ITO, Ward 3(1), Pune V. Shri Veerdhawal C. Shirole, (HUF), Pune

ITA 2505/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76071 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 19-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: JAGDEESH PURANIK
• Keywords: Capital asset; Gift; Cost of acquisition
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2505/PN/2012 A.Y. 2007-08 ITO, WARD 3(1), PUNE APPELLANT VS. SHRI VEERDHAWAL C. SHIROLE (HUF), 1201/A/14, SHIROLE ROAD, PUNE - 411004 PAN: AADHV5827K RESPONDENT APPELLANT BY : SHRI P.L. P ATHADE RESPONDENT BY : SHRI KIS HORE PHADKE AND SHRI JAGDEESH PURANIK DATE OF HEARING: 21.01.2014 DATE OF ORDER : 27.01.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-II, [SHORT C IT(A)-II] PUNE, DATED 21.08.2012 FOR A.Y. 2007-08 ON THE FOLLOWING GROUNDS. 1. THE LD COMMISSIONER OF INCOME-TAX (APPEALS) ERRED I N ALLOWING THE APPEAL OF THE ASSESSEE AND DELETING TH E ADDITIONS MADE BY THE ASSESSING OFFICER. 2. THE LD COMMISSIONER OF INCOME-TAX (APPEALS) ERRED I N NOT APPRECIATING THE FACT THAT FOR THE PURPOSE OF CALCU LATING CAPITAL GAINS, THE DATE OF ACQUISITION WILL BE THE DATE ON WHICH THE ASSESSEE BECAME OWNER OF THE PROPERTY AND NOT THE DATE ON WHICH THE PROPERTY WAS ACQUIRED BY THE PREVIOUS OWNER. 3. THE LD COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE BENEFIT OF INDEX ATION CAN BE GIVEN ONLY TO THE OWNER OF THE PROPERTY AND THAT TOO FROM 2 THE DATE ON WHICH HE BECAME THE OWNER TO THE DATE O N WHICH HE CEASES TO BE THE OWNER. 4. THE LD COMMISSIONER OF INCOME-TAX (APPEALS) ERRED I N PLACING RELIANCE ON THE DECISION IN THE CASE OF CIT VS MANJULA J SHAH (2012) 68 DTR 269 (BOM), WHEREIN IT WAS HELD THAT THE INDEXED COST OF THE GIFTED ASSET HAS TO BE DETERMINED WITH REFERENCE TO THE PREVIOUS OWNER. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OR ALL THE GROUNDS OF APPEAL. 2. THE ASSESSEE IS A HUF, WHO SOLD ONE OF ITS PROPE RTIES VIDE A SALE DEED FOR A CONSIDERATION OF 1,20,00,000/- AND DECLARED THE RESULTANT CAPITAL GAINS ADOPTING THE COST INFLATION INDEX AS ON 01.04.1981, SINCE THE PROPERTY HAD COME TO THE HUF BY WAY OF WILL EXECUTED IN SEPTEMBER, 1983. HOWEVER, THE ASSE SSING OFFICER WHILE FINALIZING THE ASSESSMENT ADOPTED THE COST IN FLATION INDEX OF THE FINANCIAL YEAR 1983-84 FOR CALCULATING THE CAPI TAL GAINS IN ASSESSEE'S CASE, WHICH IS THE MAIN CONTENTION OF TH E ASSESSEE. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MENT IONED THAT ON THE BASIS OF INFORMATION RECEIVED FROM THE DDIT (INV), UNIT- 1(2), PUNE, A NOTICE U/S.148 OF THE IT. ACT, 1961, WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTICE U/S.148 OF ACT, THE ASSESSEE SUBMITTED THAT THE RETURN FILED ON 31. 07.2007 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTIC E U/S 148 WHEREIN THE TOTAL INCOME WAS DECLARED AT 10,44,259/-. ON MERIT, THE STAND OF THE ASSESSEE HAS BEEN THAT THE PROPERTY UNDER CONSIDERATION NARRATED BY THE ASSESSEE BY WAY OF WI LL IN THE FINANCIAL YEAR 1983-84 AND THE ASSESSEE HAVING 1/6 TH SHARE IN IT. IT WAS NOTICED THAT THE ASSESSEE HAS COMPUTED THE C APITAL GAIN ADOPTING THE INDEX AS ON 01.04.1998 EVEN THOUGH THE PROPERTY WAS ACQUIRED IN THE F.Y. 1983-84. THEREFORE, THE A SSESSING OFFICER HAS HELD THAT THE ASSESSEE SHOULD HAVE ADOP TED INDEX FOR 1983-84 I.E. 519/116 INSTEAD OF 100 FOR F.Y. 1981-8 2 ADOPTED BY THE ASSESSEE. 3 3. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY, WHO GRANTED THE RELIEF TO THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US. THE LEARNED DEPARTMENTAL REPRES ENTATIVE HAS SUBMITTED ON BEHALF OF THE REVENUE THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER AND CIT(A) DID NOT APPRECIATE THE FACT THAT FOR THE PURPOSE OF CALCULATING CAPITAL GAIN, DATE OF ACQUISITION WILL BE THE DATE OF WHICH THE ASSESSEE BECAME OWNER OF THE PROPERTY AND NOT THE DATE OF WHICH THE PROPERTY WAS ACQUIRED BY THE PREV IOUS OWNER. THE CIT(A) HAS ALSO FAILED TO APPRECIATE THE FACT T HAT THE BENEFIT OF BENEFIT OF INDEX CAN BE GIVEN ONLY TO THE OWNER OF THE PROPERTY AND THAT TOO FROM THE DATE ON WHICH HE BECAME THE O WNER TO THE DATE ON WHICH HE CEASES TO BE THE OWNER. ON THE OT HER HAND, LEARNED AUTHORIZED REPRESENTATIVE HAS RELIED ON THE ORDER OF CIT(A), WHO GRANTED THE RELIEF TO THE ASSESSEE ON T HE POINT. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL RECORD, WE FIND THAT THE ISSUE BEFORE US PERTAINS T O ADOPTION OF INDEX COST OF ACQUISITION IN ASSESSEES CASE. FACT S OF THE CASE ARE THAT DURING THE F.Y.1983-84 THE ASSESSEE SOLD THE D EVELOPMENT RIGHTS IN ITS 1/6 TH SHARE OF THE PROPERTY AT SHIVAJINAGAR KNOWN AS 'ARYA BHUSJIAN PRESS' FOR A CONSIDERATION OF 1,20,00,000/- VIDE A DEVELOPMENT AGREEMENT DATED 15.06.2006. THE INTE REST IN THE SAID PROPERTY WAS FIRST ACQUIRED VIDE A WILL DATED 21.09.1983 BY KARTA'S GRANDFATHER SHRI BABURAO G. SHIROLE, WHO HA D RECEIVED THE PROPERTY VIDE A PARTITION DEED DATED 25.03.1964 ON ACCOUNT OF PARTITION OF A BIGGER HUF. THE PROPERTY SO RECE IVED BY THE ASSESSEE HAD A HUF NUCLEUS, THEREFORE, THE ASSESSIN G OFFICER ACCEPTED ITS VALUE AS ON 01.04.1981 AT 22,10,6258/- BUT REFUSED THE CLAIM THAT THE PERIOD OF HOLDING THE PR OPERTY BY THE ASSESSEE ALSO TO BE TAKEN FROM 01.04.1981 ONWARDS T ILL THE DATE OF ITS SALE. THUS THE ASSESSING OFFICER INFERRED T HAT THE HOLDING PERIOD WOULD START FROM 21.09.1983 AND ADOPTED THE COST 4 INFLATION INDEX AT 116 I.E. FOR THE F.Y. 1983-84 AN D TAKING THE COST INFLATION INDEX AT 519 FOR THE SALE OF DEVELOPMENT RIGHTS AS FOR F.Y. 2006-07, WORKED OUT THE INDEXED COST AT 98,90,641/- INSTEAD OF 21,09,359/- WORKED OUT BY THE ASSESSEE ADOPTING THE COST INFLATION INDEX AS ON 01.04.1981 . THE ASSESSING OFFICER HAS DECIDED THE ISSUE BY FOLLOWING THE RATIO OF DCIT VS KISHORE KANUNGO 102 ITD 437 WHICH WAS OVERRULED BY THE DECI SION OF SPECIAL BENCH WHICH THE ASSESSEE HAS RELIED I.E. DC IT VS MANJULA J. SHAH, 126 TTJ 145 (MUM)(SB). THE STAND OF THE AS SESSEE HAS BEEN THAT THE ASSESSING OFFICER HAD ERRED IN TAKING THE PERIOD OF HOLDING THE PROPERTY FROM 21.09.1983 AND ALSO BY TA KING THE WRONG INDEXED COST VIZ. 519/116 AND ARRIVING AT AN AMOUNT OF 98,90,641/-. IN APPEAL, THE CIT(A) FOLLOWING THE D ECISION OF MANJULA J. SHAH (SUPRA), WHEREIN IT WAS HELD THAT I NDEX COST OF GIFTED ASSET HAS TO BE DETERMINED WITH REFERENCE TO THE PREVIOUS OWNER. IN THE SAID CASE THE ASSESSEE HAS RECEIVED THE CAPITAL ASSET BY WAY OF GIFT ON 01.02.2003 WHEREAS THE PREV IOUS OWNER HAD ACQUIRED IT ON 29.01.1993. THE ASSESSEE HAD CL AIMED THE COST INFLATION INDEX FOR THE YEAR BY TAKING THE DAT E OF ACQUISITION BY THE PREVIOUS OWNER, WHEREAS THE ASSESSING OFFICE R TOOK IT WITH REFERENCE TO DATE OF RECEIPT OF GIFT BY THE ASSESSE E. THE SPECIAL BENCH OF ITAT MUMBAI DECIDED THE ISSUE AFTER CONSID ERING THE PROVISIONS OF EXPLANATION (III) TO SECTION 48 TOGET HER WITH EXPLANATION 1(B) TO SECTION 2(42A). ACCORDINGLY, T HE SPECIAL BENCH HELD THAT SINCE THE PERIOD FOR WHICH THE CAPI TAL ASSET WAS HELD BY THE PREVIOUS OWNER WAS TO BE INCLUDED IN TH E HOLDING PERIOD OF THE ASSESSEE FOR THE PURPOSE OF DETERMINI NG THE INDEXED COST OF ACQUISITION. THE INDEXED COST OF ACQUISITI ON WAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PR EVIOUS OWNER FIRST HELD THE ASSET. 5. SECTION 49 IS A DEEMING PROVISION. CAPITAL GAIN CAN ARISE TO THE ASSESSEE ONLY IF THE ASSESSEE HAS SPENT SOME AM OUNT IN 5 ACQUIRING THE CAPITAL ASSET. THERE SHOULD BE NO QU ESTION OF ANY GAINS MADE BY HIM ON TRANSFER OF THE ASSET. IN SUC H A CASE HE WOULD BE REALIZING THE CAPITAL VALUE OF THE ASSET F OR ACQUIRING ON WHICH HE SPENT NOTHING. THE MAIN REASON FOR ENACTIN G SECTION 49 WAS TO MAKE PROVISION BY ATTRIBUTING A COST OF ACQU ISITION TO SUCH ASSET AND GRANTING DEDUCTION FROM FACE VALUE OF THE CONSIDERATION. THE COST FOR WHICH THE PREVIOUS OWN ER ACQUIRED THE ASSET TOGETHER WITH THE AMOUNT SPENT BY HIM ON IMPROVEMENT OF THE ASSET WOULD BE THE COST OF ACQUISITION OF AS SET IN THE HANDS OF ASSESSEE. THE PROVISIONS OF SECTION 49 READ AS U NDER: COST WITH REFERENCE TO CERTAIN MODES OF ACQUISITIO N (1) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE (I) ON ANY DISTRIBUTION OF ASSETS ON THE TOTAL OR PARTI AL PARTITION OF A HINDU UNDIVIDED FAMILY; (II) UNDER A GIFT OR WILL; (III) (A) BY SUCCESSION, INHERITANCE OR DEVOLUTION, OR . THE COST OF THE ACQUISITION OF THE ASSET SHALL BE D EEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PRO PERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROV EMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. 6. IN THE CASE BEFORE US, THE PROPERTY IN QUESTION HAS BEEN ACQUIRED AFTER THE DEATH OF THE PARENTS OF THE ASSE SSEE BY WAY OF WILL AND THUS, IT FALLS WITHIN AMBIT OF SECTION 49( 1)(II) OF THE I.T. ACT. THE EXPRESSION INDEXED COST OF ACQUISITION USE D IN SECTION 48 IS DEFINED IN EXPLANATION (III) AS UNDER: 'INDEXED COST OF ACQUISITION' MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS C OST INFLATION INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEA R BEGINNING ON THE 1 ST DAY OF APRIL, 1981, WHICHEVER IS LATER. 6 (MANJULA J. SHAH (SUPRA) WHICH HAS BEEN APPROVED BY THE HONBLE JURISDICTIONAL OF HIGH COURT OF BOMBAY) 7. ITAT, PUNE BENCH IN THE CASE OF DCIT VS SHRI PRA DEEP V. SUPNEKAR & ORS. ITA NOS.10, 11 AND 12/PN/2011 DATED 30.04.2011 BY FOLLOWING THE RATIO OF MANJULA J SHAH (SUPRA) HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: '3. THE RELEVANT FACTS ARE THAT THE ASSESSEE RESPON DENTS HAD RECEIVED CAPITAL ASSET THROUGH GIFTS/WILL. THE A.O. APPLIED THE COST INFLATION INDEX OF THE YEAR WHEN THE PROPE RTY WAS RECEIVED BY THE ASSESSEE BY WAY OF GIFT/WILL. THE A SSESSEES CONTENDED THAT THE PROPERTIES HAVE BEEN RECEIVED BY WAY OF GIFTS/WILL AND THEREFORE, COST INFLATION INDEX HAS TO BE WORKED OUT BY TAKING THE DATE OF ACQUISITION BY THE PREVIOUS OWNER. THE A.O DID NOT AGREE AND COMPUTED THE LONG TERM CAPITAL GAIN RELYING UPON THE EXPLANATION (III) BEL OW SEC. 48 OF THE ACT TO HOLD THAT THE COST INFLATION INDEX FO R THE PURPOSE OF WORKING THE INDEXED COST OF ACQUISITION WAS TO BE TAKEN FOR THE YEAR IN WHICH THE ASSESSEES BECAME OW NER OF THE PROPERTY I.E. RECEIVED IN GIFT/WILL. THE LD CIT (A) HAS HOWEVER FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MANJULA J. SHAH (S UPRA) HAS HELD THAT FOR THE PURPOSE OF DETERMINING THE IN DEXED COST OF ACQUISITION IN RESPECT OF AN ASSET ACQUIRED UNDER A GIFT/WILL THE COST INFLATION INDEX HAS TO BE WORKED OUT BY TAKING THE DATE OF ACQUISITION OF THE PROPERTY BY T HE PREVIOUS OWNER. THIS DECISION OF SPECIAL BENCH OF T HE TRIBUNAL ON THE ISSUE HAS NOW BEEN UPHELD BY THE HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MA NJULA J. SHAH (SUPRA). 4. SINCE THE ISSUE AS DISCUSSED ABOVE IS NOW FULLY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL MUMBAI HI GH COURT IN THE CASE OF C1T VS MANJULA J. SHAH (CITED SUPRA), WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORD ER IN THIS REGARD IN QUESTION. THE SAME IS UPHELD. THE GROUNDS INVOLVING THE ISSUE ARE ACCORDINGLY REJECTED.' 8. IN VIEW OF ABOVE LEGAL AND FACTUAL DISCUSSION, T HE CIT(A) WAS JUSTIFIED IN DELETING THE COST OF INFLATION INDEX B ECAUSE INDEXED COST OF ACQUISITION HAS TO BE WORKED OUT WITH REFER ENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASS ET AND 7 THEREFORE, THE COST INFLATION INDEX OF F.Y. 1981-82 SHOULD BE ADOPTED INSTEAD OF COST INFLATION INDEX OF F.Y. 198 3-84. THIS REASONED LEGAL FACTUAL FINDING OF THE CONCERNED CIT (A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 27 TH OF JANUARY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH JANUARY, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE