ITO 14(3)(3), MUMBAI V. SANJAY CHAMPAKLAL SHAH, MUMBAI

ITA 2878/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9355 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2011
• 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, MUMBAI BENCH E, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 2878/MUM/2011(A.Y. 2007-08) THE INCOME TAX OFFICER 14(3)(3), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 21. (APPELLANT) VS. SANJAY CHAMPAKLAL SHAH, 133, JER MAHAL, 1 ST LANE, DHOBI TALAO LANE, MUMBAI - 02. PAN:AAAHS 4393 (RESPONDENT) APPELLANT BY : SHRI SANJEEV JAIN RESPONDENT BY : SHRI M.SUBRAMANIAN. (AUTHORITY TO APPEAR IS NOT FILED) DATE OF HEARING : 03/12/2012 DATE OF PRONOUNCEMENT : 0 3 /12/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-25, MUMBAI DATED 9/2/2011 FOR ASSESSM ENT YEAR 2007-08. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UND ER: 1 THE ORDER OF CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD.CIT(A). ERRED IN LAW IN JUSTIFYING ASSESS EES CLAIM THAT HE HAS RECEIVED HALF SHARE IN THE PROPERTY FROM HIS MOTHER AFTER DEATH AND AS PER WILL ON 27.3.1999 HENCE PERIOD FOR WHICH THE ASSET WAS H ELD BY THE PREVIOUS OWNER I.E. HIS MOTHER IS ALSO TO BE CONSIDERED FOR LONG T ERM CAPITAL GAIN ARISING AT THE TIME OF SALE OF THE CAPITAL ASSET WITHOUT CONSI DERING EXPLANATION (III) TO SECTION 48 OF THE IT. ACT. 3. THE LD.CIT(A) ERRED IN LAW THAT THE LD. CIT(A) W AS JUSTIFYING HOLDING THE CLAUSE (B) OF EXPI. 1 TO SECTION 2(42A) OF THE IT. ACT, 1961 IS APPLICABLE IN THIS CASE OF THE ASSESSEE AND INDEXED COST OF ACQUISITIO N OF THE HALF SHARE IN THE HOUSE PROPERTY HELD BY HIS MOTHER AND SUBSEQUENTLY SOLD BY THE ASSESSEE SHOULD BE WORKED OUT ON THE BASIS OF COST INFLATION INDEX APPLICABLE TO THE YEAR ITA NO. 2878/MUM/2011(A.Y. 2007-08) 2 1981-82 BEING THE YEAR IN WHICH THE ASSET WAS IN PO SSESSION OF THE PREVIOUS OWNER. 4. THE LD.CIT(A) ERRED IN LAW THAT IN RELYING UPON THE TRIBUNALS ORDER IN THE CASE OF MANJULA J. SHAH AND IN REJECTING THE SUBMIS SION OF THE REVENUE THAT EXPLANATION (III) TO SECTION 48 OF THE IT. ACT, 196 1 IS APPLICABLE IN THIS CASE AND THE INDEXED COST OF ACQUISITION OF THE CAPITAL ASSE T RECEIVED AS HALF SHARE IN THE PROPERTY HELD BY HIS MOTHER AND SUBSEQUENTLY SOLD B Y THE ASSESSEE SHOULD BE WORKED OUT ON THE BASIS OF COST INFLATION INDEX OF THE YEAR 1981-82 AS AGAINST 1998-99 BEING THE FIRST YEAR IN WHICH THE ASSET WAS FIRST HELD BY THE ASSESSEE MOREOVER, THE HONBLE ITATS DECISION IN THE CASE O F MANJULA J.SHAH (SUPRA) IS NOT ACCEPTED BY THE DEPARTMENT AND THE APPEAL U/S 2 60A OF INCOME TAX ACT IS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT VIDE I TXA NO.3378 OF 2010. 5. FOR THESE AND ANY OTHER REASONS THAT MAY BE URGE D AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) BE QUASHE D AND THAT OF THE AC. BE RESTORED. 2. THE ASSESSEE AND HIS FATHER HAD SOLD A FLAT FOR A CONSIDERATION OF RS.1,44,00,000/-, IN WHICH THE ASSESSEE SHARE IS 5 0%. THE SAID FLAT WAS RECEIVED BY THE ASSESSEE FROM HIS MOTHER THROUGH WILL. TH E MOTHER OF THE ASSESSEE HAD EXPIRED ON 27/3/1999. ON THE SALE VALUE, THE ASSE SSEE FOR HIS SHARE HAS RETURNED LONG TERM CAPITAL GAIN BY TAKING THE VALUE AS ON 1 /4/1981 AND APPLYING INDEX VALUE A LONG TERM CAPITAL LOSS OF RS.920/- HAS BEEN COMPUTED. THE AO TOOK THE VIEW THAT FAIR MARKET VALUE OF FLAT IN THE HANDS OF ASSESSEE SHOULD BE TAKEN FROM FINANCIAL YEAR 1998-99 WHEN THE MOTHER OF THE ASSES SEE DIED AND ASSESSEE GOT RIGHT IN THE SAID FLAT AS PER HER WILL. BY TAKING THE COST AT RS.3,68,000/- ON THE SHARE OF THE ASSESSEE INDEX VALUATION WAS TAKEN FR OM FINANCIAL YEAR 1998-99 AND THUS LONG TERM CAPITAL GAIN HAS BEEN COMPUTED BY T HE AO AT RS.13,68,040/- IN PLACE OF LONG TERM CAPITAL LOSS OF RS.920/- COMPUTE D BY THE ASSESSEE. 3. LD. CIT(A) GRANTING RELIEF TO THE ASSESSEE ON T HE GROUND THAT SPECIAL BENCH OF THE ITAT IN THE CASE OF CIT VS. MANJULA J. SHAH, ( 2009 TIOL 698-ITAT-MUM-SB) HAS HELD THAT FOR THE PURPOSE OF COMPUTING LONG TE RM CAPITAL GAIN ARISING FROM THE TRANSFER OF CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY T HE ASSESSEE HAS TO BE DETERMINED ITA NO. 2878/MUM/2011(A.Y. 2007-08) 3 TO WORK OUT THE INDEX COST OF ACQUISITION AS ENVISA GED IN EXPLANATION (III) TO SECTION 48 OF THE ACT AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER AND THUS IT WAS OBSE RVED THAT THE INDEX COST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTE D WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. T HE DEPARTMENT IS AGGRIEVED WITH SUCH FINDING OF LD. CIT(A) AND HAS FILED AFOREMENTI ONED APPEAL. 4. LD. D.R AFTER NARRATING THE FACTS RELIED UPON T HE ORDER PASSED BY A.O. 5. ON THE OTHER HAND, SHRI M.SUBRAMANIAN, THOUGH AP PEARED FOR THE ASSESSEE BUT HAS NOT FILED HIS POWER OF ATTORNEY SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 5. WE HAVE HEARD LD. D.R AND HAVE GONE THROUGH THE ORDERS PASSED BY A.O AS WELL AS LD. CIT(A). SPECIAL BENCH IN THE AFOREMENT IONED CASE OF MANJULA J. SHAH HAS CONSIDERED THE PROVISIONS OF SECTION 49(1)(II) OF THE ACT, WHICH INCLUDES THE CASES WHERE THE CAPITAL ASSET HAS BECOME THE PROPER TY OF THE ASSESSEE EITHER BY WAY OF GIFT OR UNDER WILL. THEREFORE, THE PROPOSI TION LAID DOWN IN THE SPECIAL BENCH DECISION WILL BE EQUALLY APPLICABLE TO THE CA SES WHERE THE ASSESSEE HAD RECEIVED A CAPITAL ASSET BY WAY OF WILL. A FINDING HAS BEEN RECORDED BY LD. CIT(A) THAT THE MOTHER OF THE ASSESSEE HAD ACQUIRED THE F LAT PRIOR TO 1981 AND SUCH FINDING OF FACT HAS NOT BEEN CONTROVERTED. THE AF OREMENTIONED DECISION OF SPECIAL BENCH HAS ALSO BEEN AFFIRMED BY THE HONBLE JURISD ICTIONAL HIGH COURT VIDE ORDER DATED 11/10/2011 IN INCOME TAX APPEAL NO.3378 OF 20 10. THE GRIEVANCE OF THE REVENUE IN THE PRESENT APPEAL IS THAT REVENUE HAS N OT ACCEPTED THE DECISION OF SPECIAL BENCH AND HAS PREFERRED AN APPEAL AGAINST THAT ORDER WHICH IS PENDING BEFORE JURISDICTIONAL HIGH COURT. NOW THE APPEAL OF THE REVENUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE F IND THAT THE ORDER PASSED BY LD. ITA NO. 2878/MUM/2011(A.Y. 2007-08) 4 CIT(A) IS IN ACCORDANCE WITH THE DECISION OF HONBL E JURISDICTIONAL HIGH COURT. THEREFORE, WE DECLINE TO INTERFERE IN THE RELIEF GR ANTED BY LD. CIT(A) TO THE ASSESSEE. DEPARTMENTAL APPEAL BEING DEVOID OF MERIT IS DISMI SSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 3 RD DAY OF DEC. 2012 SD/- SD/- (SANJAY ARORA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 3 RD DEC. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R E BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO. 2878/MUM/2011(A.Y. 2007-08) 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 3/12/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 3/12/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER