The ACIT, Circle-3, Baroda V. Smt. Lata Sureshchandra Patel, Baroda

ITA 2193/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89317 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD 0 0 , !' , # BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ././ ./ ITA NO. 2193/AHD/2011 & '& & '& & '& & '&/ // / ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-3, BARODA VS SMT. LATA SURESHCHANDRA PATEL SHANTI NIVAS, NEAR NARBADA CANAL, AT. SEVASI, DIST. BARODA PAN : ADHPP 6664 M () () () () / // / (APPELLANT) *+ *+ *+ *+ () ()() () / // / (RESPONDENT) REVENUE BY : SHRI NIMESH YADAV, SR. DR ASSESSEE(S) BY : NONE , - './ // / DATE OF HEARING : 16/04/2015 /0' - '. / // / DATE OF PRONOUNCEMENT: 08/05/2015 1 1 1 1/ // / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, BARODA (C IT(A) IN SHORT) DATED 23.06.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(APPEALS) ERRED IN ALLOWING INDEXED COST OF ACQU ISITION FROM THE BASE YEAR I.E. FROM 01.04.1981 AND THEREBY DELETING THE ADDITION OF RS.1,32,76,842/- MADE ON ACCOUNT OF LONG TERM CAPIT AL GAIN WITHOUT APPRECIATING THE FACT THAT THE ASSET WAS HELD BY TH E ASSESSEE ONLY FROM THE FINANCIAL YEAR 1996-97 AND AS PER THE PROVISIONS OF EXPLANATION (III) TO SECTION 48 OF THE INCOME-TAX ACT THE COST INFLATION INDEED FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE HA S TO BE CONSIDERED. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND OR ALTE R THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. ITA NO. 2193/AHD/2011 ACIT V. SMT LATA SURESHCHANDRA PATEL FOR AY 2008-09 2 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143(3) O F THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRA MED VIDE ORDER DATED 10.12.2010, WHEREBY THE ASSESSING OFFICER RECOMPUTE D THE LONG TERM CAPITAL GAIN ALLOWING THE BENEFIT OF INDEXATION FRO M THE FINANCIAL YEAR 1996- 97. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEF ORE THE LD.CIT(A) WHO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, PARTLY ALLOWED THE APPEAL BY DELETING THE ADDITION MADE ON ACCOUNT OF COMPUTING LONG TERM CAPITAL GAIN TAKING INDEXATION FROM THE FY 1996-97. AGGRIE VED BY THE AFORESAID ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL B EFORE US. 4. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY REQUEST FOR ADJOURNMENT HAS BEEN FILED BEFORE T HE TRIBUNAL DESPITE THE SERVICE OF NOTICE UPON THE ASSESSEE. SO, WE ARE PRO CEEDING THE CASE EX-PARTE QUA THE ASSESSEE AND DISPOSING THE MATTER ON THE BA SIS OF ARGUMENTS OF LD. SR. DR. AND THE MATERIAL AVAILABLE ON RECORD. 5. LD. SR. DR., SHRI NIMESH YADAV SUPPORTED THE ORD ER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE CIT(A) WAS NOT JUSTI FIED IN ALLOWING INDEX COST OF ACQUISITION FROM THE BASE YEAR I.E. FROM 01 .04.1981. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE ASSESSING OFFICER HAD APPLIED INDEXATION FROM THE FINANCIAL Y EAR 1996-97 AGAINST THE COST INFLATION INDEXATION TAKEN BY THE ASSESSEE FRO M 01.04.1981. THAT THE CIT(A) HAS REPRODUCED THE WRITTEN SUBMISSION OF THE ASSESSEE IN PARAGRAPH 2.2 OF HIS ORDER AS UNDER:- 'THE LD AO IN HIS ORDER HAS STATED THAT AS PER THE ACT U/S 48, THE COST OF INDEXATION HAS TO BE APPLIED AND THE YEAR OF COST O F INDEXATION TO BE APPLIED IS ITA NO. 2193/AHD/2011 ACIT V. SMT LATA SURESHCHANDRA PATEL FOR AY 2008-09 3 MENTIONED IN SECTION 49(1). THE SECTION 49, IN THE EXPLANATION, IT IS STATED THAT THE COST OF INDEXATION TO BE APPLIED FOR CALCU LATION OF LONG TERM CAPITAL GAIN SHALL BE IN THE YEAR IN WHICH THE ASSET IS HEL D BY THE ASSESSEE. FURTHER, THE COST OF THE PROPERTY IS TO BE TAKEN AS PER THE COST OF THE PREVIOUS OWNER. IN YOUR APPELLANT'S CASE THE COST OF THE PROPERTY IS T AKEN AS ON 01-04-1981 AS THE PROPERTY WAS ACQUIRED PRIOR TO THAT DATE. IT IS PERTINENT TO NOTE HERE THAT THE SECTION 49(1) SAYS THAT THE INDEXATION SHALL BE APPLIED FOR THE YEAR IN WHICH THE PROPERTY IS HELD BY THE ASSESSEE. IN YOUR APPELLANT'S CASE, THE PROPERTY WAS PURCHASE D BY THE HUSBAND AND SINCE THE COST IS APPLIED W.E.F. 01-04-1981, THE SA ME CHRONOLOGY SHOULD BE APPLICABLE TO THE COST OF INDEXATION AND ACCORDINGL Y THE COST OF INDEXATION INDEX IS TAKEN AS OF 01-04-1981. THE LD AO IN HIS A SSESSMENT ORDER HAD SAID THAT SINCE THE PROPERTY WAS HELD BY YOUR APPELLANT FROM THE FINANCIAL YEAR 1996-97, I.E. PURSUANT TO DEATH OF HUSBAND, THE IND EXATION SHOULD BE TAKEN INTO CONSIDERATION W.E.F. FY 1996-97 AND NOT FROM 0 1-04-1981. YOUR APPELLANT WISHES TO SUBMIT THAT IF ANALOGY OF LD AO IS TO BE ADOPTED, THEN INDEXATION BENEFIT FOR THE PERIOD 01.04.1981 T ILL DEATH OF HUSBAND SHALL NOT BE AVAILABLE TO ANY ASSESSEE. THIS IS NOT THE S PIRIT OF LAW AS INDEXATION BENEFIT SHOULD BE AVAILABLE TO ASSESSEE AND IT SHOU LD NOT LAPSE MERELY BECAUSE OF INHERITANCE OF THE PROPERTY AND SUBSEQUENT SELL BY OTHER PERSON. YOUR APPELLANT FURTHER RELIES ON DECISION BY HON'BL E ITAT, MUMBAI SPECIAL BENCH DECISION IN CASE OF DCIT, 12(2) V/S MANJULA J SHAH ITA NO.7315/MUM/2007 (PAGE NO. 34 OF PAPER BOOK) WHEREB Y IT IS HELD THAT: FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THA T FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN ARISING FROM THE T RANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UND ER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASS ESSEE HAS TO BE DETERMINED TO. WORK OUT THE INDEXED COST OF ACQUISI TION AS ENVISAGED IN EXPLANATION (III) TO SECTION 48 AFTER TAKING INT O ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PR EVIOUS OWNER. IN THAT VIEW OF THE MATTER, WE HOLD THAT THE INDEXED C OST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENC E TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. ACCO RDINGLY, WE ANSWER THE QUESTION REFERRED TO US IN FAVOUR OF THE ASSESS EE AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT (A) ON THIS ISSUE . YOUR APPELLANT FURTHER RELIES ON CIRCULAR NO. 636 D ATED 31.08.1992 ISSUED BY CBDT EXPLAINING THE PURPOSE OF INDEXATION ALLOWED W HILE COMPUTING LONG TERM CAPITAL GAIN AS REPORTED IN 198 ITR 1(ST) AT P AGE NO.24, PARA 35 (PAGE NO, 36 OF PAPER BOOK). ITA NO. 2193/AHD/2011 ACIT V. SMT LATA SURESHCHANDRA PATEL FOR AY 2008-09 4 YOUR APPELLANT FURTHER WISHES TO SUBMIT ALL ABOVE D ECISIONS WERE SUBMITTED TO THE LD AO AT THE STAGE OF ASSESSMENT PROCEEDINGS . HOWEVER, THE SAME WERE IGNORED. THE LD AO HAS ERRED IN RELYING ON DECISION BY HON'B LE ITAT, MUMBAI IN CASE OF DY. CIT V/S KISHORE KANUNQO (2006) 102 ITD 347 IGNORING THE FACT THAT DECISION RELIED UPON BY YOUR APPELLANT IN CASE OF MRS. MAJULA SHAH IS BY SPECIAL BENCH ITAT AND HENCE, OVERRIDING THE DECISI ON IN CASE OF KISHORE KANUNGO AND ALSO A FACT (PAGE NO, 21 PAPER BOOK) TH AT THE HON'BLE ITAT SPECIAL BENCH HAS GIVEN DECISION IN CASE OF MRS. MA NJULA SHAH AFTER CONSIDERING DECISION IN CASE OF KISHORE KANUNGO. 7. AFTER CONSIDERING THE AFORESAID SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE BY OBSERVING AS UNDER:- 2.3. I HAVE CONSIDERED THE SUBMISSION OF THE LD. A UTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. SPECIAL BE NCH OF HON'BLE MUMBAI ITAT IN THE CASE OF MRS. MANJULA J. SHAH, HAS CONSI DERED THE ISSUE IN DETAIL AND HAS DELIVERED THE JUDGMENT AFTER CONSIDERING TH E CASE OF KISHORE KANUNGO. RELEVANT PORTION OF THE ORDER IS REPRODUCE D HEREUNDER:- IT IS ALSO NOTED THAT IF THE INTERPRETATION AS SOU GHT BY THE LEARNED D.R. IS ASSIGNED TO CLAUSE (III) OF EXPLANATION TO SECTION 48, IT WOULD LEAD TO SUCH WORKING OF INDEXED COST OF ACQUISITION IN SOME CASES WHICH IS TOTALLY ILLOGICAL AND UNREASONABLE. FOR IN STANCE, IN THE CASE WHERE CAPITAL ASSET HAS BECOME A PROPERTY OF THE AS SESSEE UNDER A GIFT PRIOR TO THE CUT OFF DATE OF 01.04.1981 BUT THE SAM E IS TRANSFERRED BY HIM ONLY AFTER 01.04.1981; SAY IN FINANCIAL YEAR 19 87-88, THE YEAR TO BE ADOPTED FOR INDEXATION AS PER THE CONTENTION OF THE CONTENTION OF THE LEARNED D.R. WOULD BE FINANCIAL YEAR 1987-88. HOWEV ER, THE COST OF ACQUISITION OF CAPITAL ASSET IN SUCH CASE WOULD BE TAKEN AS FAIR MARKET VALUE OF 01.04.1981 BEING THE CUT OFF DATE EMBEDDED IN THE INDEXATION SCHEME AS AGREE EVEN BY THE LEARNED D.R. THE SITUAT ION WILL THUS ARISE WHERE THE COST OF ACQUISITION OF CAPITAL ASSET WOUL D BE TAKEN AS OF 01.04.1981 WHEREAS THE COST INFLATION INDEX FOR THE YEAR 1987-88 WOULD BE APPLIED TO THE SAID COST TO WORK OUT THE I NDEXED COST OF ACQUISITION. SUCH A WORKING WILL NOT STAND TO ANY R EASONABILITY OR LOGIC AND WILL CERTAINLY DEFEAT THE VERY PURPOSE OF INDEXATION SCHEME, AS EXPLAINED IN THE AFORESAID CIRCULAR NO. 636 DATE D 31.08.1990. ITA NO. 2193/AHD/2011 ACIT V. SMT LATA SURESHCHANDRA PATEL FOR AY 2008-09 5 FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THA T FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN ARISING FROM THE T RANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UND ER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASS ESSEE HAS TO BE DETERMINED TO WORK OUT THE INDEXED COST OF ACQUISIT ION AS ENVISAGED IN EXPLANATION (III) TO SECTION 48 AFTER TAKING INTO A CCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIO US OWNER. IN THAT VIEW OF THE MATTER, WE HOLD THAT THE INDEXED COST O F ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTED WITH REFERENCE 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 A ND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE' . FROM THE ABOVE, IT IS CLEAR THAT IN THE PRESENT CAS E, THE APPELLANT HAS TO BE GIVEN THE COST INFLATION INDEXATION FROM 01.04.1981 RATHER THAN 1996-97 AS GIVEN BY THE ASSESSING OFFICER I.E. THE INDEXED COS T OF ACQUISITION OF THE RESIDENTIAL HOUSE HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. THE ADDITION M ADE BY THE ASSESSING OFFICER IS THEREFORE DELETED. 8. THE LD. CIT(A) HAS FOLLOWED THE DECISION OF ITAT , MUMBAI SPECIAL BENCH IN THE CASE OF DCIT VS. MANJULA J SHAH IN ITA NO.7315/MUM/2007. THE LD. SR. DR. COULD NOT DISTINGUISH THE DECISION AS RELIED UPON BY THE LD. CIT(A); THEREFORE, WE SEE NO REASON TO INTERFERE WI TH THE FINDING OF THE LD. CIT(A) WHICH IS CONFIRMED. THEREFORE, THE GROUND N O.1 OF THE REVENUE IS REJECTED. 9. GROUND NO.2 IS GENERAL IN NATURE AND REQUIRES NO SEPARATE ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS REJ ECTED. ORDER PRONOUNCED IN THE COURT ON 8 TH MAY, 2015 AT AHMEDABAD. SD/- SD/- ( N.S. SAINI) ACCOUNTANT MEMBER (KUL BHARAT) JUDICIAL MEMBER AHMEDABAD; DATED 08/05/2015 *BIJU T. ITA NO. 2193/AHD/2011 ACIT V. SMT LATA SURESHCHANDRA PATEL FOR AY 2008-09 6 1 - *'2 32'' 1 - *'2 32'' 1 - *'2 32'' 1 - *'2 32''/ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. ' 4 / CONCERNED CIT 4. 4 ( ) / THE CIT(A) 5. 2!7 *' , , / DR, ITAT, AHMEDABAD 6. 78& 9, / GUARD FILE . 1 1 1 1 / BY ORDER, TRUE COPY : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD