ITO 19(3)(1), MUMBAI V. ELSA SILVA, MUMBAI

ITA 1976/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2223 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 24-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CAPT PRADEEP ARYA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Share purchase agreement; Cost of acquisition; Valuation report; Surrender of tenancy right
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) THE INCOME TAX OFFICER 19(3)(1), ROOM NO.307, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012 ... APPELLANT VS. SMT. ELSA SILVA, 401, COZY DELL, ST. ANDREW ROAD, BANDRA(W), MUMBAI 400050 PAN:ANTPS 7419P .... RESPONDENT APPELLANT BY : CAPT. PRADEEP ARYA RESPONDENT BY : SHRI BHUPEN DRA SHAH DATE OF HEARING : 17/11/2015 DATE OF PRONOUNCEMENT : 27/11/2015 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A)-30, MUMBAI DATED 15/12/2010. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE FILED HER RETURN OF INCOME FOR ASS ESSMENT YEAR 2007-08 ON 18/9/2007 DECLARING INCOME OF RS.1,41,9 79/-. THE CASE WAS SELECTED FOR SCRUTINY. IN THE COURSE OF ASSESSMEN T PROCEEDINGS, THE 2 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) ASSESSING OFFICER OBSERVED THAT IN THE YEAR UNDER C ONSIDERATION, I.E. ASSESSMENT YEAR 2007-08, VIDE AGREEMENT DATED 11/12 /2006 ( IN SHORT SAID AGREEMENT) THE ASSESSEE ALONGWITH OTHERS, S OLD DEVELOPMENT RIGHTS OF THE PROPERTY BEARING PLOT NO.24 AND 25 BE ARING CTS NO.H/463 AT VILLAGE SANTACRUZ, SUB-DISTRICT BANDRA,BOMBAY SU B-URBAN DISTRICT FOR A CONSIDERATION OF RS.4,46,00,000/- ( IN SHORT THE SAID PROPERTY) TO M/S.ATHITHI BUILDERS & CONSTRUCTIONS PVT. LTD. THE CONSIDERATION WAS PAID BY CHEQUE SEPARATELY TO EACH OF THE PARTIES T O THE SAID AGREEMENT AS UNDER:- I) MRS. ELSA SILVA (ASSESSEE) RS.2.73 CRORES II) MR. ALEX SILVA (TENANT) RS.0.50 CRORES III)MR. D.P. KOLI (OLD DEVELOPER) RS.1.23 CRORES RS.4.46 CRORES 2.2 IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 200 7-08, THE ASSESSEE, IN RESPECT OF HER SHARE OF CONSIDERATION OF RS.2,73,00,000/- COMPUTED THE LONG TERM CAPITAL GAIN (LTCG) THEREON AT NIL AS UNDER :- ASSESSEES SHARE OF SALE CONSIDERATION :RS.2 ,73,00,000/- LESS: I) INDEXED COST OF ACQUISITION RS.1,89,81,128/- II) EXPENSES INCURRED RS. 53,73,300/- RS.2,43,54,428 /- LONG TERM CAPITAL GAINS RS. 29,45,573/- LESS: EXEMPTION UNDER SECTION 54EC RS. 29,45,573/ - TAXABLE LTCG ______N I L 3 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) 2.3 THE ASSESSING OFFICER DID NOT ACCEPT THE COMP UTATION OF LTCG ON SALEOF THE SAID PROPERTY AS SUBMITTED BY THE ASSESS EE AND PROCEEDED TO RE-WORK THE ASSESSEES LTCG THEREON AT RS.3,13,64, 560/- AS UNDER :- SALE CONSIDERATION AS PER MARKET CONSIDERATION DECIDED BY STAMP AUTHORITIES IN THE SAID AGREEMENT UNDER SECTION50C FOR THE WHOLE OF THE SAID PROPERTY IN THE ASSESSEES HANDS - RS.4,60,73,000/- LESS: (I) INDEXED COST OF ACQUISITION (1/6 TH SHARE) RS.12,96,526/- (II) INDEXED COST OF ACQUISITION (5/6 TH SHARE) RS.35,38,614/- (III) EXPENSES INCURRED (LESS RS.5.00 LACS PAID TO SRI JUDE BELLO AND TREVER BELLO) RS.48,73,300/- LTCG RS.3,63,64,560/- LESS: EXEMPTION UNDER SECTION 54EC RS. 50,00,000/- TAXABLE LTCG RS.3,13,64,5 60/- 2.4 THE ASSESSING OFFICER ACCORDINGLY COMPLETED TH E ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 21/12/200 9 DETERMINING THE INCOME OF THE ASSESSEE AT RS.3,15,06,540/-, IN VIEW OF THE RE- COMPUTATION OF THE TAXABLE LTCG ON SALE OF THE SAI D PROPERTY AT RS.3,13,64,560/-. 3. AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESSM ENT YEAR 2007- 08 DATED 21/12/2009, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE 4 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) CIT(A)-30, MUMBAI. THE LD. CIT(A) DISPOSED OFF THE APPEAL VIDE ORDER DATED 15/12/2010 ALLOWING THE ASSESSEE PARTIAL REL IEF. (I) IN THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD T HE ASSESSING OFFICERS ACTION IN ADOPTING THE VALUE OF THE SAID PROPERTY AT RS.4,60,73,000/- AS PER THE PROVISIONS OF SECTION 5 0C OF THE ACT, AS DETERMINED BY THE STAMP AUTHORITIES FOR PAYMENT OF STAMP DUTY. (II) THE LD. CIT(A) FURTHER HELD THAT THE PAYMENTS OF RS.1.32 CRORES TO SHRI D.P.KOLI (THE OLD DEVELOPER) AND RS.0.50 CRORE S TO SHRI ALEX SILV(TENANT, SANTA WINES ), PAID DIRECTLY BY CHE QUE BY M/S. ATHITHI BUILDERS & CONSTRUCTION PVT. LTD., IN ACCORDANCE WI TH THE TERMS AND CONDITIONS OF THE SAID AGREEMENT DATED 11/12/2006, WAS TO BE DEDUCTED FROM THE RE-STATED SALE CONSIDERATION OF R S.4.60 CRORES, WHILE COMPUTING THE LTCG OF THE ASSESSEE. (III) AS FAR AS THE ISSUE OF INDEXED COST OF ACQUI SITION WAS CONCERNED, THE LD. CIT(A), FOLLOWING THE DECISION OF THE SPECI AL BENCH OF ITAT, MUMBAI IN THE CASE OF MANJULA J. SHAH (2009) 126 TT J(MUM)(SB) 145 DIRECTED THE ASSESSING OFFICER TO ADOPT THE SAME WI TH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER MRS. HILDA D SOUZA (MOTHER OF THE ASSESSEE WHO EXPIRED INTESTATE ON 1/11/1978) FI RST HELD THE ASSET OR W.E.F. 1/4/1981. (IV) THE LD. CIT(A) ALSO ALLOWED THE ASSESSEES CLAIM FO R EXPENDITURE OF RS.5,00,000/- INCURRED ON PAYMENT O F RS.2,50,000/- EACH TO SHRI TRAVER BELLO AND SHRI JUDO BELLO FOR W ITHDRAWING THEIR RIGHTS AND TITLE OF ANY NATURE FROM THE SAID PROPER TY. 5 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) 4. AGGRIEVED BY THE ORDER OF THE CIT(A)-30, MUMBAI, THE REVENUE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GRO UNDS:- (1)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE EXPENDITURE ON ACC OUNT OF PAYMENT TO SHRI D.P.KOLI OF RS.1.23 CRORES AND PAYMENT OF RS.0.50 C RORES TO SHRI ALEX SILVA ON ACCOUNT OF SURRENDER OF TENANCY RIGHTS IGNORING THE FACT THAT- (A) NO DOCUMENTARY EVIDENCE WAS FILED BY THE ASSESSEE D ESPITE HAVING BEEN CALLED UPON NOT SO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (B) THE ONUS IS ON THE ASSESSEE TO ESTABLISH THE CLAIM OF SUCH EXPENDITURE AND IT WOULD NOT BE IN THE FITNESS OF THE THINGS FO R THE ASSESSING OFFICER TO ESTABLISH THAT THE ASSESSEE HAS EITHER RECEIVED OR NOT RECEIVED THE ENTIRE CONSIDERATION OR WHETHER PART OF THE CONSIDERATION WAS PAID. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO TAKE THE FULL VALU E CONSIDERATION AS ON 01.04.1981 TOWARDS THE COST OF ACQUISITION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE ALONG WITH HER SISTERS BROTHERS WERE J OINTLY ENTITLED TO THE RIGHT OVER THE ASSET SUBSEQUENTLY IN THE F.Y. 2002-03. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE CLAUS E (B) OF SECTION 2(42A) IS ONLY FOR DETERMINING THE PERIOD HELD BY THE ASSESSE E FOR THE PURPOSE OF TREATING THE ASSET AS A LONG TERM CAPITAL ASSET AND EXPLANATION (III) TO SECTION 48 CLEARLY STATES THAT THE COST INFLATION INDEX SHA LL BE FROM THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. 4) THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF MANJULA J. SHAH ITA NO. 7315/MUM/2007 DATED 16.06.2009 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING EXPENDITURE ON ACCOUNT OF PAYMENT TO SHRI TRAVER C. BELLO OF RS.2.50 LACS AND PAYMENT OF RS.2.50 LACS T O JUDE C. BELLO ON ACCOUNT OF SURRENDER OF TENANCY RIGHTS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE'S REPRESENTATIVE VIDE LETTER DATED 14.09.2 009, IT WAS EXPRESSLY STATED AND CONFIRMED THAT THE TWO PARTIES HAD RECEI VED THE PAYMENTS AS EX- GRATIA NOT WITHSTANDING THE FACT THAT THEY DID NOT HAVE ANY RIGHT, TITLE OR INTEREST OF ANY NATURE WHATSOEVER IN AND UPON SAID PROPERTY OR THE SHARE CERTIFICATE IN RELATION TO SAID PROPERTY. 6. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 6 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) 7. THE APPELLANT CRAVES TO AMEND OR ALTER ANY GROUN D OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 5. GROUND NO.1: PAYMENT TO SHRI D.P.KOLI (RS. 1.23 CRO RES) AND SHRI ALEX SILVA (RS.0.50 CRORES) 5.1 IN THIS GROUND, THE REVENUE CONTENDED THAT THE LD. CIT(A) HAD ERRED IN ALLOWING THE EXPENDITURE ON ACCOUNT OF PAY MENT TO SHRI D.P. KOLI OF RS.1.23 CRORES AND TO SHRI ALEX SILVA OF RS .0.50 CRORES FOR SURRENDER OF TENANCY RIGHTS, IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS FOR ESTABLISHING THE C LAIM OF AFORESAID EXPENDITURE WITH DOCUMENTARY EVIDENCE. THE LD. DR WAS HEARD AND STRONGLY RELIED ON THE FINDINGS/OBSERVATIONS OF THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT. 5.2.1 PER CONTRA, THE LD. AR FOR THE ASSESSEE SUPPO RTED THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE IN THE IMPUGNED ORDER. THE LD.AR DREW THE ATTENTION OF THE BENCH TO PARA 11 & 12 OF THE ORDE R OF THE LD. CIT(A) WHEREIN, AFTER CONSIDERING THE ASSESSING OFFICERS VIEWS IN ASSESSMENT ORDER, THE ASSESSEES SUBMISSIONS AND OTHER MATERIA L ON RECORD, THE LD. CIT(A) AFTER RECORDING HIS FINDING OF FACT AT PARA- 11(A) TO (H) THEREOF UPHELD THE CLAIM OF THE ASSESSEE THAT THE PAYMENT OF RS.1.23 CRORES BY CHEQUE DIRECTLY TO SHRI D.P.KOLI (THE OLD DEVELOPER IN POSSESSION OF THE SAID PROPERTY) BY M/S. ATHITHI BUILDERS AND CONST RUCTION PVT. LTD. AS PER THE SAID AGREEMENT DATED 11/12/2006 WAS NOT TO FORM PART OF THE CONSIDERATION FOR COMPUTING THE LTCG OF THE ASSESS EE IN THE CASE ON HAND. 7 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) 5.2.2 IN RESPECT OF THE PAYMENT OF RS.0.50 CRORES B Y M/S.ATHITHI BUILDERS & CONSTRUCTION PVT. LTD. BY CHEQUE DIRECTL Y TO SHRI ALEX SILVA FOR SURRENDER OF TENANCY RIGHTS IN THE SAID PROPERTY VI Z. OCCUPATION OF A SHOP OF APPROX. 500 SQ.FT. SANTA WINES SINCE 1970 ; THE LD. AR FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARAS 1 5 TO 19 OF THE IMPUGNED ORDER OF THE LD. CIT(A), WHEREIN AFTER EXA MINING THE VIEWS OF THE ASSESSING OFFICER, THE ASSESSEES SUBMISSIONS A ND MATERIAL ON RECORD, THE LD. CIT(A) HAS RENDERED A FACTUAL FINDI NG THAT IT WAS ESTABLISHED THAT SHRI ALEX SILVA WAS HOLDING TENANC Y RIGHTS IN THE SAID PROPERTY AND THE SAID PAYMENT WAS FOR RELINQUISHMEN T OF TENANCY RIGHTS. THE LD. AR SUBMITTED THAT THE CIT(A) IN VI EW OF THE ABOVE FINDING HELD THAT THE PAYMENT OF RS.0.50 CRORES TO SHRI ALE X SILVA SHOULD NOT BE CONSIDERED AS PART OF THE CONSIDERATION FOR COMPUTI NG THE LTCG OF THE ASSESSEE IN THE CASE ON HAND. 5.2.3 THE LD. AR SUBMITTED THAT THE LD. CIT(A) AT PARA-17 OF THE IMPUGNED ORDER HAS OBSERVED THAT THE PAYMENTS OF R S.1.23 CRORES TO SHRI D.P.KOLI AND RS.0.50 CRORES TO SHRI ALEX SILVA REFLECTED AT PAGE 13 OF THE SAID AGREEMENT HAD BEEN DIRECTLY RECEIVED BY TH EM BY CHEQUE FROM M/S. ATHITHI BUILDERS & CONSTRUCTION PVT. LTD. AND HELD THAT THIS ESTABLISHES THAT THE ASSESSEE HAD NOT RECEIVED THE ENTIRE CONSIDERATION IN THE SAID AGREEMENT AS STATED BY THE ASSESSING OF FICER. THE LD. AR CONTENDS THAT IN VIEW OF THE ABOVE FACTUAL FINDING RENDERED BY THE LD. CIT(A) GROUND AT S.NO.1 OUGHT TO BE DISMISSED. 5.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE ALONGWITH 8 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) SHRI D.P.KOLI AND SHRI ALEX SILVA VIDE AGREEMENT FO R DEVELOPMENT DATED 11/12/2006 ENTERED INTO WITH M/S. ATHITHI BUILDERS AND CONSTRUCTIONS PVT. LTD.( IN SHORT ATHITHI BUILDER) TRANSFERRED THE DEVELOPMENT RIGHTS IN PROPERTY BEARING PLOT NO.24 & 25(PART), BEARING CTS NO.14/463 SITUATED AT VILLAGE SANTA CRUZ, SUB DISTRICT BANDRA , BOMBAY FOR A CONSIDERATION OF RS.4,46,00,000/-( NOW RESTATED UND ER SECTION50C OF THE ACT AT RS.4,60,73,000/-).THE ASSESSING OFFICER AT PARA-6(F) OF THE ORDER OF ASSESSMENT AT (A) TO (G) THEREOF WAS OF T HE VIEW THAT SHRI D.P.KOLI WHO WAS PAID RS.1.23 CRORES BY ATHITHI DE VELOPERS FOR RELINQUISHMENT OF TENANCY RIGHTS ACTUALLY HAS NO RI GHT, TITLE OR INTEREST, ETC. IN THE SAID PROPERTY AND, THEREFORE, THE AMOUN T STATED TO HAVE BEEN PAID TO HIM WAS TO BE CONSIDERED AS THE ASSESS EES CONSIDERATION FOR THE PURPOSE OF COMPUTING LTCG IN THE ASSESSEE S HAND IN RESPECT OF THE SAID PROPERTY. AT PARA 6(R) OF THE ORDER OF TH E ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT SINCE THE TENANCY R IGHT OF SHRI ALEX SILVA HAS NOT BEEN ESTABLISHED WITH SUPPORTING DOCUMENTA RY EVIDENCE, THE AMOUNT OF RS.0.50 CRORES STATED TO HAVE BEEN PAID T O HIM WAS ALSO TO BE CONSIDERED AS THE ASSESSEES CONSIDERATION FOR T HE PURPOSES OF COMPUTING THE LTCG IN THE ASSESSEES HANDS, IN RE SPECT OF THE SAID PROPERTY. 5.3.2 ON A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL ON RECORD WE FIND THAT AS PER THE SAID AG REEMENT DATED 11/12/2006, AT PAGE -13 THEREOF, ATHITHI BUILDERS HAS ACQUIRED THE DEVELOPMENT RIGHTS OF THE SAID PROPERTY AFTER PAYIN G SEPARATELY AND DIRECTLY BY CHEQUE RS.2.73 CRORES TO THE ASSESSEE, RS.1.23 CRORES TO SHRI D.P.KOLI AND RS.0.50 CRORES TO SHRI ALEX SILVA. TH IS CLEARLY EVIDENCE THAT 9 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) THE ASSESSEE HAS RECEIVED ONLY RS. 2.73 CRORES AS H ER SHARE OF THE CONSIDERATION OF RS.4,46 CORES. AS RIGHTLY OBSERVE D BY THE LD. CIT(A), THE ASSESSING OFFICER OVERLOOKED THE FACT THAT SHR I D.P.KOLI HAD ACQUIRED THE DEVELOPMENT RIGHTS IN THE SAID PROPERT Y VIDE AGREEMENT DATED 07/04/1992 AND HAS BEEN IN POSSESSION OF THE SAID PROPERTY TILL 2006. WE ALSO FIND THAT THE ASSESSING OFFICER HAD DISREGARDED THE FACT THAT THE PAYMENT OF RS.1.23 CRORES WAS MADE BY CHEQ UE DIRECTLY TO SHRI D.P. KOLI BY ATHITHI BUILDER WHICH EMERGED OUT OF A SINGLE DECLARATION DATED 29/05/2004 MADE BY SHRI KOLI. IN THIS FACTUA L MATRIX AS DISCUSSED ABOVE, WE FIND THAT BEFORE US, REVENUE HAS NOT BEEN ABLE TO BRING ON RECORD ANY MATERIAL EVIDENCE TO CONTROVERT THE FACT UAL FINDING OF THE LD. CIT(A) THAT THE PAYMENT OF RS.1.23 CRORES MADE DIRE CTLY BY CHEQUE TO SHRI D.P.KOLI BY ATHITHI BUILDERS CANNOT BE TREA TED AS APPLICATION OF INCOME BY THE ASSESSEE OR AS CONSIDERATION RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF HER SHARE OF LTCG ON THE SALE OF THE SAID PROPERTY. 5.3.3 IN RESPECT OF THE PAYMENT OF RS.0.50 CRORES T O SHRI ALEX SILVA, BY CHEQUE BY ATHITHI BUILDER, THE MATERIAL ON RECOR D EVIDENCES THAT HE WAS IN OCCUPATION OF A SHOP ADMEASURING APPROXIMATE LY 500 SQ.FT. IN THE SAID PROPERTY AND WAS RUNNING A BUSINESS IN THE NAME AND STYLE OF SANTA WINES SINCE 1970. THE LD. CIT(A) HAS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS DISREGARDED THE SUPPORTING EV IDENCE IN THIS REGARD I.E. FORM D- REGISTRATION CERTIFICATE OF ESTABLISHM ENT FOR BOMBAY SHOPS AND ESTABLISHMENT ACT, 1948, WHICH ESTABLISHES TH AT SHRI ALEX SILVA WAS HOLDING TENANCY RIGHTS. IN THE FACTUAL MATRIX, AS DISCUSSED ABOVE, WE FIND THAT BEFORE US REVENUE HAS NOT BEEN ABLE TO CO NTROVERT THE FACTUAL 10 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) FINDING OF THE LD.CIT(A) THAT THE PAYMENT OF RS.0.5 0 CRORES MADE DIRECTLY BY CHEQUE TO SHRI ALEX SILVA CANNOT BE TRE ATED AS APPLICATION OF INCOME BY THE ASSESSEE OR AS PART OF THE CONSIDERA TION RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF HER SHA RE OF LTCG ON SALE OF THE SAID PROPERTY. 5.3.4 IN VIEW OF OUR FINDINGS IN PARAS 5.3.1 TO 5.3 .3 (SUPRA), WE DISMISS GROUND NO.1 RAISED BY THE REVENUE. 6. GROUND NO. 2 TO 4 - INDEXED COST OF ACQUISITION: 6.1 IN THESE GROUNDS, WHICH ARE CONSIDERED TOGETHER FOR ADJUDICATION, REVENUE CONTENDS THAT THE LD. CIT(A) HAD ERRED IN A LLOWING THE ASSESSEE FULL VALUE FOR INDEXED COST OF ACQUISITION AS ON 0 1/04/1981 WITHOUT TAKING INTO CONSIDERATION THE FACT THAT THE ASSESSE E AND HER SIBLINGS WERE JOINTLY ENTITLED TO THE RIGHT OF THE ASSET IN FINANCIAL YEAR 2002-03. IT IS CONTENDED THAT AS PER THE EXPLANATION (III) T O SECTION 48 OF THE ACT, THE COST INFLATION INDEX SHALL BE FROM THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE AND NOT AS ON 01/04/1981. IT WAS ALSO SUBMITTED THAT THE DECISION RELIED ON BY THE LD. CI T(A) TO ALLOW THE ASSESEES CLAIM, I.E. OF THE ITAT, SPECIAL BENCH, M UMBAI IN THE CASE OF MANJULA J. SHAH (2009) 126 TTJ (MUMBAI) (SB) 125 HA S NOT BEEN ACCEPTED BY THE DEPARTMENT, AND THE APPEAL IN THIS REGARD IS PENDING DISPOSAL BEFORE THE HONBLE BOMBAY HIGH COURT. THE LD. DR WAS HEARD IN THE MATTER AND HE PLACED STRONG RELIANCE ON THE DECISION OF THE ASSESSING OFFICER ON THIS ISSUE. 11 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) 6.2 PER CONTRA, THE LD. AR FOR THE ASSESSEE SUPPORT ED THE FINDING IN THE IMPUGNED ORDER BY THE LD. CIT(A) IN DETERMINING THE DATE OF INDEXATION OF THE COST OF ACQUISITION OF THE SAID P ROPERTY AS ON 01/04/1981. THE LD. AR SUBMITTED THAT THE SAID PRO PERTY WAS INHERITED BY THE ASSESSEE(1/6 TH SHARE) FROM LATE SMT. HILDA D SOUZA, MOTHER OF THE ASSESSEE, WHO DIED INTESTATE ON 1/11/1978. THE LD. AR CONTENDS THAT INSPITE OF ADOPTING THE VALUE OF THE SAID PROP ERTY AS ON 1/4/1981 AT RS.36,57,250/- AS PER THE VALUATION REPORT SUBMITTE D BY THE ASSESSEE, THE ASSESSING OFFICER DID NOT ALLOW THE INDEXED CO ST OF ACQUISITION FROM 1/4/1981. THE LD. AR FURTHER SUBMITTED THAT WHEN T HE COST OF ACQUISITION TO THE PREVIOUS OWNER IS TO BE CONSIDE RED FOR COMPUTING THE INDEXED COST OF ACQUISITION, THE ASSESSING OF FICER OUGHT TO HAVE ALLOWED THE SHARE FROM 1/4/1981 AS THE PREVIOUS OWN ER SMT HILDA DSOUZA HAD EXPIRED IN 1978. IT IS FURTHER CONTEND ED BY THE LD. AR THAT THIS PROPOSITION WHICH HAS BEEN UPHELD BY THE SPECI AL BENCH OF ITAT, MUMBAI IN THE CASE OF MANJULA J SHAH (SUPRA) HAS NO W BEEN CONFIRMED BY THE DECISION OF THE HONBLE MUMBAI HIGH COURT IN (2011) 16 TAXMAN.COM 42 (BOM) WHICH HAS HELD THIS ISSUE IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. AR SUBMI TS THAT IN VIEW OF THE ABOVE FACTUAL AND LEGAL , MATRIX OF THE CASE, REVENUES GROUNDS ARE LIABLE TO BE DISMISSED. 6.3.1. WE HAVE HEARD BOTH THE PARTIES AND PERUSED A ND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WHILE COMPUTING THE ASSESSEES LTCG ON TRANSFER OF THE SAID PROPERTY HA D TAKEN THE INDEXED 12 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) COST OF ACQUISITION W.E.F. FINANCIAL YEAR 1981-82 AND THE VALUE OF THE ASSET AS ON 1/4/1981 AT RS.36,57,550/- AS PER THE A SSESSEES VALUATION REPORT. THE ASSESSING OFFICER WHILE ACCEPTING THE VALUE OF THE SAID PROPERTY AT RS.36,57,250/- DID NOT ACCEPT THE ASSES SEES COMPUTATION OF INDEXED COST OF ACQUISITION AND PROCEEDED TO REWORK THE SAME W.E.F. FINANCIAL YEAR 1993-94 FOR 1/6 TH OF THE PROPERTY AND FINANCIAL YEAR 2002-03 FOR 5/6 TH OF THE PROPERTY. WE FIND THAT THE SAID PROPERTY W AS INHERITED BY THE ASSESSEE FROM HER MOTHER. IN THIS FACTUAL MATRIX, THE COST OF ACQUISITION OF THE ASSET BY THE PREVIOUS O WNER (IN THE CASE ON HAND OF SMT. HILDA DSOUZA WHO EXPIRED IN 1978) IS TO BE CONSIDERED FOR COMPUTING THE INDEXED COST OF ACQUISITION. THEREF ORE, AS RIGHTLY HELD BY THE LD. CIT(A), THE INDEXED COST OF ACQUISITION IN THE CASE ON HAND OUGHT TO BE FINANCIAL YEAR 1981-82 WHILE COMPUTING THE LTCG IN THE HANDS OF THE ASSESSEE. THIS PROPOSITION IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH REPORTED IN (2011) 16 TAXMAN.COM 42 (BOMBAY), WHEREIN IT WAS HELD THAT WHILE COMPUTING CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET, THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BECAME OWNER OF THE ASSET. RESPECTFULLY FOLLOWING THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH (S UPRA), WE UPHOLD THE ORDER OF THE LD. CIT(A) IN DIRECTING THE ASSESS ING OFFICER TO ADOPT THE COST INFLATION INDEX OF THE ACQUISITION OF THE CAPI TAL ASSET WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET I.E. W.E.F. 1/4/1981 FOR THE PURPOSE OF COMPUTATION OF THE LTCG OF THE ASSESSEE IN RESPECT OF THE TRANSFER OF THE SAID PROPERTY. 13 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) 7. GROUND NO.5- PAYMENT TO TRAVER BELLLO AND JUDE BELL O TOTALLING RS.5.00 LAKHS: 7.1 IN THIS GROUND, REVENUE CONTENDS THAT THE LD. C IT(A) ERRED IN ALLOWING THE EXPENDITURE CLAIMED ON PAYMENTS OF RS. 2.50 LAKHS EACH TO SHRI TRAVER BELLO AND SHRI JUDE BELLO WHICH WERE AD MITTEDLY RECEIVED BY THEM AS EX-GRATIA, INSPITE OF THE FACT THAT THEY DI D NOT HAVE ANY TITLE, RIGHT OR INTEREST IN THE SAID PROPERTY. 7.2 WE HAVE HEARD BOTH THE LD. DR FOR THE REVENUE AND THE LD. AR FOR THE ASSESSEE ON THIS ISSUE, AND HAVE PERUSED AN D CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENT RELIED UPON BY THE ASSESSEE. FROM TH E MATERIAL ON RECORD, IT IS SEEN THAT THE ASSESSEE PAID RS. 2.50 LAKHS EACH TO SHRI TAVER BELLO AND SHRI JUDE BELLO, SONS OF THE ASSESSEES S ISTER IRIS BELLO FOR WITHDRAWING THEIR TITLE OR RIGHTS OF ANY NATURE IN RESPECT OF THE SAID PROPERTY BEFORE THE SUPERINTENDENT OF LAND RECORDS, IN ORDER TO ENABLE HER TO SELL/TRANSFER THE SAID PROPERTY TO THE DEVEL OPER WITHOUT ANY DISPUTE OR LEGAL HASSLES. WE AGREE WITH THE OBSERV ATION OF THE LD. CIT(A) THAT THE ASSESSING OFFICER HAS DISALLOWED TH E RS.5.00 LAKHS PAID TO SHRI TRAVER BELLO AND SHRI JUDE BELLO ON A WRONG APPRECIATION OF FACTS THAT THESE PARTIES HAD NO RIGHTS OR INTEREST IN THE SAID PROPERTY. IN THIS VIEW OF THE MATTER, WE UPHOLD THE DECISION OF THE L D. CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESEES CLAIM FOR DEDUCTION RS.5.00 LAKHS PAID TO THE AFORESAID TWO PERSONS FROM THE S ALE CONSIDERATION WHILE COMPUTING THE LTCG OF THE ASSESSEE IN RESPECT OF THE SAID 14 ITA NO. 1976/MUM/2011 (ASSESSMENT YEAR : 2007-08) PROPERTY. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED. 8. THE GROUNDS AT SL.NOS.6 AND 7 ARE GENERAL IN NAT URE AND, THEREFORE, NO ADJUDICATION IS CALLED FOR THEREON. 9. IN THE RESULT, THE REVENUES APPEAL FOR ASSESSM ENT YEAR 2007-08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/2015. SD/- SD/- (RAMLAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 27/11/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS