Margesan Hemanathan, Gudiyatham V. ACIT, Vellore

ITA 1485/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9090 (ITAT-CHENNAI)
• Duration Of Justice: 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2016
• Court: TRIBUNAL
• Department Lawyers: SHI A V SREEKANTH J
• Assessee Lawyers: K RAVI
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1485/MDS./2016 / ASSESSMENT YEAR : 2009-10 SHRI MARGESAN HEMANATHAN , 58,RAJENDRA SINGH STREET, GUDIYATTAM 632 602. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, VELLORE. [PAN ADJPH 1117 R ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI K.RAVI, ADVOCATE /RESPONDENT BY : SHI A.V.SREEKANTH, JCIT,DR / DATE OF HEARING : 02 - 06 - 201 6 / DATE OF PRONOUNCEMENT : 17 - 06 - 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)-13, CHENNAI DA TED 08.03.2016 PERTAINING TO ASSESSMENT YEAR 2009-10. ITA NO.1485/MDS./2016 :- 2 -: 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO FINDINGS OF THE CIT(A) THAT COST OF INFLATION INDEX ATION OF THE PROPERTY, WHICH WAS ACQUIRED BY THE ASSESSEE BY WAY OF GIFT F ROM THE ASSESSEES FATHER, THE COST OF INFLATION INDEX TO BE CONSIDERE D ONLY FROM THE YEAR OF RECEIPT OF THE GIFT FROM THE ASSESSEES FATHER A ND NOT FROM THE DATE WHEN IT WAS ACQUIRED BY THE ASSESSEES FATHER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF HIRING CENTERING SHEETS AND MATERIALS AND TRADING IN FIREWOOD AND FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 03.06.2009 CLAIMING EXEMPTION FOR LONG T ERM CAPITAL GAINS. THE ASSESSEE BECAME THE OWNER OF 20 ACRES OF LAND B Y VIRTUE OF GIFT FROM HIS FATHER ON 11.08.2008 AND SUBSEQUENTLY, TH E ASSESSEE SOLD 2 ACRES OF LAND ON 01.09.2008 FOR SALE CONSIDERATION OF ` 88,50,000/- AFTER CLAIMING COST INFLATION INDEX FOR 1989-90 AT 172 WHICH WOKS OUT TO ` 8,50,870/- AND INVESTED IN A RURAL ELECTRIFICATION BOND U/S.54EC TO THE EXTENT OF ` 50,00,000/-. FURTHER, THE ASSESSEE CLAIMED U/S.54F OF ` 24,59,500/- AND BALANCE OF ` 5,39,229/- WAS OFFERED AS LTCG. WHILE CALCULATING THE COST INFLATION INDEX, ASSESSEE SHOU LD HAVE ADOPTED 582 AND NOT 172 AS THE PROPERTY WAS HELD BY HIM FROM TH E YEAR 1989-90 WHICH IS FACTUALLY CORRECT. THE ASSESSEE RECEIVED THIS IMMOVABLE PROPERTY BY WAY OF GIFT FROM HIS FATHER ON 11.08.20 08. FROM THE DATE ITA NO.1485/MDS./2016 :- 3 -: OF THE GIFT DEED EXECUTION IN HIS NAME, THE PROPER TY EVOLVED ON HIM AND HE BECOMES THE OWNER OF THE PROPERTY. THEREBY , THE ASSESSEE OWNS THIS PROPERTY FROM THE DATE OF GIFT I.E.11.8.2 008. ACCORDINGLY, THE COST INFLATION INDEX WAS ADOPTED FOR FY 2008-09 BY THE AO AND AO CALCULATED THE INDEXED COST OF ASSET FOR THE PURPOS E OF LTCG. AGAINST THIS, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD .CIT(A). ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF LD. ASSESSING OFFICER. 4. THE CONTENTION OF THE ASSESSEES COUNSEL IS THA T THE PROPERTY WAS RECEIVED BY THE ASSESSE BY WAY OF GIFT FROM HIS FATHER ON 11.08.2008. THE PROPERTY HAD BEEN ACQUIRED BY HIS FATHER DURING THE FINANCIAL YEAR 1989-90 BY WAY OF WILL EXECUTED BY H IS FATHER. HIS FATHER DIED DURING 1989-90 AND AS PER LD.A.R, THE COST OF THE LAND IN THE APRIL 1989 WAS AT ` 1,25,730/-. THE LD.A.R SUBMITTED THAT IN THE CASE OF INHERITANCE OF PROPERTY THE ASSESSEE WAS ENTITLED T O COST OF INFLATION INDEX, ONLY FROM THE YEAR OF INHERITANCE OF PROPERT Y AND NOT FROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER. ON THE OTH ER HAND, LD.D.R SUPPORTED 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 ITA NO.1485/MDS./2016 :- 4 -: 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 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 OWNER OF THE PROPERTY UNDER CONSIDERATION ONLY BY WAY OF GIFT FROM HIS FATHER ON 11.08.2008 AND THE ASSESSEE SOLD 2 ACRES OF LAND ON 01.09.2008 FOR SALE CONSIDERATION OF 88,50,000/- AND THE ASSESSEE BECAME THE OWNER OF THE PROPERTY ONLY ON 11.08.2008 AND THERE IS NO QUESTION OF CONSIDERATION OF COST OF ASSET IN TERMS OF SEC.49(1 )(III)(A) OF THE ACT FROM THE FINANCIAL YEAR 1989-90(A.Y.1990-91). 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 ITA NO.1485/MDS./2016 :- 5 -: 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 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 ITA NO.1485/MDS./2016 :- 6 -: 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). 8. IN VIEW OF THIS, WE HOLD THAT IN THE PRESENT CAS E, THE ASSESSEE BECAME THE OWNER OF 20 ACRES OF LAND BY VIRTUE OF G IFT FROM HIS FATHER ON 11.08.2008. THE SAID PROPERTY WAS RECEIVED BY T HE ASSESSEES FATHER DURING THE FINANCIAL YEAR 1989-90 BY WAY OF WILL EXECUTED BY HIS FATHER. ACCORDINGLY, THE COST OF INDEXATION FOR TW O ACRES TO BE APPLIED FROM FINANCIAL YEAR 1989-90 (A.Y.1990-91) AND IT CA NNOT BE SAID THAT THE ASSESSEE ACQUIRED PROPERTY UNDER DISPUTE ONLY O N 11.08.2008 BY WAY OF GIFT FROM HIS FATHER SO AS TO COMPUTE THE CA PITAL GAINS. IN OTHER WORDS, CAPITAL GAINS HAS TO BE ASSESSED AS LONG TER M CAPITAL GAINS BY FIXING THE COST OF ASSET RELEVANT ASSESSMENT YEAR 1 990-91 AND THEREAFTER APPLYING THE COST OF INFLATION INDEX IN TERMS OF SEC.49(1)(III)(A) OF THE ACT. IT NEEDLESS TO SAY TH AT SAME VIEW WAS TAKEN IN THE CASE OF CIT VS. MANJULA J.SHAH REPOR TED IN 355 ITR 474(BOM.). ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.1485/MDS./2016 :- 7 -: 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 17 TH JUNE, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF