ITO, Ward 3(1), Pune V. Smt. Manjushree Jadhav, Pune

ITA 2120/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76363 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.2120/PN/2012 (ASSESSMENT YEAR : 2008-09) ITO, WARD-3(1), PUNE .. APPELLANT VS. MANJUSHREE JADHAV, 26, GERA ANAND HOUSING SOCIETY, NAVI PETH, PUNE .. RESPONDENT PAN NO. AGRPJ6633K ASSESSEE BY : NONE REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 11-03-2014 DATE OF PRONOUNCEMENT : 13 -03-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 15-06-2012 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2008-09. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AT THE T IME OF HEARING, THEREFORE, THE MATTER IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL RE PRESENTATIVE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND HOUSEWIFE DERIVING INCOME UNDER THE HEAD INCOM E FROM OTHER SOURCES WHICH INCLUDES RECEIPT OF BANK INTEREST. S HE FILED HER RETURN OF INCOME DECLARING INCOME OF RS. 25,000/-. DURING THE YEAR THE ASSESSEE HAD SOLD TWO ANCESTRAL PROPERTIES AT S.NO. 79 CTS A ND 80 CTS 939, 2 WORLI, MUMBAI, THE ASSESSEE'S SHARE BEING 2.60% AND 2.08% IN THE TWO PROPERTIES, RESPECTIVELY. THE ASSESSEE HAD SHOWN LO NG TERM CAPITAL LOSS OF RS.32,95,516/- FOR THE PROPERTY AT S.NO. 79CTS A ND RS.15,40,160/- FOR THE PROPERTY AT S.NO. 80CTS, WORLI, MUMBAI. THE AFORESAID PROPERTIES WERE RECEIVED BY THE ASSESSEE AS GIFT FR OM HER MOTHER IN THE F.Y. 2002-03 AND THE TOTAL CONSIDERATION RECEIVED F OR BOTH THE PROPERTIES BY ALL THE FAMILY MEMBERS WAS RS.18,14,5 9,500/-. THE ASSESSEE'S SHARE WAS RS.40 LACS AND RS.32 LACS RESP ECTIVELY FOR THE TWO PROPERTIES TOTALING TO RS. 72 LACS. THE ASSESSEE AL ONG WITH THE FAMILY MEMBERS HAD APPOINTED AN APPROVED VALUER TO DETERMI NE THE FAIR MARKET VALUE OF BOTH THE PROPERTIES AS ON 01.04.198 1, SO AS TO DETERMINE THE CAPITAL GAINS LIABLE TO TAX AFTER INDEXATION. T HE ASSESSEE, AS PER THE VALUATION DETERMINED BY THE APPROVED VALUER, TOOK T HE INDEXED VALUE OF BOTH THE PROPERTIES AS ON 01-04-1981 AND THE SAME W AS FILED IN THE RETURN OF INCOME. 3.1 THE A.O. DURING THE ASSESSMENT PROCEEDINGS COMP UTED THE CAPITAL GAINS ADOPTING THE YEAR OF ACQUISITION AS F .Y. 2002-03 AS ACCORDING TO HIM THE ASSESSEE HAD BECOME THE OWNER OF THE SAID PROPERTIES VIDE GIFT DEED DATED 27.03,2003 I.E. F.Y . 2002-03. THE A.O. THUS TREATED THE DATE OF ACQUISITION AS THE DATE ON WHICH THE PROPERTY WAS TRANSFERRED TO THE ASSESSEE AND NOT THE DATE ON WHICH THE PROPERTY WAS ACQUIRED BY THE PREVIOUS OWNERS. THUS, THE BENE FIT OF INDEXATION WAS RESTRICTED BY THE A.O. TO THE ACTUAL PERIOD OF HOLDING OF THE PROPERTY BY THE ASSESSEE IN VIEW OF THE DECISION OF THE MUMBAI BENCH 3 OF THE TRIBUNAL IN THE CASE OF DCIT VS KISHORE KANU NGO 102 ITD 437 (MUM). 4. IN APPEAL THE LD.CIT(A) DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE BY OBSERVING AS UNDER : 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE APPELLANT HAS RAISED THREE GROUNDS OF APPEAL AND IN GROUND NO.1 HAS CONTESTED THE ADOPTION OF THE INDEX VALUE OF COST OF THE PROPERTY OF F.Y. 2002-03 AS AGAINST 01.04.1981 ADOPTED BY THE APPELLANT. THE APPELLANT HAS CONTENDED THAT THE HON'BLE BOMBAY HIGH COURT HAD ACCEPTED THE FIND INGS OF THE SPECIAL BENCH OF MUMBAI ITAT IN THE CASE OF CIT VS SMT. MANJU LA J. SHAH (2009) 318 ITR 417 (MUM)(SB). IT HAS BEEN SUBMITTED THAT IN THE AFORESAID ORDER IT HAS BEEN HELD THAT UNDER EXPLANATION 1(I)(B ) TO SECTION 2(42A), IN DETERMINING THE PERIOD FOR THE ANY ASSET IS HELD BY A ASSESSEE UNDER GIFT, THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER HAS TO BE INCLUDED. IT HAS ALSO BEEN SUBMITTED THAT THI S FICTION WILL APPLY TO CLAUSE (III) OF THE EXPLANATION TO SECTION 48 AS WE LL FOR DETERMINING THE INDEXED COST OF ACQUISITION. THE APPELLANT HAS ALSO RELIED ON THE DECISIONS OF THE PUNE ITAT IN THE CASE OF DCIT VS. JEE VAN M. GORADE ITA NO.379/PN/2010 DATED 24.08.2011 AND HAS ALSO FILED A COPY OF APPELLATE ORDER DATED 15.10.2010 IN THE CASE OF SMT. MANGALA V. SUPNEKAR FOR A.Y. 2007-08 PASSED BY THE CIT (APPEALS)- II, PUNE. 3.4 THE PRESENT CASE IS FOUND TO BE COVERED BY THE DECISIO N OF HON'BLE MUMBAI HIGH COURT IN THE CASE OF DCIT VS. MANJULA J. SHAH (2009) 318 ITR (AT) 417 (MUMBAI)(SB), WHICH HAS ALSO BEEN RELIED UPON BY THE APPELLANT. THE MUMBAI HIGH COURT APPROV ED THE FINDING OF THE SPECIAL BENCH IN THE CASE OF DCIT VS. MANJULA J. SHAH (2009) 318 ITR (AT) 417 (MUMBAI)(SB), WHEREIN IT WAS HELD THAT THE INDEXED COST OF THE GIFTED ASSET HAS TO BE DETERMINED WITH REFE RENCE TO THE PREVIOUS OWNER. IN THAT CASE THE ASSESSEE HAS RECEIVED THE CAPITAL ASSET BY GIFT ON 01.02.2003 WHEREAS THE PREVIOUS OWNER HAD ACQUIRED IT ON 29.01.1993. THE ASSESSEE HAD CLAIMED THE COST INFLATION INDEX FOR THE YEAR BY TAKING THE DATE OF ACQUISITION BY THE PREVIO US OWNER, WHEREAS THE A.O. TOOK IT WITH REFERENCE TO DATE OF RECEIPT OF GIFT BY THE ASSESSEE. THE SPECIAL BENCH OF ITAT MUMBAI DECIDED THE ISSUE AF TER CONSIDERING THE PROVISIONS OF EXPLANATION (III) TO SECTION 48 TOGE THER WITH EXPLANATION 1(B) TO SECTION 2(42A) AND IT WAS HELD AS UNDER: . '11. A COMBINED READING OF BOTH THE AFORESAID PRO VISIONS, WHICH ARE RELEVANT IN THE PRESENT CONTEXT, CLEARLY SHOWS THAT IMPORTANCE IS ASSIGNED TO THE PERIOD OF HOLDING OF THE CAPITAL ASSET IN AS MUCH AS EXPLANATION (III) TO SECTION 48 REF ERS TO THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE WHER EAS EXPLANATION 1(B) TO SECTION 2(42A) PROVIDES FOR INCLU SION OF THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWN ER IN DETERMINING THE PERIOD FOR WHICH ANY CAPITAL ASSET IS HELD BY THE ASSESSEE. HAVING REGARD TO THIS ASPECT AS WELL AS KEEPING IN VIEW THAT THE DEFINITIONS GIVEN IN SECTION 2 ARE APPLICABL E FOR THE 4 ENTIRE ACT, WE ARE OF THE VIEW THAT THE LEGISLATIVE INTENTION BEHIND ENACTING THESE PROVISIONS IS VERY CLEAR TO TREAT THE DATE AS WELL AS COST OF ACQUISITION OF CAPITAL ASSET OF THE PRE VIOUS OWNER TO BE THE DATE AND COST OF ACQUISITION OF THE ASSESSEE FO R THE PURPOSE OF COMPUTING CAPITAL GAIN IN TERMS OF SECTION 48. THIS IS THE SCHEME OF THE ACT AS LAID OUT IN THE RELEVANT PRO VISIONS AND THIS IS THE CONTEXT IN WHICH THE SAME HAS TO BE UNDERSTO OD AND APPRECIATED. AS RIGHTLY CONTENTED BY THE ID. COUNSEL FOR THE ASSESSEE, HAD IT NOT BEEN THE INTENTION OF THE LEGISLATU RE, THE EXPRESSION USED IN EXPLANATION (III) TO SECTION 48 WOUL D HAVE BEEN '.............. FOR THE FIRST YEAR IN WHICH THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE' AS USED IN SECTION 49(1). . . . . . . . 13. THIS IS SO ALSO BECAUSE WHEN THE COST OF ACQUI SITION TO THE PREVIOUS OWNER AS ON THE DATE OF ACQUISITION OF THE CAPITAL ASSET BY HIM IS TO BE ADOPTED AS COST OF ACQUISITION TO THE ASSE SSEE EVEN FOR THE PURPOSE OF WORKING OUT THE INDEXED COST OF ACQUISITI ON AS PER THE MEANING GIVEN IN EXPLANATION (III) TO SECTION 48, I T DOES NOT SOUND LOGICAL TO ADOPT THE COST INFLATION INDEX FOR THE Y EAR IN WHICH THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE AND NOT T HAT FOR THE YEAR IN WHICH THE ASSET WAS ACQUIRED BY THE PREVIOUS OWNER. IN OUR OPINION, WHEN THE COST OF ACQUISITION OF THE PREVIOUS OWNER AS ON THE DATE OF ACQUISITION OF THE CAPITAL ASSET BY HIM IS TO BE TA KEN FOR WORKING OUT THE INDEXED COST OF ACQUISITION, THE ONLY CONCLUSION WH ICH LOGICALLY AND REASONABLY FOLLOWS IS TO ADOPT THE COST INFLATION I NDEX CORRESPONDING TO THAT DATE FOR APPROPRIATELY DETERMINING THE INDEXED COST OF ACQUISITION.' ACCORDINGLY, THE SPECIAL BENCH HELD THAT SINCE THE P ERIOD FOR WHICH THE CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER WAS TO BE I NCLUDED IN THE HOLDING PERIOD OF THE ASSESSEE FOR THE PURPOSE OF DETERM INING THE INDEXED COST OF ACQUISITION, THE INDEXED COST OF ACQUI SITION WAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PR EVIOUS OWNER FIRST HELD THE ASSET. IN THE PROCESS, THE SPECIAL BENCH HAS ALSO OVERRULED THE DECISION OF DCIT VS. KISHORE KANUNGO (2006) 104 TTJ 56 0 (MUMBAI). 3.5 IN VIEW OF THE SPECIAL BENCH DECISION AND THAT OF TH E HON'BLE BOMBAY HIGH COURT, THE MATTER NOW STANDS SQUARELY COVE RED IN FAVOUR OF THE APPELLANT. THEREFORE, THE COST INFLATION INDE X AND THE INDEXED COST OF ACQUISITION HAS TO BE WORKED OUT BY TAKING THE DATE OF ACQUISITION BY THE PREVIOUS OWNER IN CASE OF THE PROPE RTY RECEIVED BY THE APPELLANT AS GIFT FROM HER MOTHER. GROUND NO. 1 IS, THEREFORE, LIABLE TO BE ALLOWED. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) ERRED IN HOLDING THAT FOR T HE PURPOSE OF DETERMINING THE INDEXED COST OF ACQUISITION IN RESPECT OF AN ASSET ACQUIRED UNDER WILL, THE COST INFLATION INDEX HAS TO BE WORKED OUT BY TAKING THE DATE OF ACQUISITION BY THE PREVIOUS OWNER. 5 2. THE LEARNED CIT(A) ERRED IN NOT HOLDING THAT AS PER CLAUSE (III) OF THE EXPLANATION TO SECTION 48, THE COST INFLATION IN DEX TO BE TAKEN ON THE DENOMINATOR HAS TO BE NECESSARILY THE INDEX FOR TH E FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE AND NOT BY ANY PR EVIOUS OWNER. 3. THE LEARNED CIT(A) ERRED IN FAILING TO APPRECIA TE THAT UNDER THE SCHEME OF THE ACT, THE BENEFIT OF INDEXATION CAN BE GIVEN ONLY TO THE OWNER OF THE ASSET AND THAT TOO FROM THE DATE HE BECO MES THE OWNER TO THE DATE HE CEASES TO BE THE OWNER. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE TO BE DECIDED IN THE INSTANT CASE IS REGARDING THE DETERMINATION OF THE INDEXED COST OF ACQUISITION IN RESPECT OF AN ASSET ACQUIRED UNDER GIFT/WILL. THER E IS NO DISPUTE TO THE FACT THAT THE ASSESSEE ACQUIRED THE TWO PROPERTIES AS GIFT FROM HER MOTHER IN THE F.Y 2002-03. ACCORDING TO THE ASSESS ING OFFICER FOR THE PURPOSE OF CALCULATION OF INDEXED COST OF ACQUISITI ON THE YEAR OF ACQUISITION HAS TO BE TAKEN AS F.Y. 2002-03 SINCE T HE ASSESSEE HAD BECOME THE OWNER OF THE SAID PROPERTIES VIDE GIFT D EED DATED 27-03- 2003. WE FIND THE LD.CIT(A) FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SMT. MANJULA J . SHAH (SUPRA) HELD THAT THE COST INFLATION INDEX AND THE INDEXED COST OF ACQUISITION HAS TO BE WORKED OUT BY TAKING THE DATE OF ACQUISITION BY THE PREVIOUS OWNER IN CASE OF THE PROPERTY RECEIVED BY THE ASSESSEE AS GIFT FROM HER MOTHER. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY CONTRARY DECISION AGAINST THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL WHICH HAS SINCE BEEN AFFIRMED BY HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. MANJULA SHAH REPORTED IN (2012) TAX MANN.COM 691 AND 269 CTR 470 (BOM.) (HIGH COURT). SINCE THE LD. CIT(A) WHILE 6 DECIDING THE ISSUE HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL WHICH HAS SINCE BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT, THEREFORE, IN ABSENCE OF ANY CONTRARY M ATERIAL BROUGHT TO OUR NOTICE, WE FIND NO INFIRMITY IN THE ORDER OF TH E CIT(A) HOLDING THAT THE COST INFLATION INDEX AND THE INDEXED COST OF AC QUISITION HAS TO BE MARKED OUT BY TAKING THE DATE OF ACQUISITION BY THE PREVIOUS OWNER, IN THE INSTANT CASE, WHERE THE PROPERTY HAS BEEN RECEI VED BY THE ASSESSEE FROM HER MOTHER AS GIFT. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13-03-2014. SD/- SD/- (R.S.PADVEKAR ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 13 TH MARCH, 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE