ADIT, New Delhi V. Sh. Rajeev Ajmani, New Delhi

ITA 2057/DEL/2011

• Counselvise Citation: 205720114 RSA 2011
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-12-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: MRS LALITA KRISHNAMURTHY
• Keywords: Capital asset; Cost of acquisition
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 2057/DEL/2011 ASSTT. YR: 2002-03 ASSTT. DIRECTOR OF INCOME-TAX, VS. SH. RAJEEV AJMAN I, CIR. 1(1), (INTL. TAX), C/O RAHUL KAPOOR & ASSOC IATES, NEW DELHI. E-186, GREATER KAILASH, NEW DELHI-110048. PAN/GIR NO. ADCPA8258R (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI N.K. CHAND SR. DR RESPONDENT BY : MRS. LALITA KRISHNAMURTHY CA O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DAT ED 12-1-2011, RELATING TO A.Y. 2002-03. SOLE GROUND RAISED IS AS UNDER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF LONG TERM CAPITAL GAINS, WITHOUT APPRECIATING THAT THE A SSESSEES SHARE IN THE INHERITED PROPERTY BECAME DETERMINED B Y VIRTUE OF FAMILY SETTLEMENT DATED 11-9-2000. ACCORDINGLY, THE INDEXED COST OF ACQUISITION SHOULD BE AS PER F.Y. 2000-01, WHEN THE ASSESSEE FIRST HELD THE PROPERTY AND NOT 1981-82. 2. BRIEF FACTS ARE: THE ASSESSEE SUCCEEDED TO A PRO PERTY ON THE DEMISE OF HIS MOTHER IN 1986. THIS PROPERTY WAS ACQUIRED BY T HE DECEASED MOTHER PRIOR TO 1-4-1981. DURING THE YEAR IN QUESTION THE ASSESS EE SOLD THIS PROPERTY AND OFFERED LONG TERM CAPITAL GAINS. RETURN WAS PROCESS ED U/S 143(1). THEREAFTER A NOTICE U/S 148 WAS ISSUED. IN REASSESSMENT PROCEE DINGS, WHILE COMPUTING THE LONG TERM CAPITAL GAINS, AO HELD THAT ASSESSEE WAS NOT ELIGIBLE FOR ITA 2057/DEL/11 ADIT VS. RAJEEV AJNANI 2 INDEXATION OF COST OF ACQUISITION W.E.F. 1-4-1981 A S THE ASSESSEE BECAME OWNER CONSEQUENT TO A FAMILY SETTLEMENT ON 11-9-200 0. THE CAPITAL GAINS WERE COMPUTED ACCORDINGLY. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH ERE CIT(A) ACCEPTED THE ASSESSEES CLAIM BY FOLLOWING OBSERVATIONS: THUS THE INCOME TAX ACT CLEARLY LAYS DOWN THAT IN THE CASE OF ACQUISITION OF A PROPERTY BY INHERITANCE, UNDER A W ILL, THE COST OF ACQUISITION IS DEEMED TO BE THE COST AT WHICH THE P ROPERTY WAS ACQUIRED BY THE PREVIOUS OWNER. THE ACT MAKES NO DI STINCTION ON ACCOUNT OF THE YEAR IN WHICH THE ASSESSEE INHERI TS THE PROPERTY. THE ASSESSING OFFICERS FINDING THAT, AS A RESULT OF FAMILY DISPUTE, THE APPELLANT DID NOT HOLD THE PR OPERTY UNTIL THE DATE OF THE FAMILY SETTLEMENT IN THE F.Y. 2000- 01, IS MISCONCEIVED. THOUGH THE PROVISIONS OF SECTION 49 A RE CLEAR AND UNAMBIGUOUS IN THIS RESPECT, HOWEVER THIS ISSUE AHS ALSO BEEN DISCUSSED BY THE COURTS FROM TIME TO TIME. THE APPELLANT AHS RELIED ON RECENT JUDGMENT OF THE ITAT, DELHI AN D ITAT, CHANDIGARH IN THE CASES CITED AT 19 SOT 251 AND 81 ITD 1. IN THE CASE OF CIT V. N.N. MOHAN & SONS (2001) 250 ITR 131, THE DELHI HIGH COURT HELD THAT THE EXPRESSION PREVIOUS OWNER OF THE PROPERTY IN SECTION 49(1) WOULD OBVIOUSLY MEAN THE PERSON WHO PURCHASED THE PROPERTY. WHEN THE PREVIOUS OWNER HAD THROWN THE PROPERTY INTO THE COMMON HOTCHPOT OF THE HUF, AND WHEN THE HUF LATER SOLD THE PROPERTY, ITS COST OF A CQUISITION WAS THE AMOUNT SPENT BY THE PERSON WHO THREW THE AS SET INTO THE COMMON HOTCHPOT. THE MADRASH HIGH COURT CONSIDE RED THE ISSUE OF ASSETS RECEIVED UNDER FAMILY SETTLEMENT IN THE CASE OF CIAT V. SHANTI CHANDRAN (2000) 241 ITR 371. IN THAT CASE IT WAS HELD THAT WHEN THE ASSESSEE RECEIVED CERTAIN S HARES UNDER A SETTLEMENT EFFECTED BY HER FATHER, AND SUBSEQUENTLY SOLD THE SHARES, IT IS THE COST TO THE PREVIOUS OWNER (FATHE R) THAT IS TO BE TAKEN INTO ACCOUNT AS THE COST OF ACQUISITION OF TH E SHARES. ACCORDINGLY IT IS HELD THAT THE COST OF ACQUISITION OF THE PROPERTY SOLD BY THE APPELLANT IN THE A.Y. 2002-03 IS TO BE WORKED OUT WITH REFERENCE TO THE COST INFLATION INDEX OF 1-4-1 981, AND NOT THE DATE OF DEATH OF THE MOTHER, OR OF THE DATE OF THE FAMILY ITA 2057/DEL/11 ADIT VS. RAJEEV AJNANI 3 SETTLEMENT. ACCORDINGLY, THE ADDITION MADE OF LONG TERM CAPITAL GAINS OF RS. 26,48,855/- IS DELETED. AGGRIEVED, REVENUE IS BEFORE US. 3. LEARNED DR RELIED ON THE ORDER OF AO. 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED ON THE ORDER OF HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. MANJULA J. SHAH (2011) 16 TAXMANN 42 (BOM.), HOLDING AS UNDER: 21. APART FROM THE ABOVE, SECTION 55(1)(B)(2)(II) OF THE ACT PROVIDES THAT WHERE THE CAPITAL ASSET BECAME THE PR OPERTY OF THE ASSESSEE BY ANY OF THE MODES SPECIFIED UNDER SECTIO N 49(1), OF THE ACT, NOT ONLY THE COST OF IMPROVEMENT INCURRED BY THE ASSESSEE BUT ALSO THE COST OF IMPROVEMENT INCURRED BY THE PREVIOUS OWNER SHALL BE DEDUCTED FROM THE TOTAL CON SIDERATION RECEIVED BY THE ASSESSEE WHILE COMPUTING THE CAPITA L GAINS UNDER SECTION 48 OF THE ACT. THE QUESTION OF DEDUC TING THE COST OF IMPROVEMENT INCURRED BY THE PREVIOUS OWNER IN TH E CASE OF AN ASSESSEE COVERED UNDER SECTION 49(1) OF THE ACT WOULD ARISE ONLY IF THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER IS INCLUDED IN DETERMINING THE PERIOD FOR WHI CH THE ASSET WAS HELD BY THE ASSESSEE. THEREFORE, IT IS REASONAB LE TO HOLD THAT IN THE CASE OF AN ASSESSEE COVERED UNDER SECTION 49 (1) OF THE ACT, THE CAPITAL GAINS LIABILITY HAS TO BE COMPUTED BY CONSIDERING THAT THE ASSESSEE HELD THE SAID ASSET F ROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER AND THE SAME ANALOGY HAS ALSO TO BE APPLIED IN DETERMINING THE INDEXED COST OF AC QUISITION. 4.1. LEARNED COUNSEL CONTENDS THAT ONCE THE ASSESSE E IS HELD TO BE SUCCESSOR TO A PROPERTY BY WAY OF ANY MODE PRESCRIB ED U/S 49(1), THEN THE CAPITAL GAINS LIABILITY IS TO BE COMPUTED BY HOLDIN G THAT THE ASSET WAS HELD BY THE ASSESSEE ON THE DATE IT WAS HELD BY THE PREVIOU S OWNER. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTIO N OF THE LEARNED COUNSEL ITA 2057/DEL/11 ADIT VS. RAJEEV AJNANI 4 FOR THE ASSESSEE. IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE SUCCEEDED TO THIS PROPERTY AND IN SUCH EVENTUALITY THE WORD HOLD IS TO BE INTERPRETED KEEPING IN MIND THE HONBLE BOMBAY HIGH COURT JUDGMENT IN T HE CASE OF CIT VS. MANJULA J. SHAH (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF CIT(A). 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13-01-2012. SD/- SD/- ( K.G. BANSAL ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13-01-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 2057/DEL/11 ADIT VS. RAJEEV AJNANI 5