ACIT, New Delhi V. Shri Ratan Lal, New Delhi

ITA 2457/DEL/2011

• Counselvise Citation: 245720114 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 18-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V K GARG; ANIL KUMAR CHOPRA
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2457/DEL/2011 ASSESSMENT YEAR : 2007-08 ACIT, SHRI RATAN LAL, CIRCLE 28 (1), 6658-GADODIA MARKET, NEW DELHI. V. KHARI BAOLI, DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACPL AACPL AACPL AACPL- -- -1663 1663 1663 1663- -- -Q QQ Q APPELLANT BY : SHRI SUDESH GARG, SR. DR. RESPONDENT BY : SHRI ANIL KUMAR CHOPRA, C.A. & SHRI V.K. GARG, ADVOCATE. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) DATED 4.3.2011. THE GROUNDS RAISED BY THE REVENUE AR E AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DIRECTING THAT THE PERIOD FOR WHICH THE EARLIER OWNER (DONOR) HAS HELD THE PROPERTY IS INCLUSIVE FOR COMPUT ATION OF INDEXED COST OF ACQUISITION IGNORING THE FACT THAT: A) IN THE CASES RELIED UPON, THE HON'BLE ITAT HAD NOT CONSTRUED THE REVENUE STATUTE ON THE ISSUE STRICTLY AND LIBERALLY, RATHER IT HAS TAKEN A HARMONIOUS INTERPRET ATION. ITA NO2457/DEL/2011 2 B) THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF HON'B LE ITAT IN THE CASE OF MS. KAMLA MISHRA V. ITO WARD-31 (2 ) NEW DELHI (208) 19 SOT 251 (ITAT DELHI). 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER ADD OR FOREGO AND GROUND(S) OF APPEAL AT ANBY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE BRIEF FACTS OF THE CASE AS ENUMERATED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 31.10.2007. THE CASE WAS SELECTE D FOR SCRUTINY. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE NOTED THAT THE A SSESSEE HAD DECLARED LONG TERM CAPITAL GAIN ON SALE OF PROPE RTY AND HAD TAKEN INDEXED COST OF ACQUISITION BY TAKING THE INDEX IN DE NOMINATOR AS 100 I.E. FOR 1.4.1981. THE ASSESSING OFFICER FURTHER NOTED THAT ASSESSEE BECAME OWNER OF 1/3RD SHARE THROUGH WILL IN FINANCI AL YEAR 1984-85 AND FOR ANOTHER 1/3RD SHARE HE BECAME OWNER IN FINA NCIAL YEAR 1986- 87 AND FOR THE BALANCE 1/3RD SHARE IN 1966-67. IN FACT, THE ASSESSING OFFICER NOTED THAT ASSESSEE ALONG WITH HIS BROTHER SHRI BAL MUKAND AND SHRI SOHAN LAL HAD BECOME THE OWNER OF THE SAID PROP ERTY IN FINANCIAL YEAR 1966-67 AND 1/3 RD SHARE OF WAS TRANSFERRED TO ASSESSEE IN FINANCIAL YEAR 1984-85 THROUGH WILL AND REMAINING 1 /3 RD SHARE WAS GIFTED BY SHRI SOHAN LAL OUT OF LOVE & AFFECTION IN THE FINANCIAL YEAR 1986-87. THE ASSESSEE HAD TAKEN THE COST OF ACQUISITION A S ON 1.4.1981 FOR WHOLE OF THE PROPERTY WHEREAS THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE COULD TAKE THE VALUE A S ON 1.4.1981 ONLY FOR 1/3 RD SHARE AND FOR THE REMAINING 2/3 RD SHARE HE BECAME OWNER ONLY IN THE FINANCIAL YEAR 1984-85 & 1986-87 THROUG H WILL AND GIFT. IN THIS RESPECT ASSESSING OFFICER RELIED UPON SECTION 48 OF T HE ACT WHICH STATES THAT INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST O F INFLATION INDEX ITA NO2457/DEL/2011 3 FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST OF INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSESSEE WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGINNING ON IST DAY OF APRIL, 1981 WHICHEVER IS LATER. THEREFORE, THE ASSESSING OFFICER TREATED THE COST OF ACQUISITION TO ASSESSEE ON THE BASIS OF 1/3RD FOR 100 AS ON 1.4.1981, 125 FOR 1/3RD SHARE I.E. IN FINANCIAL YEAR 1984-85 AND 140 FOR BAL ANCE 1/.3RD SHARE I.E. IN FINANCIAL YEAR 1986-87. THE EXPLANATION OF THE ASSESSEE THAT AS PER SECTION 49(1) WHERE THE CAPITAL ASSET BECOMES THE PROPERTY OF THE ASSESSEE UNDER GIFT OR WILL, THE COST OF ACQUISITION OF T HE PROPERTY IS DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER AC QUIRED THE PROPERTY I.E. THE COST IN THE HANDS OF THE DONOR OR D ECEASED AS THE CASE MAY BE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSEE F URTHER EXPLAINED THAT UNDER SECTION 2(42A) FOR COMPUTING WH ETHER A CAPITAL ASSET IS A SHORT TERM CAPITAL ASSET AS LONG TERM CAPITAL ASSET IN THE CIRCUMSTANCES STATED IN SUB SECTION (1) OF SECTION 49 THE RE SHALL BE INCLUDED THE PERIOD FOR WHICH THE ASSET WAS HELD BY TH E PREVIOUS OWNER. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT TH E CONTENTIONS OF ASSESSEE AND MADE AN ADDITION ON ACCOUNT OF LONG TER M CAPITAL GAIN ON THE BASIS OF BASE RATE AS 100, 125 & 140 IN THREE PA RTS ON THE BASIS OF PERIOD OF HOLDING. 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD CIT( A) AND SUBMITTED AS UNDER:- A) THAT CAPITAL GAIN IS CHARGEABLE UNDER SECTION 45 AND MODE OF COMPUTATION AND THE BENEFIT INDEXATION HAS BEEN PROV IDED U/S 48 AND SOME OF THE TRANSFERS ARE NOT TREATED AS TRANSFER FOR THE PURPOSE OF CAPITAL GAIN AND EXEMPTIONS ARE GIVEN U/S 4 7 WHICH INCLUDES HUF PARTITION PROPERTY, GIFT OR WILL ETC. ITA NO2457/DEL/2011 4 B) THAT THE PROVISION OF COMPUTING THE COST OF ACQUISITIO N HAS BEEN PROVIDED U/S 49 WHERE IT HAS BEEN PROVIDED THAT COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT IF TH E TRANSFER IS THROUGH GIFT OR WILL. C) THAT THE CASE OF THE ASSESSEE IS FULLY AND SQUARELY COVERE D BY THE SPECIAL BENCH DECISION IN THE CASE OF DCIT V. MAN JULA J. SHAH, MUMBAI 2011-TIOL-808-HC-MUMBAI 318 ITR 417 (MUM). A ND IN THE CASE OF MRS. KAMLA MISHRA V. ITO WARD-31, NEW DELH I 19 SOT 251 (ITAT) (DEL.). 4. THE LD CIT(A) AFTER GOING THROUGH THE SUBMISSIONS OF ASSESSEE ACCEPTED THE CONTENTION OF ASSESSEE AND DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER. THE RELEVANT PARAGRAPHS OF LD CIT (A)S ORDER ARE REPRODUCED BELOW:- SO FAR AS THE COST OF ACQUISITION IS CONCERNED, THERE IS NO DISPUTE BETWEEN THE ASSESSING OFFICER AND THE ASSESSEE. THERE IS NO DISPUTE EVEN FOR THE 1/3RD OF THE PROPERTY IN WHICH THE ASSESSEE HAS THE OWNERSHIP FROM THE YEAR 1966-67. THE MAIN DISP UTE IS REGARDING THE MODE OF COMPUTATION AND THE BENEFIT O F INDEXATION. THE MODE OF COMPUTATION AND INDEXATION HAS BEEN PROVIDED U/S 48 R.W. THE 2 ND PROVISO AND THE CLAUSE (III) OF THE EXPLANATION. THE ASSESSEE BECAME THE LEGAL OWNER OF TH E 1/3RD OF THE PROPERTY OF HIS BROTHER SHRI BALMUKAND AFTER THE WILL IN THE YEAR1984-85 AND THE OWNERSHIP OF ANOTHER /3RD OF THE PROPERTY ONLY AFTER THE GIFT BY HIS BROTHER SHRI SOHAN LAL IN THE YEAR 1986- 87. SO FAR AS THE ASSESSING OFFICER IS CONCERNED, HE HAS R IGHTLY TAKEN THE COST OF ACQUISITION AS PER SECTION 49(1)(III ) AND THE INDEXATION AS PROVIDED U/S 48 R.W. 2 ND PROVISO AND CLAUSE (III) OF ITA NO2457/DEL/2011 5 THE EXPLANATION AND IT IS AS PER LAW. BUT AT THE SAME TIME THERE IS CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE HON'BLE TRIBUNAL SPECIAL BENCH IN THE CASE OF DCIT V. MANJULA J SHAH 318 ITR 417 (A T) (ITAT MUM. SB) AND THE CASE OF MS. KAMLAQ MISHRA V. ITO WARD -31 (2), NEW DELHI (2008) 19 SOT 251 (ITAT DELHI). IN THE C ASE OF MANJULA J SHAH (SUPRA) THE ASSESSEE RECEIVED A GIFT OF A FLAT FROM HER DAUGHTER IN THE FY 2002-03 (ON 1.2.2003). THE SA ID FLAT WAS PURCHASED BY THE ASSESSEES DAUGHTER IN THE YEAR 1992-93 (ON 29.1.1993).WHEN THE ASSESSEE SOLD THE FLAT SHE CLAIMED TH E BENEFIT OF INDEXATION OF THE BASE YEAR 1992-93 I.E. ON THE YEAR ON WHICH THE ORIGINAL OWNER OR THE PREVIOUS OWNER (THE DAUGHTER OF THE ASSESSEE) WAS ELIGIBLE FOR INDEXATION. THE ASSESSING OFF ICER HAD DISALLOWED THE CLAIM OF THE ASSESSEE AND ALLOWED THE BENEFIT OF INDEXATION OF THE BASE YEAR 2002-03 I.E. ON THE Y EAR IN WHICH THE ASSESSEE BECAME THE OWNER AFTER RECEIPT OF THE GIFT . THE LD CIT(A) HAD ALLOWED THE APPEAL OF THE ASSESSEE. THE HON' BLE TRIBUNAL ALSO ALLOWED THE CLAIM OF THE ASSESSEE BY DISMISSI NG THE DEPARTMENTAL APPEAL. THE HON'BLE TRIBUNAL HAS ALLOWE D THE RELIEF ON THE GROUND OF HARMONIOUS AND PURPOSIVE CONSTRUCTION OF THE SECTION I.E. SECTION 45, 48 AND SECTION 2(42A) ETC. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, I AM OF THE VIEW THAT ALTHOUGH THE ASSESSING OFFICER HAS RIGHTLY TAKEN THE BASE YEAR FOR INDEXATION AS PROVIDED U/S 48 THERE IS CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THE CASE OF THE ASSESSEE IS FULLY AND SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISIONS OF THE HON'BLE TRIBUNAL AS DISCUSSED ABOVE AND ACCORDINGLY, RESPECTFULLY FOLLOWING THE ITA NO2457/DEL/2011 6 DECISIONS OF THE HON'BLE TRIBUNAL, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE ON THE ISSUE OF INDEXATION AND RECOMPUTED TH E INCOME. 5. AGGRIEVED THE REVENUE FILED APPEAL BEFORE THIS TR IBUNAL. 6. AT THE OUTSET, THE LD AR SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION IN THE CASE OF MANJ ULA J./ SHAH (SUPRA) AS DECIDED BY THE SPECIAL BENCH MUMBAI AND FU RTHER STATED THAT THE CASE IS ALSO COVERED BY THE DECISION OF HON'BL E DELHI HIGH COURT IN THE CASE OF ARUN SHUNGLOO TRUST V. CIT (2012 ) TIOL 154 HC- DEL-IT AND ON THE BASIS OF THESE DECISIONS THE LD AR ARG UED THAT LD CIT(A) HAD RIGHTLY DELETED THE ADDITION. 7. THE LD DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE TWO CITATIONS SUBMITTED BY LD AR, WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE ABOVE TWO CASES. IN THE CASE OF ARUN SHUNGLOO TRUST V. CIT (SUPRA) THE FACTS OF THE CASE ARE THAT THE PROPERTY PURCHASED PRIOR TO 1981 WAS TRANSFERRED TO A TRUST IN 1 996 AND TRUST SOLD THE SAME PROPERTY ION THE FY 2000-01. THE HON'BL E HIGH COURT HELD AS UNDER:- THE BENEFIT OF INDEXED COST OF INFLATION IS GIVEN TO ENSURE THAT THE TAXPAYER PAYS CAPITAL GAIN ON THE REAL OR ACTUAL GAIN AND NOT ON THE INCREASE IN THE CAPITAL VALUE OF THE PROPERTY DUE TO ITA NO2457/DEL/2011 7 INFLATION. THIS IS THE OBJECT OR PURPOSE IN ALLOWING BENEFIT OF INDEXED COST OF IMPROVEMENT, EVEN IF THE IMPROVEMENT WAS BY THE PREVIOUS OWNER IN CASES COVERED BY SECTION 49. ACCO RDINGLY, THERE IS NO JUSTIFICATION OR REASON TO NOT ALLOW THE B ENEFIT OF INDEXATION TO THE COST OF ACQUISITION IN CASES COVERED BY SECTION 49. THIS IS NOT THE LEGISLATIVE INTENT BEHIND CLAUSE (I II) TO EXPLANATION TO SECTION 48 OF THE ACT. THE EXPRESSION HELD BY THE ASSESSEE USED IN EXPLANATION (I II) TO SECTION 48 HAS TO BE UNDERSTOOD IN THE CONTEXT AND HAR MONIOUSLY WITH OTHER SECTIONS. THE COST OF ACQUISITION STIPULATED IN SEC. 49 MEANS THE COST FOR WHICH THE PREVIOUS OWNER HAD ACQUIR ED THE PROPERTY. THE TERM HELD BY THE ASSESSEE SHOULD BE INTERP RETED TO INCLUDE THE PERIOD DURING WHICH THE PROPERTY WAS HEL D BY THE PREVIOUS OWNER. THE TERM HELD BY THE ASSESSEE HAS BEEN DE FINED IN EXPLANATION 1(I)(B) TO SECTION 2(42A) OF THE ACT. THE CLAUSE (III) TO EXPLANATION TO SECTION 48 IS APPLI CABLE WHEN THE TRANSFER IS A LONG TERM CAPITAL GAIN AND NOT A SH ORT TERM CAPITAL GAINS. THE LEGISLATURE WAS CONSCIOUS OF DEFINITI ON OF THE EXPRESSION HELD BY THE ASSESSEE IN EXPLANATION 1(I)(B) OF SEC. 2(42A) AND THEREFORE HAS USED THE SAME EXPRESSION IN EXPLANATION (III) TO SECTION 48 OF THE ACT. THE AFOR ESAID EXPLANATION TO SECTION 2(42A) WAS REFERRED TO BY THE BOMBAY HIGH COURT IN CIT V. MAJULA J SHAH (MUMBAI) (20011- TOIL-808-HC- IT) WHERE A SIMILAR QUESTION WAS EXAMINED AND HELD IN FAVOUR OF THE ASSESSEE. WE ARE ENTIRELY IN AGREEMENT WITH THE RATIO RECORDE D BY THE BOMBAY HIGH COURT IN THE CASE OF MAJULA J. SHAH. ITA NO2457/DEL/2011 8 9. FOLLOWING THE ABOVE JUDICIAL PRONOUNCEMENTS, WE A LSO HOLD THAT PERIOD OF HOLDING TO BE CONSIDERED IN THE CASE OF ASSESSE E WOULD INCLUDE PERIOD OF HOLDING OF THE ASSET BY ITS PREVIOU S OWNER WHO HAD TRANSFERRED THEIR SHARE IN FAVOUR OF THE ASSESSEE THROUG H WILL OR THROUGH GIFT. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD DAY OF NOVEMBER, 2012. SD/- SD/- (RAJPAL YADAV) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 23.11.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 18.9.2012 DATE OF DICTATION 9.11.2012 DATE OF TYPING 9.11.2012 ITA NO2457/DEL/2011 9 DATE OF ORDER SIGNED BY 23.11.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 23.11.2012 & SENT TO THE BENCH CONCERNED.