S.Krishnan, CHENNAI V. DDIT, CHENNAI

ITA 2075/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90349 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2075/MDS/2014 ( )( / ASSESSMENT YEAR : 2006-07 SHRI S. KRISHNAN, C/O JAGANNATHAN & SARABESWARAN, NO.35, LUZ AVENUE, MYLAPORE, CHENNAI - 600 004. PAN : AAFPK 5858 B V. THE DEPUTY DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : NONE -.+, / 0 / RESPONDENT BY : SHRI N. MADHAVAN, JCIT 1 / 2% / DATE OF HEARING : 21.04.2015 3') / 2% / DATE OF PRONOUNCEMENT : 15.05.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) VII, CHE NNAI, DATED 09.05.2014 AND PERTAINS TO ASSESSMENT YEAR 2006-07. THE ONLY 2 I.T.A. NO.2075/MDS/14 ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO CO MPUTATION OF CAPITAL GAIN. 2. NOTICE WAS SERVED TO THE ASSESSEE BY RPAD. HOWEV ER, THE ASSESSEE HAS FILED WRITTEN SUBMISSION WITH A REQUES T TO CONSIDER THE SAME TO PASS AN ORDER ON MERIT. ACCORDINGLY, WE HE ARD THE LD. DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE WRIT TEN SUBMISSION FILED BY THE ASSESSEE AND PROCEED TO DIS POSE THE APPEAL ON MERIT. 3. IN THE WRITTEN SUBMISSION, THE ASSESSEE CLAIMED THAT HE RECEIVED 75 CENTS OF LAND BY GIFT THROUGH A SETTLEM ENT DEED DATED 23.01.2004. THE MOTHER OF THE ASSESSEE PURCHASED T HE SAID LAND ON 25.09.1957 BY MEANS OF A REGISTERED SALE DEED NO .2068 OF 1957. THE ASSESSEE TRANSFERRED THE SAID LAND AND C LAIMED INDEXATION AS ON 01.04.1981. HOWEVER, THE ASSESSIN G OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND ALLOWED INDE XATION ONLY FROM 23.01.2004 WHEN THE ASSESSEE BECAME THE OWNER. THE ASSESSEE, BY PLACING RELIANCE ON THE JUDGEMENT OF THE BOMBAY HIGH COURT IN CIT V. MANJULA J. SHAH (2012) (204 TAXMAN 691), CLA IMED IN THE WRITTEN SUBMISSION FILED BEFORE THIS TRIBUNAL THAT THE INDEXATION HAS TO BE MADE FROM 01.04.1981AND NOT FROM 23.01.2004. 3 I.T.A. NO.2075/MDS/14 4. ON THE CONTRARY, THE LD. D.R. SUBMITTED THAT UND ER EXPLANATION (III) TO SECTION 48 OF THE INCOME-TAX A CT, 1961 (IN SHORT 'THE ACT), THE INDEXED COST OF ACQUISITION HAS TO B E MADE FROM THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSES SEE. IN THE PRESENT CASE, THE ASSET WAS HELD BY THE ASSESSEE ON LY WITH EFFECT FROM 23.01.2004. ACCORDING TO THE LD. D.R., THE AS SESSEE OBTAINED THE 75 CENTS OF LAND THROUGH SETTLEMENT DEED ONLY F ROM 23.01.2004 WHICH FALLS IN THE FINANCIAL YEAR 2003-04. THEREFO RE, FOR THE PURPOSE OF INDEXATION, THE COST OF THE ASSET HAS TO BE ADOP TED ON 01.04.1981 ASSUMES SIGNIFICANT AND NOT FOR INDEXED COST OF ACQ UISITION. THIS DISTINCTION IS IMPORTANT FOR WORKING OF THE CAPITAL GAIN. 5. WE HAVE HEARD THE LD. D.R. AND GONE THROUGH THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AND MATERIAL AVAIL ABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE OBTAINED 75 CENTS OF LAND FROM HIS MOTHER BY MEANS OF SETTLEMENT DEED DATED 23.01. 2004. THE ASSESSEE ALSO SOLD THE LAND DURING THE YEAR UNDER C ONSIDERATION AND CLAIMED CAPITAL GAIN BY ADOPTING THE VALUE AS O N 01.04.1981. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE G ROUND THAT THE ASSET WAS OWNED ONLY ON 23.01.2004. THEREFORE, THE VALUE AS ON 23.01.2004 IS TO BE ADOPTED IN RESPECT OF THE PROPE RTY RECEIVED BY THE ASSESSEE FROM HIS MOTHER. WE FIND THAT THE BOM BAY HIGH COURT 4 I.T.A. NO.2075/MDS/14 IN THE CASE OF MANJULA J. SHAH (SUPRA) HAD AN OCCAS ION TO CONSIDER AN IDENTICAL ISSUE. THE BOMBAY HIGH COURT, AFTER C ONSIDERING THE PROVISIONS OF SECTION 48 OF THE ACT, HAS OBSERVED A S FOLLOWS:- 17. WE SEE NO MERIT IN THE ABOVE CONTENTION. AS RI GHTLY CONTENDED BY MR. RAI, LD.COUNSEL FOR THE ASSESSEE, THE INDEXED COST OF ACQUISITION HAS TO BE DETERMINED WI TH REFERENCE TO THE COST OF INFLATION INDEX FOR THE FI RST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASSESSEE. SINCE THE EXPRESSION HELD BY THE ASSESSEE IS NOT DEFINE D UNDER SECTION 48 OF THE ACT, THAT EXPRESSION HAS TO BE UN DERSTOOD AS DEFINED UNDER SECTION 2 OF THE ACT. EXPLANATION 1(I)(B) TO SECTION 2(42A) OF THE ACT PROVIDES THAT IN DETERMIN ING THE PERIOD FOR WHICH AN ASSET IS HELD BY AN ASSESSEE UN DER A GIFT, THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER SHALL BE INCLUDED. AS THE PREVIOUS OWNER HEL D BY THE CAPITAL ASSET FROM 29.1.1993, , AS PER EXPLANATION 1(I)(B) TO SECTION 2(42A) OF THE ACT, THE ASSESSEE IS DEEMED T O HAVE HELD THE CAPITAL ASSET FROM 29.1.1993, THE ASSESSEE IS DEEMED TO HAVE HELD THE ASSET AS A LONG TERM CAPITA L ASSET. IF THE LONG TERM CAPITAL GAINS LIABILITY HAS TO BE COMPUTED UNDER SECTION 48 OF THE ACT BY TREATING THAT THE AS SESSEE HELD THE CAPITAL ASSET FROM 29.1.1993, THEN, NATURA LLY IN DETERMINING THE INDEXED COST OF ACQUISITION UNDER S ECTION 48 OF THE ACT, THE ASSESSEE MUST BE TREATED TO HAVE HE LD THE ASSET FROM 29/1/1993 AND ACCORDINGLY THE COST INFLA TION INDEX FOR 1992-93 WOULD BE APPLICABLE IN DETERMINING THE INDEXED COST OF ACQUISITION. 18. IF THE ARGUMENT OF THE REVENUE THAT THE DEEMING FICTION CONTAINED IN EXPLANATION 1(I)(B) TO SECTION 2(42A) OF THE ACT CANNOT BE APPLIED IN COMPUTING THE CAPITAL GAINS UN DER SECTION 48 OF THE ACT IS ACCEPTED, THEN, THE ASSESS EE WOULD NOT BE LIABLE FOR LONG TERM CAPITAL GAINS TAX, BECA USE IT IS ONLY BY APPLYING THE DEEMED FICTION CONTAINED IN EXPLANA TION 1(I)(B) TO SECTION 2(42A) AND SECTION 49(1)(II) OF THE ACT, THE ASSESSEE IS DEEMED TO HAVE HELD THE ASSET FROM 29/1 /1993 AND DEEMED TO HAVE INCURRED THE COST OF ACQUISITION AND ACCORDINGLY MADE LIABLE FOR THE LONG TERM CAPITAL G AINS TAX. THEREFORE, WHEN THE LEGISLATURE BY INTRODUCING THE DEEMING FICTION SEEKS TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED UNDER A GIFT OR WILL AND THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT HAS TO BE COMPUTED BY APPLYIN G THE DEEMED FICTION, IT IS NOT POSSIBLE TO ACCEPT THE CO NTENTION OF REVENUE THAT THE FICTION CONTAINED IN EXPLANATION 1 (I)(B) TO 5 I.T.A. NO.2075/MDS/14 SECTION 2(42A) OF THE ACT CANNOT BE APPLIED IN DETE RMINING THE INDEXED COST OF ACQUISITION UNDER SECTION 48 OF THE ACT. 6. IN VIEW OF THE ABOVE OBSERVATION OF THE BOMBAY H IGH COURT ON IDENTICAL ISSUE, THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH EFFECT FROM 01.04.1981. ACCORDINGLY, THE ORDERS OF THE LOWER A UTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO COMP UTE THE INDEXED COST OF ACQUISITION FROM 01.04.1981 IN VIEW OF THE OBSERVATION OF THE BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH (S UPRA). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 15 TH MAY, 2015 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) (. !'# ! ) ( . . . ) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 15 TH MAY, 2015. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-VII, CHENNAI 4. 1 92 /CIT (INTERNATIONAL TAXATION), CHENNAI 5. 7: -2 /DR 6. ( ; /GF.