SUNANDA V. BHASSIN, MUMBAI V. DCIT CIR 23(1), MUMBAI

ITA 2090/MUM/2010

• Counselvise Citation: 209019914 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KANOJA
• Assessee Lawyers: SATISH MODY
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Gift; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND PRAMOD KUMAR (A.M ) ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) MRS.SUNANDA V.BHASSIN, C/O L.D.TEXTILES INDUSTRIES LTD., MEHRA ESTATE, LBS MARG, VIKHROLI-WEST, MUMBAI-400079 PAN: ADFPB2186G DY. COMMISSIONER OF INCOME TAX 23(1), ROOM NO.108, C-10,1 ST FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA-EAST, MUMBAI-400051. APPELLANT V/S RESPONDENT DATE OF HEARING : 11.10.2011 DATE OF PRONOUNCEMENT : 14.10.2011 APPELLANT BY : SHRI SATISH MODY RESPONDENT BY : SHRI MANISH KA NOJA O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.1.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL DERIVES INCOME FROM HOUSE PROPERTY, C APITAL GAINS AND OTHER SOURCES. SHE FILED RETURN DECLARIN G TOTAL INCOME OF RS.14,51,873/- WHICH INCLUDED LONG TERM CAPITAL GAINS OF RS.13,98,069/-. DURING THE COURSE OF ASSE SSMENT ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 2 PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE ALONG WITH THREE OTHER CO-OWNERS SOLD THE PROPERTY BEARING CTS NOS. 69 (PART) AND 69/8 SITUATED AT VILLAGE VIKHROLI FOR A TOTAL CONSIDERATION OF RS.2,34,29,782/- AND ASSESSEES SH ARE IN THE TRANSACTION IS 20% OF THE TOTAL CONSIDERATION. HE FURTHER NOTED THAT BY A DEED OF TRUST DATED 30.11.1970, A F AMILY TRUST KNOWN AS MEHRA FAMILY TRUST WAS CREATED AND THERE AFTER THE TRUSTEES ON BEHALF OF TRUST ACQUIRED VARIOUS IM MOVABLE PROPERTIES. THE ASSESSEE WAS ONE OF THE BENEFICIARI ES UNDER THE ABOVE TRUST. THE ABOVE TRUST WAS DISSOLVED W.E. F. 1.9.1997 AND AS PER THE DISSOLUTION DEED ASSESSEE A LONGWITH OTHER THREE CO-OWNERS ACQUIRED ABSOLUTE OWNERSHIP I N RESPECT OF THE PROPERTY SOLD. IN THE COMPUTATION OF CAPITAL GAINS ASSESSEE HAS TAKEN VALUE OF PROPERTY AS ON 1. 4.1981 AS PER VALUATION REPORT AT RS.33,07,734/- AND THERE AFTER COMPUTED THE INDEXED COST OF ACQUISITION AT RS.1,64 ,39,438/-, AFTER ADOPTING COST INFLATION INDEX OF 100 AS APPLI CABLE TO 1981. THE AO FURTHER OBSERVED THAT ON VERIFICATI ON OF THE REGISTERED DOCUMENT THE PROPERTY IN QUESTION HAD BEEN SOLD FOR A TOTAL CONSIDERATION OF RS.2,34,29,782/- WHERE AS THE MARKET VALUE FOR THE PURPOSE OF CALCULATION OF STAM P DUTY HAS BEEN ADOPTED AT RS.2,71,54,550/-. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE COST INFLATION INDEX APPL ICABLE TO 1997 BE NOT TAKEN WHILE CALCULATING CAPITAL GAINS C HARGEABLE ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 3 TO TAX AND WHY PROVISIONS OF SECTION 50C SHOULD NOT BE ADOPTED AS THE AGREEMENT PRICE WAS LESS THAN THAT A DOPTED BY STATE GOVT. AUTHORITIES FOR THE PURPOSE OF CALCU LATION OF STAMP DUTY. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 16.12.2008 SUBMITTED HER EXPLANATION. THE AO HAS OBSERVED VIDE PARAGRAPH 7 OF THE ASSESSMENT ORDER AS UNDER : 7. THE ASSESSEES ARGUMENTS CAN BE SUMMARIZED AS UNDER: I) THE TRUST IS A SPECIFIC TRUST AND HAS NO SEPARAT E ENTITY FOR TAX PURPOSES; II) A TRUST WITH MORE THAN ONE BENEFICIARY IS NOT T O BE TREATED AS AN A.O.P. OR B.O.I; III) EVEN THOUGH TRUST FILED A NORMAL RETURN IT WAS NOT SUBJECTED TO TAX, BUT BENEFICIARIES WOULD BE SUBJECT TO TAX. IV) ASSESSEE, AS A BENEFICIARY OF TRUST HAD A RIG HT IN THE ASSETS EVEN BEFORE THE DATE OF DISSOLUTION O F TRUST AND THEREFORE THE RIGHT BEGAN FROM THE COMMENCEMENT OF THE TRUST. ACCORDINGLY THE ASSESSEE WAS A HOLDER OF ASSET EVEN BEFORE 1.4.81; V) PROVISIONS OF SEC.50C ARE NOT APPLICABLE IN T HE ASSESSEES CASE AS THE PROPERTY IS A DISPUTED PROPERTY AND UNDER LITIGATION. THE AO AFTER CONSIDERING THE ASSESSEES SUBMISSIONS OBSERVED AND HELD THAT IN THE COMPUTATION OF INCOM E ASSESSEE HAS TAKEN THE COST OF THE ASSET TRANSFERRE D AS THE COST TO THE PREVIOUS OWNER. AS PREVIOUS OWNER HAS A CQUIRED THE PROPERTY BEFORE 1.4.1981, THE COST AS ON 1,4.19 81 HAS ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 4 BEEN ADOPTED FOR THE PURPOSE OF COMPUTING THE CAPIT AL GAINS. ASSESSEES ACTION IN THIS REGARD I.E. ADOPTION OF V ALUE AS ON 1.4.1981 IS ACCEPTED. HOWEVER, FOR THE PURPOSE OF COST OF INFLATION INDEX, THE AO IN VIEW OF THE EXPLANATION (III) TO SECTION 48 HAS HELD THAT SINCE THE ASSESSEE BECAME ABSOLUTE OWNER OF THE PROPERTY IN THE YEAR IN WHIC H TRUST WAS DISSOLVED AND TILL THAT TIME THE PROPERTY BELONGED TO THE TRUST, THEREFORE COST INFLATION INDEX APPLICABLE TO FINAN CIAL YEAR 1997-98 HAS TO BE ADOPTED AND NOT THAT APPLICABLE T O FINANCE YEAR 1981-82. REGARDING THE ASSESSEES CON TENTION THAT STAMP DUTY ACT IS NOT APPLICABLE IN HER CASE, THE AO OBSERVED THAT THE ASSESSEE HAS NOT RAISED ANY OBJEC TION WHILE PAYING STAMP DUTY AND IT HAS ALSO NOT BEEN E STABLISHED THAT THE VALUE ADOPTED FOR LEVYING STAMP DUTY WAS MUCH MORE THAN FAIR MARKET VALUE AND ALSO THE ASSESSEE H AS NOT SUBMITTED ANY VALUATION REPORT TO SUBSTANTIATE HER CLAIM, THE AO WHILE REJECTING THE SAID PLEA OF THE ASSESSEE AD OPTED THE VALUE AS DETERMINED BY THE STAMP DUTY AUTHORITIES AND ACCORDINGLY COMPUTED THE ASSESSEES SHARE OF LONG TERM CAPITAL GAINS AT RS.44,37,591/- AS PER THE WORKING GIVEN AT PAGE 8 OF THE ASSESSMENT ORDER AND THEREBY COMPLETE D THE ASSESSMENT AT AN INCOME OF RS.44,91,400/- VIDE ORDE R DATED 19.12.2008 PASSED U/S 143(3) OF THE INCOME TAX ACT , 1961(IN SHORT THE ACT). ON APPEAL, THE LD. CIT(A) WHILE ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 5 AGREEING WITH THE VIEWS OF THE AO ON BOTH THE ISSU ES, DISMISSED THE ASSESSEES APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWINGS G ROUNDS OF APPEAL: I 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE A.O. IN TAKING THE SALE CONSIDERATION AT RS.2,71,54,550/- INSTEAD OF RS.2,34,29,782/- AS DECLARED BY THE APPELLANT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AT NO POINT OF TI ME, THE APPELLANT HAD REQUESTED THAT VALUATION THROUGH GOVERNMENT VALUER TO BE DONE TO DETERMINE THE VALUE OF THE PROPERTY. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) OUGHT TO HAVE APPRECIATED THA T AS PER PROVISIONS OF SECTION 50C(2) FOR REFERENCE TO VALUATION OFFICER U/S. 50C(2) NO REQUEST OUGHT TO H AVE BEEN MADE BY THE APPELLANT, THE ONLY REQUIREMENT WA S THAT THE APPELLANT OUGHT HAVE DISPUTED THE STAMP DU TY VALUATION, WHICH THE APPELLANT HAS AS NOTED IN THE ASSESSMENT ORDER, HAD SPECIFICALLY DISPUTED AND OUG HT TO HAVE DIRECTED THE ASSESSING OFFICER TO REFER THE SA ID VALUATION AS PER SECTION 50C(2) TO THE DVO. II. 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN ADOPTING THE INDEXATION VALUE FOR 1998-99 I.E 331 INSTEAD OF 1981-82 I.E. 100 WHI LE CALCULATING THE LONG TERM CAPITAL GAINS AND THUS TA KING THE INDEXED COST OF ACQUISITION AT RS.33,07,734/- I NSTEAD OF RS.1,64,39,438/- AS TAKEN BY APPELLANT. ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 6 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT WAS A BENEFICIARY WITH A SPECIFIC RIGHT A ND INTEREST OF 20% FROM THE DATE OF CREATION OF THE ME HTA FAMILY TRUST I.E. 30/11/1970 AND HENCE BECAME THE OWNER OF THE PROPERTY IN THE SAID YEAR AND NOT IN T HE YEAR 1997-98 WHEN THE TRUST WAS DISSOLVED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) OUGHT TO HAVE APPRECIATED TH E PROVISION OF SECTION 47(III) OF THE ACT R.W.S. 49(1 )(D) OF THE ACT AND OUGHT TO HAVE HELD THAT THE APPELLANT WAS ELIGIBLE FOR INDEXATION VALUE OF 1981-82 I.E. 100 I NSTEAD OF 331 FOR 1998-99 AS HELD BY AO. ADDITIONAL GROUND IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO ABOVE T HE CIT APPEAL OUGHT TO HAVE APPRECIATED THE PROVISION OF SECTION 49 (1) (III)(A) AND OUGHT TO HAVE HELD THA T THE APPLICANT WAS ELIGIBLE FOR INDEXATION BENEFIT FROM 1981- 1982 INSTEAD OF 1998-1999 AS HELD BY THE A.O. 4. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE ASSESSEE HAS OBJEC TED TO THE VALUATION DONE BY THE STAMP DUTY AUTHORITIES, T HE AO OUGHT TO HAVE REFERRED THE MATTER TO THE VALUATIO N OFFICER IN TERMS OF THE PROVISIONS OF SECTION 50C(2) OF THE ACT AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON T HE DECISIONS NAMELY (1) MEGHRAJ BAID V/S ITO (2008) 1 14 TTJ 84(JODH); (2008)4 DTR (JD)(TRIB) 509, (2) SMT.NASRE EN YUSUF DHANANI V/S ACIT (2008) 24 SOT 31(MUM.) (3) MRS. NA NDITA KHOSLA V/S ITO (2011) 46 SOT 90(MUM.) AND (4) AJMAL FRAGRANCES & FASHIONS (P.) LTD. V/S ACIT (2009) 34 SOT 57(MUM.). HE FURTHER SUBMITS THAT THERE IS NO DISP UTE THAT ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 7 THE AO FOR THE PURPOSE OF COMPUTING THE CAPITAL GA INS HAS ADOPTED THE VALUE AS ON 1.4.1981. HOWEVER, FOR THE PURPOSES OF COST INFLATION INDEX, THE AO HAS ADOPTED THE IN DEXED COST OF ACQUISITION AS APPLICABLE FOR THE FINANCIAL YEA R 1997-98 ON THE GROUND THAT THE ASSESSEE BECAME ABSOLUTE OWN ER OF THE PROPERTY IN THE FINANCIAL YEAR 1997-98. HE FURTHER SUBMITS THAT THIS VERY ISSUE IS COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF DY. CIT V/S MANJULA J. SHA H (2010) 35 SOT 105(MUM.) (SB). HE, THEREFORE, SUBMITS THAT FOLLOWING THE SAME, THE ISSUE MAY BE DECIDED ACCOR DINGLY. 5. ON THE OTHER HAND, THE LD.DR SUPPORTS THE ORDER OF THE AO AND THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT BEFORE THE AO, THE ASSESSEE HAS OBJECTED TO THE VALUATION ADOPTED BY T HE STAMP DUTY AUTHORITIES. HOWEVER, THE AO IN THE ABS ENCE OF ANY VALUATION REPORT REJECTED THE CLAIM OF THE ASSE SSEE. UNDER THE PROVISIONS OF SUB-SECTION (2) OF SECTION 50C OF THE ACT, WHERE THE ASSESSEE CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, AND HE HAS ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 8 NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSED IN A NY APPEAL OR REVISION OR REFERENCE BEFORE ANY AUTHORITY OR CO URT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SEC TION 55A OF THE INCOME TAX ACT. 7. IN MEGHRAJ BAID (SUPRA) IT HAS BEEN HELD THAT IN CASE THE AO DOES NOT AGREE WITH THE EXPLANATION OF ASSE SSEE WITH REGARD TO LOWER SALE CONSIDERATION THAN THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY, HE SHOULD REFER THE MATT ER TO THE DVO UNDER SUB-SECTION (2) OF SECTION 50C. 8. IN SMT.MANJU RANI JAIN (SUPRA) IT HAS BEEN HELD (PAGE 30) : 10. IN OUR OPINION, THE CIT(A) ON CONSIDERING THE PROVISIONS OF S. 50C(2) OF THE ACT HAS RIGHTLY DIRE CTED THE AO TO REFER THE PROPERTIES TO THE VALUATION CELL OF IT DEPARTMENT FOR THE PURPOSE OF VALUATION OF THE PROP ERTY AND, THEREAFTER, ADOPT THE VALUATION FOR WORKING OU T THE CAPITAL GAINS. SINCE, THE DIRECTION ISSUED BY THE C IT(A) IS IN ACCORDANCE WITH THE PROVISIONS OF S. 50C OF THE ACT, WE FIND NO ILLEGALITY OR INFIRMITY IN THE WELL REAS ONED ORDER OF THE CIT(A) AND, ACCORDINGLY, THE SAME IS U PHELD AND GROUND OF APPEAL TAKEN BY THE REVENUE IS REJECT ED. 9. IN AJMAL FRAGRANCES & FASHIONS (P.) LTD. (SUPRA) IT HAS BEEN HELD (PAGE 63 & 64): 11. WE ARE OF THE VIEW THAT ONCE THE ASSESSEE IS RAISING OBJECTION NO HARM WOULD BE CAUSED TO THE REVENUE IF THE MATTER IS REFERRED TO THE VALUATION OFFICER FOR THE PROPER VALUATION OF THE PROPERTY. THEREFORE , WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 9 REFER THE VALUATION TO THE VALUATION OFFICER AND TH EN ADOPT THE VALUE ACCORDINGLY. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE OR CON TRARY DECISION BROUGHT ON RECORD BY THE REVENUE, WE RES PECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL, SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO REFER THE MATTER OF VALUATION TO THE DVO AND ADOPT THE VALUE AS ASCERTAINED BY THE DVO AS PER THE PROVISIONS OF T HE ACT AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE . THE GROUNDS NO.1,2 AND 3 OF ISSUE NO. I TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STA TISTICAL PURPOSES. 10. AS REGARD THE SECOND ISSUE OF ADOPTING COST I NFLATION INDEX APPLICABLE TO FINANCIAL YEAR 1997-98 AS AGAI NST 1.4.1981, WE FIND THAT THERE IS NO DISPUTE THAT THE AO HAS ACCEPTED THE ASSESSEES CLAIM THAT SINCE THE PREVI OUS OWNER HAS ACQUIRED THE PROPERTY BEFORE 1.4.1981, THE COST AS ON 1.4.1981 HAS TO BE ADOPTED FOR THE PURPOSES OF COMP UTING THE CAPITAL GAINS AND ACCORDINGLY THE AO HAS ACCEP TED THE COST OF THE PROPERTY AS ON 1.4.1981. HOWEVER, WHIL E CONSIDERING THE COST INFLATION INDEX, THE AO HAS T AKEN THE INDEX COST OF ACQUISITION AS APPLICABLE FOR THE F INANCIAL YEAR 1997-98 AS THE ASSESSEE, ON DISSOLUTION OF TH E TRUST, HAS ACQUIRED THE PROPERTY IN THE SAID FINANCIAL YE AR. ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 10 11. IN MANJULA J. SHAH (SUPRA) ON THE FOLLOWING QU ESTION : 'WHILE COMPUTING THE CAPITAL GAINS IN THE HANDS OF AN ASSESSEE WHO HAD ACQUIRED THE ASSET TRANSFERRED UND ER GIFT WHETHER INDEXED COST OF ACQUISITION WAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET OR THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET.' IT HAS BEEN HELD VIDE PARAGRAPHS 19 AND 20 AS UNDE R : 19. IT IS ALSO NOTED THAT IF THE INTERPRETATION AS SOUGHT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS ASSIGNED TO CL. (III) OF EXPLANATION TO S. 48, IT WOULD LEAD TO SUCH WORKING OF INDEXED COST OF ACQUISITION IN SOME CASE S WHICH IS TOTALLY ILLOGICAL AND UNREASONABLE. FOR IN STANCE, IN THE CASE WHERE CAPITAL ASSET HAS BECOME A PROPER TY OF THE ASSESSEE UNDER A GIFT PRIOR TO THE CUT OFF DATE OF 1ST APRIL, 1981 BUT THE SAME IS TRANSFERRED BY HIM ONLY AFTER 1ST APRIL, 1981; SAY IN FINANCIAL YEAR 1987-88, THE YEAR TO BE ADOPTED FOR INDEXATION AS PER THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, WOULD BE FINAN CIAL YEAR 1987-88. HOWEVER, THE COST OF ACQUISITION OF C APITAL ASSET IN SUCH CASE WOULD BE TAKEN AS FAIR MARKET VA LUE OF 1ST APRIL, 1981 BEING THE CUT OFF DATE EMBEDDED IN THE INDEXATION SCHEME AS AGREED EVEN BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE SITUATION WILL THU S ARISE WHERE THE COST OF ACQUISITION OF CAPITAL ASSE T WOULD BE TAKEN AS OF 1ST APRIL, 1981 WHEREAS THE COST INF LATION INDEX FOR THE YEAR 1987-88 WOULD BE APPLIED TO THE SAID COST TO WORK OUT THE INDEXED COST OF ACQUISITION. S UCH A WORKING WILL NOT STAND TO ANY REASONABILITY OR LOGI C AND WILL CERTAINLY DEFEAT THE VERY PURPOSE OF INDEXATIO N SCHEME AS EXPLAINED IN THE AFORESAID CIRCULAR NO. 6 36, DT. 31ST AUG., 1990. 20. FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIE W THAT FOR THE PURPOSE OF COMPUTING LONG- TERM CAPITA L GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER GIFT, THE FIR ST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASS ESSEE HAS TO BE DETERMINED TO WORK OUT THE INDEXED COST O F ACQUISITION AS ENVISAGED IN EXPLN. (III) TO S. 48 A FTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SAID C APITAL ASSET WAS HELD BY THE PREVIOUS OWNER. IN THAT VIEW OF THE ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 11 MATTER, WE HOLD THAT THE INDEXED COST OF ACQUISITIO N OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENC E TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO US IN FAVOUR OF THE ASSESSEE AND UPHOLD THE IMPUGNED ORDE R OF THE LEARNED CIT(A) ON THIS ISSUE. 12. APPLYING THE RATIO OF THE ABOVE DECISION TO THE FACTS OF THE PRESENT CASE, WE FIND THAT SINCE THE AO FOR TH E PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAINS HAS TAKEN COST OF THE IMPUGNED PROPERTY WHICH WAS ACQUIRED BY THE AS SESSEE AS A RESULT OF DISSOLUTION OF THE TRUST IN THE FIN ANCIAL YEAR 1997-98 AS THE COST AS ON 1.4.1981 TO THE PREVIOUS OWNER, THEREFORE, THE INDEX COST OF ACQUISITION OF SUCH CA PITAL ASSETS HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSETS OR 1.4.1981 WH ICHEVER IS LATER. IN THE CASE OF THE ASSESSEE SINCE THE AO HA S RIGHTLY TAKEN THE COST OF THE PROPERTY AS ON 1.4.1981, THER EFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE AO I S DIRECTED TO WORK OUT THE LONG TERM CAPITAL GAIN AFTER TAKING INTO CONSIDERATION THE COST OF INFLATION INDEX AS ON 1.4 .1981 AS AGAINST COST INFLATION INDEX APPLIED BY THE AO APPL ICABLE FOR THE FINANCIAL YEAR 1997-98. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. ITA NO. 2090/MUM/2010 (ASSESSMENT YEAR: 2006-07) 12 13. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH OCT .,2011. SD S D ( PRAMOD KUMAR ) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 14TH OCTOBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI