ITO (IT) 3(1), MUMBAI V. NEELA KOTAK, MUMBAI

ITA 2963/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54900 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 09-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: S S PHADKAR
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F,MUMBAI BEFORE SHRI T.R. SOOD (AM) & SHRI V. DURGA RAO (JM ) I.T.A.NO.2963/MUM/2010 (A.Y. 2007-08)) INCOME-TAX OFFICER (IT)-3(1), R.NO.114, SCINDIA HOUSE, BALLARD PIER,MUMBAI-400 038. VS. SMT. NEELA KOTAK, 2 ND FLOOR, KOTAK KUNJ, 13/6, KIDWAI NAGAR, K.M. MUNSHI MARG, CHOWPATTY, MUMBAI-400 007. PAN: AQRPK9341H APPELLANT RESPONDENT APPELLANT BY SHRI S.K. SINGH. RESPONDENT BY SHRI S .S. PHADKAR. DATE OF HEARING 09-08-2011 DATE OF PRONOUNCEMENT -08-2011 O R D E R PER T.R. SOOD, AM : IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOW ING GROUND : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSES SEE IS ENTITLED TO THE BENEFITS OF INDEXED COST OF ACQUISI TION WITH EFFECT FROM 01-04-1981 WITHOUT APPRECIATING THAT CL AUSE (III) OF EXPLANATION TO THE PROVISO TO SEC. 48 OF T HE I.T. ACT 1961 SPECIFICALLY ALLOWS INDEXATION FROM THE DATE O F HOLDING OF THE ASSESSEE BY THE ASSESSEE AND ACCORDI NGLY THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE PERIOD OF HOLDING OF THE PREVIOUS O WNER FOR THE PURPOSES OF COMPUTING INDEXED COST OF ACQUISITI ON. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ASSESSEE HAD FILED RETURN OF INCOME IN WHICH INCOME FROM CAPITAL GAIN WAS ALSO D ECLARED ON 1/4 TH SHARE OF PROPERTY SOLD. THIS PROPERTY WAS INHERITED BY THE A SSESSEE FROM HER HUSBAND WHO EXPIRED ON 29-08-1993. THE HUSBAND HAD, IN TURN, IN HERITED THE PROPERTY FROM HIS ITA NO.2963/M/10 SMT. NEELA KOTAK. 2 FATHER ON 28-01-1978 WHO HAD FURTHER INHERITED THE PROPERTY FROM HIS FATHER ON 18-01-1957. SINCE THE PROPERTY BELONGED TO THE PREV IOUS OWNER, THEREFORE, THE FAIR MARKET VALUE WAS SUBSTITUTED AS ON 01-04-1981 AND INDEXATION WAS APPLIED ACCORDINGLY. THE AO WAS OF THE OPINION THAT SINCE T HE PROPERTY HAD BEEN INHERITED FROM HER HUSBAND FROM 29-08-1993, THEREFORE, INDEXA TION COULD BE GIVEN ONLY FROM THAT DATE AND ACCORDINGLY HE ENHANCED THE CAPI TAL GAIN. 3. ON APPEAL, THE LD. CIT(A), FOLLOWING THE DECISI ON OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MANJULA J. SHAH 3 0 DTR (MUM) (SB) (TRIB) 601, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 3. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF A O. 4. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF DCIT VS. MANJULA J. SHAH (SUPRA). FURTHER, IN TH E CASE OF RAJU KOTAK, SON OF THE ASSESSEE, WHO WAS ALSO 1/4 TH SHAREHOLDER, SIMILAR ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N ITA NO.2964/UM/2010 VIDE ORDER DATED 30-03-2011. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S. MANJULA J. SHAH (SUPRA) HAS CONSIDERED THIS ISSUE IN DETAIL. THE HEAD-NOTE OF T HE SAID DECISION READS AS UNDER: CAPITAL GAINSCOST OF ACQUISITION INDEXED COST O F PROPERTY RECEIVED THROUGH GIFTFOR THE PURPOSE OF COMPUTING LONG-TERM CAPITAL GAIN ARISING FROM TRANS FER OF CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSE SSEE UNDER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL AS SET WAS HELD BY THE ASSESSEE HAS TO BE DETERMINED TO WORK O UT THE INDEXED COST OF ACQUISITION AS ENVISAGED IN EXPLN. (III) TO S. 48 AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH T HE SAID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNERIN THA T VIEW OF THE MATTER, THE INDEXED COST OF ACQUISITION OF S UCH CAPITAL ASSET HAS TO BE COMPUTED WITH LEGISLATIVE I NTENTION BEHIND ENACTING THE PROVISIONS IS VERY CLEAR TO TRE AT THE DATE AS WELL AS COST OF ACQUISITION OF CAPITAL ASSE T OF THE PREVIOUS OWNER TO BE THE DATE AND COST OF ACQUISITI ON OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING CAPITAL G AIN IN ITA NO.2963/M/10 SMT. NEELA KOTAK. 3 TERMS OF S. 48 IF EXPLN. (III) TO S.48 IS INTERPR ETED IN THE WAY SOUGHT BY THE DEPARTMENTAL REPRESENTATIVE BY TA KING THE DATE ON WHICH THE CAPITAL ASSET RECEIVE BY THE ASSESSEE UNDER A GIFT BECOMING HIS PROPERTY FOR THE PURPOSE OF WORKING OUT THE INDEXED COST OF ACQUISITION, IT WIL L CERTAINLY NOT BE IN CONSONANCE WITH THE SCHEME OF THE ACT AN D WILL ALSO DEFEAT THE VERY PURPOSE OF INTRODUCING THE CON CEPT OF INDEXED COST OF ACQUISITION. FOLLOWING THE ABOVE DECISION, WE ARE OF THE VIEW TH AT COST OF ACQUISITION HAS TO BE TAKEN AS PER THE COST OF ACQUISITION OF THE PREVIOU S OWNER AND THE INDEXED 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. IT F URTHER BECOMES CLEAR FROM THE EXPLANATION TO SEC. 49, WHICH READS AS UNDER : EXPLANATION.IN THIS SUB-SECTION THE EXPRESSION P REVIOUS OWNER OF THE PROPERTY IN RELATION TO ANY CAPITAL A SSET OWNED BY AN ASSESSEE MEANS THE LAST PREVIOUS OWNER OF THE CAPITAL ASSET WHO ACQUIRED IT BY A MODE OF ACQUISITION OTHE R THAN THAT REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CL AUSE (III) OF THIS SUB-SECTION. FOLLOWING THE ABOVE, WE DECIDE THE ISSUE AGAINST TH E REVENUE. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON THE 12TH DAY OF AUGUST, 2011 . SD/- SD/- (V. DURGA RAO) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 12TH AUGUST , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-10,MUMBAI. 4 DIT(IT),MUMBAI. ITA NO.2963/M/10 SMT. NEELA KOTAK. 4 5.DR,F BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.2963/M/10 SMT. NEELA KOTAK. 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 08-08-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 09-08-2011 SR.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/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER