Shri Arunbhai Chhotalal Kantaria, RAJKOT-GUJARAT V. The Income Tax Officer, (Inter. Taxa.), RAJKOT-GUJARAT

ITA 3/RJT/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1276 (ITAT-RAJKOT)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Assessee Lawyers: DM RINDANI
• Keywords: Gift; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER) ITA. NO: 03/RJT/2016 (ASSESSMENT YEAR: 2011-12) SHRI ARUNBHAI CHHOTALAL KANTARIA C/O. DEEPAK M. RINDANI, CA 203, TRADE CENTRE, SARDARNAGAR MAIN ROAD, RAJKOT-360001 V/S THE INCOME-TAX OFFICER, (INTERNATIONAL TAXATION), RAJKOT. (APPELLANT) (RESPONDENT) PAN: ADSPK5045L APPELLANT BY : SHRI D.M. RINDANI, C.A. RESPONDENT BY : SHRI C. S. ANJARIA, SR. D.R . ( )/ ORDER DATE OF HEARING : 17 -05-201 6 DATE OF PRONOUNCEMENT : 23-05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-I3, AHMEDABAD DATED 23.11.2 015 PERTAINING TO A.Y. 2011-12. ITA NO. 03/R JT/2016 . A.Y.2011-12 2 2. THE GRIEVANCE OF THE ASSESSEE READ AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME-TAX(APPEALS)-13 , AHMEDABAD ERRED IN CONFIRMING THE ACTION OF INCOME-TAX OFFICER IN NOT GRANTING DEDUCTION AND INDEXATION OF COST OF ACQUISITION OF RS. 1,71,551/- INCURRED PRIOR TO 01.04.1981. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT AS PE R THE INFORMATION RECEIVED BY THE A.O, IT WAS FOUND THAT THE ASSESSEE HAS SOLD A PROPERTY FOR 1.71 CRORES WHICH WAS JOINTLY OWNED BY HIM WITH ONE OTHER PERSON. THE A.O. NOTICED THAT THE ASSESSEE HA S SHOWN LONG TERM CAPITAL GAIN OF RS. 10,43,207/- ON THE SALE OF THIS PROPERTY. 4. ON FURTHER VERIFICATION, THE A.O CAME TO KNOW THAT THE IMPUGNED PROPERTY WAS PURCHASED BY SHRI CHHOTALAL DHARAMSHI, HUF AND SHRI RAMESH JAMNADAS KANTARIA ON 10.08.1978 FOR RS. 90,0 00/- THE ASSESSEE CAME IN POSSESSION OF THIS PROPERTY BY VIR TUE OF GIFT MADE BY SHRI RAMESH JAMNADAS KANTARIA VIDE A GIFT DEED EXE CUTED ON 13.10.2008. THUS, THE ASSESSEE BECAME HALF OWNER OF THE IMPUGNED PROPERTY. 5. WHILE GOING THROUGH THE WORKING OF LONG TERM CAPITA L GAIN, THE A.O NOTICED THAT THE ASSESSEE HAS TAKEN COST INFLATION INDEX AS ON 01.04.1981. ASSESSEE WAS ASKED TO JUSTIFY HIS STAND AS PER THE PROVISIONS OF THE LAW. 6. ASSESSEE EXPLAINED THAT SINCE HE HAS RECEIVED THE P ROPERTY BY VIRTUE OF A GIFT COST TO THE PREVIOUS OWNER OR FMV AS ON 0 1.04.1981 SHALL BE THE COST OF ACQUISITION FOR THE ASSESSEE AND HENCE THE LONG TERM CAPITAL GAINS HAVE BEEN COMPUTED ACCORDINGLY. 7. THIS EXPLANATION OF THE ASSESSEE WAS RUBBISHED BY T HE A.O. THE A.O WAS OF THE FIRM BELIEF THAT THE COST OF ACQUISITION BEING ASSESSEES ITA NO. 03/R JT/2016 . A.Y.2011-12 3 SHARE AT RS. 50,603/- IS ELIGIBLE FOR INDEXATION ON LY FROM 2008, WHEN THE ASSESSEE BECAME THE JOINT OWNER OF THE PROPERTY . THE A.O ACCORD- INGLY RE-COMPUTED THE LONG TERM CAPITAL GAIN. 8. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED HIS CLAIM. THE LD. CIT(A) WAS CONVINCED THAT IF THE PROPERTY IS PASSED BY WAY OF A GIFT THAN THE CO ST OF ACQUISITION SHALL BE THE COST OF ACQUISITION IS TO BE TAKEN FRO M 01.04.1981. HOWEVER, THE LD. CIT(A) DECLINED TO GIVE THE BENEFI T OF COST INFLATION INDEX TO THE COST OF CONSTRUCTION OF RS. 1,71,551/- AND CONFIRMED THE FINDINGS OF THE A.O. ON THIS ISSUE. 9. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE U S. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT BOTH LOWER AUTHO RITIES HAVE NOT CORRECTLY APPRECIATED THE RELEVANT PROVISIONS OF TH E LAW. IT IS THE SAY OF THE LD. COUNSEL THAT THE RELEVANT PROVISION IS SECT ION 55(2)(B)(II) AND NOT 55(2)(II). 10. PER CONTRA, THE LD. D.R. STRONGLY RELIED UPON THE F INDINGS OF THE REVENUE AUTHORITIES. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY PERUSED T HE RELEVANT PROVISIONS OF THE ACT. 12. THE UNDISPUTED FACT EMERGING FROM THE ASSESSMENT RE CORD SHOWS THAT THE ASSESSEE RECEIVED THE IMPUGNED PROPERTY BY VIRTUE OF GIFT. IT IS ALSO AN UNDISPUTED FACT THAT THE DONOR PURCHASED THE PROPERTY ON 10.08.1978 I.E. PRIOR TO 01.04.1981. THEREAFTER, TH E DONOR JOINTLY WITH ITA NO. 03/R JT/2016 . A.Y.2011-12 4 THE CO-OWNER CONSTRUCTED A RESIDENTIAL HOUSE ON THE SAID PROPERTY FOR RS. 3,43,101/- AS PER THE PROVISIONS OF SECTION 49( 1)(II), THE COST OF ACQUISITION IS THE COST OF ACQUISITION TO THE PREVI OUS OWNER. IN THE CASE IN HAND, IT MEANS THE COST TO THE DONOR. SINCE, THE DONOR JOINTLY WITH CO-OWNER HAD SPENT RS. 3,43,101/- ON THE CONSTRUCTI ON OF A HOUSE ON THE PIECE OF LAND, THE TOTAL COST TO THE PREVIOUS O WNER (I.E. DONOR IS COST OF LAND RS. 1,01,205/- + THE COST OF CONSTRUCT ION RS. 3,43,101/-). 13. SINCE THE ASSESSEE DID NOT OPT FOR FMV AS ON 01.04. 1981 BUT OPTED THE COST OF ACQUISITION TO THE PREVIOUS OWNER . THEREFORE, AS PER THE PROVISIONS OF SECTION 55(2)(B)(II), THE ASSESSE E IS ENTITLED FOR THE INDEXATION ON SUCH COST FROM 01.04.1981. 14. IN OUR CONSIDERED OPINION, THE COST OF CONSTRUCTION OF THE HOUSE ON THE SAID PIECE OF LAND HAS BEEN CONSTRUED AS COS T OF IMPROVEMENT BY THE LOWER AUTHORITIES AND WHICH HAS RESULTED IN ERRONEOUS ORDERS. 15. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CI T(A) AND DIRECT THE A.O TO ALLOW THE BENEFIT OF COST INFLATION INDE X WITH EFFECT FROM 01.04.1981 ON THE COST TO THE PREVIOUS OWNER WHICH IS COST OF LAND + COST OF CONSTRUCTION PRIOR TO 01.04.1981. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 23 - 05 - 2 016 SD/- SD/ (KUL BHARAT) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY