROAD NO.18, JUBILEE HILLS, HYDERABAD WAS SOLD IN MARCH 2 012 AND THE ASSESSEE ADMITTED THE LONG TERM CAPITAL GAINS AT RS.2,73,32, 860/- AS ASSESSEES ONE THIRD SHARE OF RS.8,19,98,580/-. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD.A.R RELIED ON THE CASE LAWS OF CIT VS. SMT. MINA DEOGUN, REPORTED IN 375 ITR 586(CALCUTTA), AND OF COMMISSIONER OF INCOME-TAX VS . MANJULA J. SHAH, REPORTED IN 355 ITR 474(BOM). IT IS SUBMITTED THAT THE BOMBAY HIGH COURT HAD CLEARLY LAID DOWN THAT, WHILE COMPUTING THE CAP ITAL GAINS, THE INDEXED COST OF ACQUISITION HAD TO BE COMPUTED WITH REFEREN CE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE APPELLANT BECAME THE OWNER. HOWEVER, THE AO PASSED AN ORDER BY ADOPTING THE PROVISIONS OF THE SECTION 49(1) AND ACCEPTED TH E POSITION REGARDING COST OF INDEXATION WITH REFERENCE TO DATE OF ACQUISITION OF THE PROPERTY BY THE PREVIOUS OWNER. AGGRIEVED WITH THE ORDER OF AO, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 3.2 DURING THE APPELLATE PROCEEDINGS, LD.A.R SUBMIT TED THAT THE COMPUTATION MADE BY THE ASSESSEE WAS CORRECT AND RE ITERATED THE SUBMISSIONS MADE BEFORE THE AO. IT MAY ALSO BE POIN TED OUT THAT THE ASSESSMENTS OF THE OTHER TWO BROTHERS OF THE APPELL ANT HAD BEEN COMPLETED ITA NO.1296/MDS./16 :- 3 -: BY ACCEPTING THIS CONTENTION AND NO ADDITION WAS MA DE TO THE LONG TERM CAPITAL GAINS ADMITTED IN THEIR RETURNS OF INCOME, WHICH IS THE SAME AS THAT ADMITTED IN THE ASSESSEES RETURN OF INCOME. ON AP PEAL, LD.CIT(A) OBSERVED THAT THE ASSESSEE WAS INHERITED THE PROPERTY AFTER THE D EMISE OF HER FATHER ON 02/02/2011. ACCORDING TO HIM, THE ASSESS EE IS ENTITLED FOR BENEFIT FOR COST OF ACQUISITION FROM FINANCIAL YEAR 2010-11. ACCORDINGLY, LD.CIT(A) DISMISSED THE APPEAL OF ASSE SSEE. AGAINST THIS ASSESSEE IS IN APPEAL BEFORE US. 4. THE CONTENTION OF THE ASSESSEES COUNSEL IS THAT THE PROPERTY WAS INHERITED BY THE ASSESSE AFTER THE DEM ISE OF HER FATHER ON 02/02/2011. THE PROPERTY HAD BEEN ACQUIRED BY HER FATHER BEFORE 1981. THE LD.A.R SUBMITTED THAT IN THE CASE OF INHE RITANCE OF PROPERTY THE ASSESSEE WAS ENTITLED TO COST OF INFLATION INDE X, ONLY FROM THE YEAR OF INHERITANCE OF PROPERTY AND NOT FROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER. ON THE OTHER HAND, LD.D.R SUPPORTE D THE ORDERS OF LOWER AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS PER SEC.49(1)(III)(A) OF THE ACT, WHEREA S THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BY SUCCESSION, INHERITANCE OR DEVOLUTION, THE COST OF ACQUISITION OF THE ASSET SH ALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPER TY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT INCURRED B Y THE PREVIOUS ITA NO.1296/MDS./16 :- 4 -: OWNER OF THE ASSESSEE, AS THE CASE MAY BE. FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS, THE COST OF ASSET SHO ULD BE REVISED UPWARDS BY APPLYING THE APPROPRIATE COST OF INFLATI ON INDEX. IF THE ASSET WAS ACQUIRED PRIOR TO 1ST APRIL, 1981, THE CO ST OF INFLATION INDEX RELATING TO THE FINANCIAL YEAR 1981-82 IS REQUIRED TO BE APPLIED FOR THE PURPOSE OF ARRIVING AT THE INDEX COST OF ASSET. T HE COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT THE ASSESSEE BEC AME THE CO- OWNER OF THE PROPERTY UNDER CONSIDERATION ONLY ON T HE DEATH OF ASSESSEES FATHER MR.S.T.RAMAMURTHY I.E. ON 02/02/2 011 AND THE SAID PROPERTY WAS SOLD FOR A CONSIDERATION OF RS.9 CRORE S DURING THE FINANCIAL YEAR 2011-12. ACCORDING TO THE COMMISSIO NER OF INCOME- TAX(APPEALS), THE ASSESSEE BECAME THE OWNER OF THE PROPERTY ONLY ON 02/02/2011 AND THERE IS NO QUESTION OF CONSIDERATIO N OF COST OF ASSET IN TERMS OF SEC.49(1)(III)(A) OF THE ACT. 6. IT IS TO BE NOTED THAT THIS TRIBUNAL IN THE CASE OF SMT. MINA DEOGUN V. ITO(19 SOT 183)(KOL.), AFTER CONSIDERING THE MEMORANDUM EXPLAINING THE FINANCE BILL 1992 AND CBDT CIRCULAR NO.636 DATED 13.8.1992 (107 CTR(ST.), HELD THAT INDEXATION IS TO BE ALLOWED IN RESPECT OF PERIOD OF HOLDING OF THE ASSET AND NOT I N RELATION TO THE INDIVIDUALITY OF THE ASSESSEE. ACCORDINGLY, IT WAS HELD THAT FOR THE PURPOSE OF DETERMINING THE PERIOD OF HOLDING, INTER MEDIATE TRANSFERS ON ACCOUNT OF SUCCESSION ARE TO BE IGNORED. SIMILA RLY, IN THE CASE OF ITA NO.1296/MDS./16 :- 5 -: SMT. PUSHPA SOFAT V. ITO (81 ITD 1), CHANDIGARH BEN CH OF THIS TRIBUNAL HAS EXPRESSED SIMILAR VIEW. WE ALSO NOTIC ED THAT AS PER THE PROVISIONS OF SEC.2(42A), EXPLANATION I(B), IT IS S TIPULATED THAT IN DETERMINING THE PERIOD FOR WHICH ANY CAPITAL ASSET IS HELD BY THE ASSESSEE, IN THE CASE OF A CAPITAL ASSET WHICH BECO MES THE PROPERTY OF THE ASSESSEE BY WAY OF SUCCESSION, INHERITANCE ETC. , THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER SHAL L ALSO BE INCLUDED. 7 . IT IS ALSO TO BE NOTED THAT IN THE CASE OF DCIT V . KISHORE KANUNGO (102 ITD 437), THE MUMBAI BENCH OF THIS TRI BUNAL, HELD THAT INDEXATION IS TO BE ALLOWED ONLY FROM THE YEAR IN W HICH THE ASSESSEE BECAME THE OWNER OF THE PROPERTY. CONTRARY TO THIS , VISHAKHAPATNAM BENCH IN THE CASE OF M. SIVAPARVATHI & OTHERS V. IT O (7 ITR (TRIB) 468) HELD THAT, THE ASSESSEE HAVING INHERITANT PROP ERTY PURCHASED BY THE PREVIOUS OWNER IN THE YEAR 1974, THE COST OF AC QUISITION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS ON THE SALE OF SUCH PROPERTY HAD TO BE COMPUTED BY APPLYING THE COST OF INFLATIO N INDEX BY FINANCIAL YEAR 1981-82 AND NOT BY FINANCIAL YEAR 1989-90 I.E. THE YEAR OF INHERITANCE BY THE ASSESSEE. THUS, IT IS A SETTLED PROPOSITION THAT WHEN TWO VIEWS ARE POSSIBLE, A VIEW WHICH IS IN FAVOUR O F THE ASSESSEE, HAS TO BE ADOPTED. IN THIS REGARD, WE MAKE REFERENCE T O THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE P RODUCTS LTD. (88 ITR 192). ITA NO.1296/MDS./16 :- 6 -: 8. IN VIEW OF THIS, WE HOLD THAT IN THE PRESENT CAS E, THE ASSESSEE INHERITED THE PROPERTY ON 02/02/2011. THE SAID PRO PERTY WAS PURCHASED BY THE ASSESSEES FATHER BEFORE 1981. AF TER THE DEATH OF THE ASSESSEES FATHER, THE PROPERTY WAS INHERITED T O THE ASSESSEE ALONG WITH OTHER TWO CO-OWNERS. ACCORDINGLY, THE COST OF INDEXATION TO BE APPLIED AS ON 1.4.1981, AFTER FIXING THE VALUE OF T HE ASSET AS ON 1.4.1981 AND IT CANNOT BE SAID THAT THE ASSESSEE AC QUIRED PROPERTY UNDER DISPUTE ONLY ON 02/02/2011 ON THE DEATH OF TH E ASSESSEES FATHER SO AS TO COMPUTE THE CAPITAL GAINS. IN OTHE R WORDS, CAPITAL GAINS HAS TO BE ASSESSED AS LONG TERM CAPITAL GAINS BY FIXING THE COST OF ASSET AS ON 1.4.1981 AND THEREAFTER APPLYING THE COST OF INFLATION INDEX IN TERMS OF SEC.49(1)(III)(A) OF THE ACT. IT NEEDLESS TO SAY THAT SAME VIEW WAS TAKEN IN THE CASE OF CIT VS. MANJULA J.SHAH REPORTED IN 355 ITR 474(BOM.). ACCORDINGLY, THIS APPEAL OF T HE ASSESSEE IS ALLOWED. 9. THE SECOND GROUND IS WITH REGARD TO ALLOWABILIT Y OF DEDUCTION U/S.54EC OF THE ACT IN RESPECT OF AMOUNT WHICH WAS INVESTED AT ` 50 LAKHS WITHIN SIX MONTHS OF DATE OF SALE, BUT IN TWO DIFFERENT FINANCIAL YEARS. ITA NO.1296/MDS./16 :- 7 -: 10. IN THIS CASE, THE ASSESSEE MADE INVESTMENTS IN REC BONDS ON 28.03.2012 DURING FINANCIAL YEAR 2011-12 & IN NHAI BONDS ON 07.04.2012 DURING FINANCIAL YEAR 2012-13 AT ` 50 LAKHS EACH AND CLAIMED DEDUCTION U/S.54EC OF THE ACT. THE SAME WAS DENIED BY THE LD.CIT(A) ON THE REASON THAT PROVISIONS OF THE SECT ION 54EC OF THE ACT, THE INVESTMENTS MADE ON OR BEFORE FIRST DAY OF AP RIL, 2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING AN Y FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES ( ` 50/- LAKHS). 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ISSUE IS SQUARELY COVER ED BY THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. C.JAICHANDER REPORTED IN [2015] 370 ITR 0579(MAD.) WHEREIN IT W AS HELD THAT LEGISLATURE BY FINANCE (NO.2) ACT, 2014, WITH EFFEC T FROM 01.04.2015, INSERTED AFTER EXISTING PROVISO TO SUB-SECTION(1) O F SECTION 54EC SECOND PROVISO, AS PER WHICH INVESTMENT MADE BY AN ASSESSEE IN LONG TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET, DURING FINANCIAL YEAR IN WHICH ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKHS RUPEES. IN THIS CASE, THE ASSE SSEE INVESTED IN REC CAPITAL GAINS TAX SAVING BONDS ON 28.03.2012 AT ` 50/- LAKHS, AND ON 07.04.2012 AT ` 50/- LAKHS. IN VIEW OF JURISDICTIONAL ITA NO.1296/MDS./16 :- 8 -: HIGH COURT CITED ABOVE, WE ARE INCLINED TO HOLD THA T THE CLAIM OF ASSESSEE WHEREIN THE ASSESSEE HAS INVESTED ` 50/- LAKHS WITHIN SIX MONTHS OF DATE OF SALE, BUT IN TWO DIFFERENT FINANC IAL YEARS, IS ENTITLED FOR DEDUCTION U/S.54EC OF THE ACT. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A) ON THIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 22 ND JULY, 2016, AT CHENNAI. SD/ - SD/ - ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ) (CHANDRA POOJARI) ' / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 22 ND JULY, 2016 K S SUNDARAM %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 4. ' + / CIT 2. / RESPONDENT 5. ),-' . / DR 3. ' +'/! / CIT(A) 6. -0'1 / GF