Aftab Seth, New Delhi V. ADIT, International Taxation, New Delhi

ITA 3364/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8557 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-07-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M P SINGH
• Assessee Lawyers: S K TANDON; MANJIT SINGH SAHNI
• Keywords: Capital asset; Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA : VICE PRESIDENT; A ND SRHI R.P. TOLANI : JUDICIAL MEMBER ITA NO. 3364/DEL/08 ASSTT. YRS: 2005-06 AFTAB SETH,ASSTT. VS. DIRECTOR OF INCOME-TAX, C/0 SANDEEP K. TANDON INTERNATIONAL TAXATION, & ASSOCIATES, CAS CIR. 2(2), NEW DELHI. 31/26, EAST PATEL NAGAR, NEW DELHI-110008. PAN/GIR NO. AARPS7217G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI MANJIT SINGH SAHNI & SH. S.K. TANDON CA RESPONDENT BY : SHRI M.P. SINGH SR. DR O R D E R PER G.E. VEERABHADRAPPA, V.P: THIS APPEAL, BY ASSESSEE , ARISES OUT OF THE ORDER DATED 11-9-2008 OF CIT(A)-XXIX, NEW DELHI, RELATING TO A.Y. 2005-06. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSE E IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSIN G OFFICER IN ASSESSING THE LONG TERM CAPITAL GAIN ON SALE OF PROPERTY AT RS. 2 4,22,724/- AS AGAINST NIL RETURNED BY THE ASSESSEE. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE SO LD PROPERTY NO. N-236, GREATER KAILASH, PART-I, NEW DELHI, IN WHICH THE AS SESSEE HAD 1/4 TH SHARE. 2 THE SAID PROPERTY WAS INHERITED BY HIM AS A LEGAL H EIR FROM HIS MOTHER, WHO DIED ON 14-2-2003. THE PROPERTY WAS HELD BY THE MOT HER OF THE ASSESSEE PRIOR TO 1-4-1981 AND FAIR MARKET VALUE OF THE PROP ERTY AS ON1-4-1981 WAS DETERMINED AT RS. 26,09,762/-. THE ASSESSING OFFICE R WHILE COMPUTING THE INDEXED COST OF ACQUISITION TOOK THE COST INFLATIO N INDEX AT 447 FOR F.Y. 2002-03 AS AGAINST THE ASSESSEES CLAIM OF TAKING THE COST OF INFLATION INDEX AT 100 CORRESPONDING TO F.Y. 1980-81. THERE IS NO D ISPUTE THAT THE PROPERTY WAS INHERITED BY THE ASSESSEE AS ON 14-2-2003 ON TH E DEMISE OF HIS MOTHER. THERE IS ALSO NO DISPUTE THAT THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1-4- 81 AS PER VALUATION REPORT PROPOSED BY THE REGIST ERED VALUER WAS RS. 26,09,762/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT EXPLANATION 1(B) TO SECTION 2(42A) OF THE ACT BE REFERRED TO THE P ERIOD TO BE COUNTED FOR CLASSIFICATION OF AN ASSET EITHER AS A SHORT TERM C APITAL ASSET OR A LONG TERM CAPITAL ASSET. IT HAS NO BEARING UPON THE COMPUTATI ON OF THE INDEXED COST OF ACQUISITION WITH REFERENCE TO THE PREVIOUS YEAR FOR THE PURPOSE OF GIVING DEDUCTION. ACCORDINGLY, IN RESPECT OF COST OF ACQUI SITION THE ASSESSING OFFICER GAVE LOWER DEDUCTION WHILE COMPUTING CAPIT AL GAINS. IN APPEAL THE CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER. THE ASSESSEE IS AGGRIEVED. 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY PO INTED OUT THAT BY VIRTUE OF EXPLANATION 1(B) TO SECTION 2(42A), THE P ROPERTY WAS HELD TO BE LONG TERM CAPITAL ASSET BY INCLUDING THE PERIOD FOR WHICH IT WAS HELD BY THE PREVIOUS OWNER. THIS FACT HAS BEEN ACCEPTED BY THE DEPARTMENT. THE LEARNED COUNSEL SUBMITTED THAT THE INDEXATION HAS TO BE ALL OWED FROM 1-4-1981 WHICH HAS SUBSTITUTED THE COST OF ACQUISITION.. ON 1-4-1981 THE ASSESSEE HIMSELF WAS NOT THE OWNER BUT THE PREVIOUS OWNER HE LD THE ASSET MUCH PRIOR TO THIS DATE. THE INDEXATION IS TO BE ALLOWED FRO M 1-4-1981 WITH REFERENCE TO THE COST AS ON 1-4-1981. THE ISSUE OF THIS NATUR E AROSE BEFORE SEVERAL BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES: (I) KAMAL MISHRA VS. ITO (2008) 19 SOT 251; (II) MINA DEOGUN VS. ITO (2008) 19 SOT 183. (III) PUSHPA SOFAT VS. ITO 81 ITD 1. (IV) DCIT VS. SMT. MEERA KHERA 2 SOT 902. 4.1. THE LEARNED COUNSEL SUBMITTED THAT IN ALL THES E CASES THE TRIBUNAL HAS ACCEPTED THAT IN SUCH CIRCUMSTANCES INDEXATION HAS TO BE ALLOWED FROM THE DATE ON WHICH THE PREVIOUS OWNER HELD THE PROPERTY. HE HAS FILED COPIES OF AFORESAID DECISIONS OF THE TRIBUNAL IN THE PAPER BO OK. 6. THE LEARNED DR, ON THE OTHER HAND, STRONGLY RELI ED UPON THE DISCUSSIONS IN THE ORDER OF THE ASSESSING OFFICER A ND THAT OF THE CIT(A) IN SUPPORT OF THE DEPARTMENTAL STAND. 4 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND GONE THROUGH THE RECORDS. ON FACTS THERE IS NO DISPUTE BETWEEN T HE PARTIES THAT THE ASSESSEE INHERITED THE PROPERTY ON 14-2-2003 ON THE DEMISE OF HIS MOTHER. THE DEPARTMENT ACCEPTS THE ASSET TO BE LONG TERM CAPITA L ASSET ALTHOUGH IT WAS SOLD IN A.Y. 2005-06 BY CONSIDERING THE PERIOD DUR ING WHICH THE PREVIOUS OWNER, NAMELY, MOTHER HELD THE PROPERTY IN TERMS OF EXPLANATION 1(B) OF SECTION 2(42A) OF THE ACT. THE AO HAS SIMPLY ADOPT ED THE BASE YEAR ON THE DATE WHEN THE ASSESSEE BECAME THE OWNER. BUT IN OUR VIEW, THERE COULD NOT BE TWO DIFFERENT DATES IN RESPECT OF THE SAME ASSE T DEVOLVING UPON THE LEGAL HEIR, ONE ON THE DATE TO DETERMINE THE COST OF ACQ UISITION AND ANOTHER TO DETERMINE THE INDEXED COST OF ACQUISITION. EVEN OTH ERWISE, THE PERIOD OF HOLDING FOR DETERMINATION OF THE LONG TERM CAPITAL ASSET, INCLUDED THE PERIOD FOR WHICH THE PREVIOUS OWNER HELD THE ASSET THAT DE VOLVED UPON THE LEGAL HEIR UNDER THE CIRCUMSTANCES MENTIONED IN SECTION 49(1 ) OF THE ACT. THE ISSUE IN QUESTION HAS BEEN THE SUBJECT MATTER OF DETAILED DI SCUSSION IN THE ORDERS OF THE ITAT IN ALL THE AFORESAID CASES AND MORE PARTI CULARLY IN THE DECISION OF ITAT CALCUTTA BENCH IN THE CASE OF MINA DEOGUN VS. ITO (2008) 19 SOT 183. HAVING REGARD TO DISCUSSIONS IN THESE ORDER S WITH WHICH WE ARE IN FULL AGREEMENT, WE ACCEPT THE CLAIMS OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE COST OF ACQUISITION BY TAK ING 1-4-1981 AS THE BASE 5 YEAR FOR THE PURPOSE OF ARRIVING AT THE INDEXED COS T OF ACQUISITION. WE ORDER ACCORDINGLY. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 23-7-2009. (R.P. TOLANI ) ( G.E. VEERABHADR APPA ) JUDICIAL MEMBER VICE PRESIDENT DATED: 23-07-2009. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR