The ITO, 1(1), Bhopal V. Shri Priyank Shinde, Bhopal

ITA 319/IND/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66682 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: MANOJ AYACHIT
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value
• Section: 143(3); 147

Judgement Text

`1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 319/IND/2012 A.Y.2008-09 INCOME TAX OFFICER 1(1), BHOPAL :: APPELLANT VS PRIYANK SHINDE BHOPAL PAN ARKPS 7930M :: RESPONDENT APPELLANT BY SHRI V.K. KARAN RESPONDENT BY SHRI MANOJ AYACHIT DATE OF HEARING 12.9.2012 DATE OF PRONOUNCEMENT 1 3 .9.2012 O R D E R PER SHRI R.C.SHARMA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 31.3.2012 FOR THE ASSESSME NT YEAR 2008-09 IN THE MATTER OF ORDER PASSED U/S 147 READ WITH SECTION 143(3) OF THE ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE FACTS IN BRIEF, ARE THAT THE ASSESSEE SOLD HOUSE PR OPERTY ON 16.4.2007 FOR RS. 1,12,80,000/- WHICH WAS OWNED BY HIM JOINTLY `2 WITH HIS MOTHER AND WHEN CONFRONTED TO EXPLAIN THE LIABILITY FOR CAPITAL GAINS TAX, IT WAS SUBMITTED IN PROCEEDINGS BEFORE THE AO THAT THE IMPUGNED PROPERTY WAS IN ARERA COLONY, BHO PAL, HAVING CARPET AREA OF 11010.05 SQ.FT. AND BUILT UP AREA WA S 2250 SQ.FT AND THAT THE HOUSE WAS TWENTYFIVE YEARS OLD; THAT I NITIALLY THE PLOT WAS PURCHASED AND CONSTRUCTED BY SHRI G.B. SHINDE B EFORE 1.4.1981 AND AFTER THAT HE HAD GIVEN THIS PROPERTY TO HER GRANDSON VIZ. SHRI PRIYANK SHINDE, THE ASSESSEE, AN D HER SON SHRI SUBODH KUMAR SHINDE AND DAUGHTER IN LAW, SMT. SHIVANI SHINDE BY MAKING A WILL ON 25.3.1991; THAT ACCIDENT ALLY SHRI SUBODY KUMAR DIED ON 20.9.1992 AND AFTER THAT SMT. SHIVANI SHINDE AND PRIYANK SHINDE HAD ENJOYED THIS PROPERTY ; THAT SMT. A.M. SHINDE DIED ON 14.12.2001 AND AFTER THAT DATE, THE SAID PROPERTY WAS TRANSFERRED IN THE JOINT NAME OF SMT. SHIVANI SHINDE AND HER SON PRIYANK SHINDE; THAT FOR PERSONA L REASONS, THIS PROPERTY WAS SOLD JOINTLY BTY THE ASSESSEE PRI YANK SHINDE AND HIS MOTHER SMT. SHIVANI ON 16.4.2007; THAT THE SAID HOUSE PROPERTY WAS TRANSFERRED IN THE NAME OF THE ASSESSE E AND HIS MOTHER ON 14.12.2001 BY WILL OF SMT. A.M. SHINDE; T HAT ACCORDING TO SECTION 49(1)(II) OF THE INCOME TAX AC T, 1961 WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESS EE UNDER A GIFT `3 OR WILL; THAT THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PRO PERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSE SSEE, AS THE CASE MAY BE; THAT IN THIS CASE THE COST OF ACQUISIT ION IS BEING TAKEN RS. 12,33,500/- (FAIR MARKET VALUE AS ON 1.4. 1981) IN THE HANDS OF THE ASSESSEE AND BENEFIT OF INDEXATION WIL L BE ALLOWED FROM YEAR OF 2001 IN WHICH THE SAID PROPERTY WAS TR ANSFERRED IN THE NAME OF THE ASSESSEE. ACCORDINGLY, THE AO COM PUTED THE COST OF ACQUISITION BY TAKING THE YEAR 2001 IN WHIC H THE SAID PROPERTY WAS TRANSFERRED IN THE NAME OF THE ASSESSE E IN PLACE OF DATE OF ACQUISITION IN THE HANDS OF FATHER OF THE A SSESSEE WHO ACTUALLY ACQUIRED THE PROPERTY PRIOR TO 1981. ACCO RDINGLY, THE ADDITION OF RS. 25,99,930/- WAS MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN. 3. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE AD DITION AFTER HAVING MADE THE FOLLOWING OBSERVATIONS :- 6. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE ONLY GRIEVANCE OF THE APPELLANT IS WITH REGARD TO ALLOWA NCE OF BENEFIT OF INDEXATION FROM THE FY 2001-02 WHEN THE `4 APPELLANT HAD BECOME THE CO-OWNER OF THE IMPUGNED PROPERTY WHICH WAS SOLD DURING THE PREVIOUS YEAR RE LEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION INSTEAD OF BENEFIT OF INDEXATION FROM THE FY 1981-82. THE APP ELLANT HAS FURNISHED COMPUTATION OF LONG TERM CAPITAL GAIN BY TAKING THE COST OF ACQUISITION TO THE PREVIOUS OWNE R (BEING FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981) A T RS. 12,33,500/- AND THE APPELLANT HAS COMPUTED THE INDE XED COST OF ACQUISITION OF THE PROPERTY TAKING COST INF LATION INDEX OF 01.04.1981 I.E. 100. AS ALREADY STATED, T HE UNDISPUTED FACT WAS THAT THE APPELLANT HAD BECOME C O- OWNER OF THE ABOVE PROPERTY ONLY ON 14.12.2001 BY W ILL OF LATE SMT. A.M. SHINDE AND HENCE BY VIRTUE OF PROVIS IONS CONTAINED IN SECTION 49(1)(II) OF THE ACT, THE COST OF THE PREVIOUS OWNER (BEING FAIR MARKET VALUE AS ON 01.04.1981) AT RS. 12,33,500/- AND THE APPELLANT HA S COMPUTED THE INDEXED COST OF ACQUISITION OF THE PRO PERTY TAKING COST INFLATION INDEX OF 01.04.1981 I.E. 100. AS ALREADY STATED, THE UNDISPUTED FACT WAS THAT THE AP PELLANT HAD BECOME CO-OWNER OF THE ABOVE PROPERTY ONLY ON 14.12.2001 BY WILL OF LATE SMT. A.M. SHINDE AND HEN CE BY VIRTUE OF PROVISIONS CONTAINED IN SECTION 49(1)(II) OF THEACT, `5 THE COST OF THE PREVIOUS OWNER (BEING FAIR MARKET V ALUE AS ON 1.4.1981) AT RS. 12,33,500/- WAS RIGHTLY TAKEN A S COST OF THE ACQUISITION OF THE IMPUGNED PROPERTY; EXPLAN ATION (III) TO SECTION 48 OF THE IT ACT CLEARLY STATES TH AT INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INF LATION INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRE D BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN W HICH THE ASSET WAS HELD BY THE APPELLANT OR FOR THE YEAR BEG INNING ON THE IST DAY OF APRIL, 1981 WHICHEVER IS LATER. I T IS AN UNDISPUTED FACT THAT THE APPELLANT BECAME THE OWNER OF THE SAID PROPERTY THROUGH WILL AND THE PROPERTY WAS PURCHASED BY THE PREVIOUS OWNER BEFORE 01.04.1981. I FIND THAT THE DECISIONS RELIED UPON BY THE APPELLAN T ARE PROVIDING STRENGTH TO THE CASE OF THE APPELLANT. M OREOVER, THE FOLLOWING DECISIONS ARE ALSO PROVIDING FURTHER STRENGTH TO THE APPELLANTS CASE :- (I) KAMAL MISHRA VS. INCOME TAX OFFICER; (2008) 19 SOT 251 (DEL) (II) M SIVA PARVATHI &ORS VS. INCOME TAX OFFICER (2001) 129 (TTJ) (VISAKHA) 463 : (2010) 37 DTR 124 : (2011) 7 ITR 568 (III) COMMISSIONER OF INCOME TAX VS. VEGETABLE PRODUCTS LTD.; 1973 CTR (SC) 177 : (1973) 88 ITR 192 (SC) `6 (IV) ACIT VS. SYED MAQBUL HUSSAIN (2010) 4 ITR (TRIB) 44 (CHENNAL) 7. I FIND THAT THE ISSUE IS NOW SETTLED IN FAVOUR O F THE APPELLANT AFTER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX-12 VS. MANJULA J. SHAH (2012) 204 TAXMAN 691 (2011) 16 TAXMAN.COM 42(BOMBAY) DATED OCTOBER 11, 2011 WHERE IT WAS HELD THAT SECTION 48 OF THE INCOME TAX ACT, 1961 CAPITAL GAINS COMPUTATION OF ASSESSMENT YEAR 2004-05 WHETHER WHEN LEGISLATURE BY INTRODUCING DEEMING FIC TION SEEKS TO TAX GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED UNDR A GIFT OR WILL AND CAPITAL GAIN UNDER SECTION 48 HAS TO BE COMPUTED BY APPLYING DEEMED FICTION, I T CANNOT BE SAID THAT FICTION CONTAINED IN EXPLANATI ON 1(I)(B) TO SECTION 2(42A) CANNOT BE APPLIED IN DETERMINING INDEXED COST OF ACQUISITION UNDER SECTION 48 HELD , YES- WHETHER THEREFORE WHILE COMPUTING CAPITAL GAINS ARI SING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY ASSESSEE UNDER A GIFT OR WILL, INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO YEAR IN WHICH PREVIOUS O WNER `7 FIRST HELD ASSET AND NOT YEAR IN WHICH ASSESSEE BEC AME OWNER OF ASSET HELD, YES (IN FAVOUR OF ASSESEE) CIRCULARS AND NOTIFICATIONS : CIRCULAR NO. 636 DATE D 31.08.1992. 8. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CA SE AS ALSO DECISIONS CITED ABOVE, PARTICULARLY THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT CITED SUPRA, THERE IS NO MERIT IN THE ADDITION MADE BY THE A.O. BY RESTRICTI NG THE BENEFIT OF INDEXATION FROM F.Y. 2001-02 INSTEAD OF 01.04.1981. HENCE, THE ADDITION OF RS. 25,99,930/- IS HEREBY DELETED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE T HROUGH THE MATERIAL PLACED ON RECORD AND FIND THAT THE PROPERT Y SOLD BY THE ASSESSEE WAS ACQUIRED BY HIM BY A WILL EXECUTED BY SMT. A.M. SHINDE. BY VIRTUE OF THE PROVISIONS OF SECTION 49(1 )(II) THE COST OF PREVIOUS OWNER WAS REQUIRED TO BE TAKEN AS COST OF ACQUISITION WHILE COMPUTING CAPITAL GAIN IN THE HANDS OF THE AS SSESSEE. EXPLANATION 3 TO SECTION 48 CLEARLY STATED INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COS T OF ACQUISITION OF THE SAME PROPORTION AS COST INFLATIO N INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION `8 INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HEL D BY THE ASSESSEE OR FOR THE YEAR BEGINNING ON THE IST DAY O F APRIL, 1981, WHICHEVER IS LATER. THERE IS NO DISPUTE TO THE FAC T THAT THE ASSESSEE HAS BECOME THE OWNER OF THE PROPERTY THROU GH WILL AND THE PROPERTY WAS PURCHASED BY THE PREVIOUS OWNER BE FORE 1.4.1981. HONBLE BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH; 204 TAXMAN 691 HELD THAT WHILE COMPUTING CAPI TAL GAINS ON TRANSFER OF CAPITAL ASS ET ACQUIRED UNDER A GIFT OR WILL, INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFEREN CE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSETS A ND NOT THE YEAR IN WHICH THE ASSESSEE BECAME OWNER OF THE ASSET. TH E DETAILED FINDINGS GIVEN BY THE CIT(A) AT PARAS 6 AND 7 OF HI S ORDER HAVE NOT BEEN CONTROVERTED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.25,99,930/- MADE ON ACCOUNT OF LONG TERM CAPITAL GAINS. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 TH SEPTEMBER, 2012 SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER SEPTEMBER 13 TH , 2012 COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR `9 DN/-11