Amarjit Singh Puri, New Delhi V. ACIT, New Delhi

ITA 4834/DEL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7096 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS GEETMALA MOHANANY
• Assessee Lawyers: S D KAPILA; SIDHARTH KAPILA S
• Keywords: Gift; Cost of acquisition; Fair market value; Valuation report
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.4834/DEL/2010 ASSESSMENT YEAR : 2007-08 AMARJIT SINGH PURI, A-251, NEW FRIENDS COLONY, NEW DELHI. PAN : AAKPP9998A VS. ACIT, CIRCLE 22 (1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI S.D. KAPILA & SIDHARTH KAPILA, ADVOCATES REVENUE BY : MRS. GEETMALA MOHANANY, CIT, DR ORDER PER I.P. BANSAL, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 29 TH SEPTEMBER, 2010 FOR ASSESSMENT YEAR 2007-08. THE GROUNDS APPEAL READ AS UNDER :- 1. THAT THE ORDER OF THE LEARNED CIT (A) IS BAD, BOTH I N LAW AND ON FACTS OF THE CASE. 2. THAT THE CIT (A) HAS ERRED IN UPHOLDING THE ASSESSM ENT AT RS.3,28,73,820/- AS AGAINST THE RETURNED INCOME OF RS.96,03,820/- WHICH WAS LATER REVISED TO A LOWER FIG URE. 3. THAT THE COMPUTATION OF CAPITAL GAINS AS MADE BY THE A .O. IS WRONG AND LEGITIMATE DEDUCTION AS CLAIMS HAVE BEEN DEN IED BY HIM. ITA NO.4834/DEL/2010 2 4. THAT THE A.O. ERRED IN WRONGLY COMPUTING THE CAPITAL GAIN ON INCOME AND INTER-ALIA IN DENYING THE BENEFIT OF INDEXA TION TO THE ASSESSEE WHILE COMPUTING CAPITAL GAINS & DETERMINING TH E INDEXED COST OF RS.80,50,000/- AS AGAINST THE ASSESSEE S CLAIM OF RS.4,48,88,615/-. THE LEARNED CIT (A) ERRED IN UPH OLDING SUCH ACTION OF THE A.O. 5. THAT THE LEARNED A.O. WRONGLY INTERPRETED EXPLANATION S (III) TO SECTION 48 AND ERRED IN HOLDING THAT FOR THE PURPOSE OF INDEXATION THE PROPERTY WAS HELD BY THE ASSESSEE IN THE FINANCIAL YEAR 2006-07 AND WAS NOT HELD ON 1.04.1981 OR ALTERNA TIVELY ON 14.01.1993 ON THE DAY OF DEATH OF HIS FATHER AND THE LE ARNED CIT (A) ERRED IN UPHOLDING SUCH ACTION OF THE A.O. 6. THAT THE ORDER OF THE A.O. IS BASED ON IRRELEVANT CONSIDERATIONS AND WRONG LEGAL PRINCIPLES AND IS PER VERSE. 7. THAT THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO ONE A NOTHER AND THE ASSESSEE APPELLANT CRAVES LEAVE TO ADD/AMEND/D ELETE ANY GROUNDS TAKEN ABOVE. 8. THAT THE APPEAL IS WITHIN TIME, THE ORDER OF THE CIT ( A) HAVING BEEN RECEIVED ONLY ON 4.10.10. 2. THE ASSESSEE HAD SOLD A PROPERTY OF 600 SQ. YARD BEARI NG NO.22, FRIENDS COLONY (WEST), MATHURA ROAD, NEW DELHI. THE SAID PROPERTY WAS ACQUIRED BY THE ASSESSEE PURSUANT TO A MEMORANDUM OF ORAL FAMILY AGREEMENT WHICH WAS REDUCED TO WRITING ON JUN E, 2, 2006. THE ASSESSEE CALCULATED THE LONG-TERM CAPITAL GAIN ON THIS P ROPERTY AT ` 95,71,500/- AS PER THE FOLLOWING CALCULATIONS:- CALCULATION OF LONG TERM CAPITAL GAIN SALE CONSIDERATION OF 1400 SQ. YDS (APPROX) FORMING PART OF PROPERTY ADMEASURING 4262.55 SQ. YDS. AT 22, FRIENDS COLONY (WEST), MATHURA ROAD, NEW DELHI, INHERITED FROM FATHER LATE SHIVCHARAN SINGH AS PER RECEIPT DATED 14.11.2006. RS.10,92,00,000 LESS : INDEXED COST OF ACQUISITION VALUATION AS ON 1.4.1981 (AS PER VALUATION REPORT) 8050000*519/100 RS.4,00,08,500 LONG TERM CAPITAL GAIN RS.6,91,91,500 ITA NO.4834/DEL/2010 3 SHARE OF THE ASSESSEE ON 600 SQ. YARDS RS.2,96,53,50 0 LESS EXEMPTION U/S 54 OF INCOME TAX ACT: LESS EXEMPTION U/S 54 OF INCOME TAX ACT: LESS EXEMPTION U/S 54 OF INCOME TAX ACT: LESS EXEMPTION U/S 54 OF INCOME TAX ACT: PURCHASE OF GF AND BASEMENT OF A-251, NEW FRIENDS COLONY, NEW DELHI 65 ANNEXURE VII OF LETTER DT. 26.11.2009 FILED. RS.1,20,60,000 PURCHASE OF 10% SHARE IN FF, SF AND ROOF OF A-251, NEW FRIENDS COLONY, NEW DELHI 65 RS.16,20,000 EXPENDITURE ON IMPROVEMENT AS PER STATEMENT 14,00,000 SUB TOTAL RS.1,50,80,000 BALANCE CAPITAL GAIN RS.1,45,73,500 INVESTMENT IN BONDS (ANNEXURE IX LETTER DTD. 25.11.2009 RS.50,000 NET CAPITAL GAIN NET CAPITAL GAIN NET CAPITAL GAIN NET CAPITAL GAIN RS.95,71,500 RS.95,71,500 RS.95,71,500 RS.95,71,500 /- 3. VIDE LETTER DATED 15 TH DECEMBER, 2009 A REVISED WORKING OF CAPITAL GAIN WAS FILED AND NET LONG-TERM CAPITAL GAI N WAS COMPUTED AS UNDER:- A.S. PURI SHARE OF LONG TERM CAPITAL GAIN (600/1400) 27562022 ALLOWABLE DEDUCTIONS PURCHASE OF A-251, NEW FRIENDS COLONY (IMPROVEMENT PART CONSIDERED) 12600000 1620000 1400000 15620000 INVESTMENT IN BONDS 5000000 20620000 LONG TERM CAPITAL GAIN 6,942,022 4. THE FACTS WHICH LED TO EXECUTION OF MEMORANDUM OF FAMILY SETTLEMENT ARE GIVEN BY THE LEARNED AR IN THE FORM O F SEQUENCE OF DATES WHICH, FOR THE SAKE OF CONVENIENCE ARE REPRODUC ED BELOW:- ITA NO.4834/DEL/2010 4 1) LATE BAKSHI SHIVCHARAN SINGH PURI PURCHASES AS ABSOLUTE OWNER OF PLOT OF LAND AT 22-23 FRIENDS COLONY, NEW DELHI (8225 SQ. YDS.) 1955 2) BAKSHI SHIVCHARAN SINGH PURI DIES SEVEN LEGAL HEIRS COMPRISING HIS TWO WIVES AND THEIR CHILDREN (AGGREGATING FIVE) FROM THEM (SEE PG 4/IT (A) ORDER) 14.1.1993 3) COL. RAVINDER SINGH, S/O SHIVCHARAN SINGH FILES APPLICATION U/S 276 OF THE INDIAN SUCCESSION ACT IN THE COURT OF DIST. JUDGE. 7.2.2005 4) LEGAL HEIRS SETTLE DISPUTES IN RESPECT OF THE WILL OF BAKSHI SHIVCHARAN SINGH MEMO OF ORAL AGREEMENT IS SIGNED BY ALL MEMBERS OF THE FAMILY ON 2.6.2006 5) COURT DISPOSES OF THE APPLICATION U/S 276 OF THE INDIAN SUCCESSION ACT (PGS.1-8/PAPER BOOK) 3.7.2008 6) ASSESSEE SELLS HIS SHARE OF INHERITANCE IN THE PLO T OF LAND FOR RS.10.92 CRORE AND CLAIMS INDEXED COST OF ACQUISITION OF MARKET VALUE AS ON 1.4.1981 U/S 48. 14.11.2006 7) A.O. ASSESS THE GAIN AS LONG TERM CAPITAL GAIN IN TERMS OF SEC. 2(42A) EXPLA. 1 (I)(B)/SECTION 48 EXPLANATION (III) & (IV) READ WITH SECTION 49(1) OF THE ACT AND SECTION 55 (1) (B) (II) OF THE ACT. P.2/A.O. P.5/CIT (A) 8) A.O./CIT (A) FOLLOW BOMBAY TRIBUNAL IN KISHORE KANUNGO AND TREATS THE GAIN AS LONG TERM CAPITAL GAIN IN TERMS OF S.2(42A) READ WITH SECTION 48, BUT DOES NOT GRANT INDEXATION AS THE ASSESSEE FIRST HELD THE PROPERTY ONLY AFTER THE COURT PASSED THIS ORDER IN THE RELEVANT PREVIOUS. 9) 9) RELEVANT PROVISIONS OF THE ACT A) SECTION 2 (42A)/EXPLANATION (1)(I)(B) B) SECTION 45 C) C) SECTION 48 READ WITH EXPLANATION (III) * (IV) D) SECTION 49(1)(II) & (III) READ WITH SECTION 276 OF THE INDIAN SUCCESSION ACT (TEXT ANNEXED AT PG.1) E) SECTION 55 (1) (B) (2)(II) 10) CASE LAW RELIED ON: I) MANJULA J SHAH 318 ITR (AT) 417 (MUM) (SB) (ANNE XED AT PG.2- 16) II) MANJULA J SHAH (BOM) ITA NO.3378 OF 2010 ANNEXE D AT PG. 17-23. ITA NO.4834/DEL/2010 5 5. AS IT CAN BE SEEN FROM THE ABOVE CHART, THE PROPER TY IN QUESTION WAS ACQUIRED BY THE FATHER OF THE ASSESSEE IN 1955 ON WH ICH RESIDENTIAL HOUSE WAS CONSTRUCTED . THE FATHER OF THE ASSESSEE DIED IN JANUARY, 1993 LEAVING SEVEN LEGAL HEIRS COMPRISING HIS TWO WIVES AND THEIR CHILDREN. SHRI RAVINDER SINGH BEING SON OF DEC EASED FILED APPLICATION U/S 276 OF THE INDIAN SUCCESSION ACT IN TH E COURT OF DISTRICT JUDGE ON 7 TH FEBRUARY, 2005 PURSUANT THEREOF LEGAL HEIRS HAD SETTL ED THE DISPUTE AMONGST THEM AND ARRIVED AT A MEMORANDUM OF FAMILY SETTLEMENT ON 2 ND JUNE, 2006 AND THE COURT DISPOSED OF THE APPLICATIO N FILED U/S 276 AS PER THE ORDER DATED 3 RD JULY, 2008. ON 14 TH NOVEMBER, 2006, THE ASSESSEE HAD SOLD SHARE OF THE SAID PLOT OF LAND ON WHICH INDEXED COST OF ACQUISITION OF MARKET VALUE AS ON 1.4. 1981 WAS CLAIMED. THE ASSESSING OFFICER AFTER REFERRING TO THE PROVISIONS OF THE INCOME-TAX ACT, HAS COMPUTED THE LONG-TERM CAPITAL G AIN IN THE HANDS OF THE ASSESSEE AS FOLLOWS:- A SALE CONSIDERATION (AS RETURNED BY THE ASSESSEE) 10 ,92,00,000 B EXPENSES ON TRANSFER (AS RETURNED BY THE ASSESSEE) NIL C CII OF THE YEAR OF TRANSFER (FY 2006-07). 519 D CII OF THE YEAR IN WHICH THE ASSET WAS FIRST HELD BY THE ASSESSEE (FY 2006-07) 519 E FAIR MARKET VALUE OF LAND AS ON 1.4.1981 (AS RETURNED BY THE ASSESSEE) 80,50,000 F INDEXED COST OF ACQUISITION [E*(C/D)] 80,50,000 G TOTAL LONG TERM CAPITAL GAIN (A-B-F) 10,11,50,000 H ASSESSEES SHARE OUT OF (G) (G*600/1400) 4,33,50,0 00 I EXEMPTION U/S 54 (AS RETURNED BY THE ASSESSEE) 1,50, 80,000 J EXEMPTION U/S 54 EC (AS RETURNED BY THE ASSESSEE) 50 ,00,000 K TAXABLE LONG TERM CAPITAL GAIN [G-(H+I)] 2,32,70,0 00 ITA NO.4834/DEL/2010 6 6. ON THESE FACTS, IT IS THE CASE OF THE LEARNED AR THA T THE CASE OF THE ASSESSEE FALLS U/S 49 AND, THEREFORE, THE COST INDEXAT ION BENEFIT HAS TO BE GIVEN TO THE ASSESSEE ON THE VALUE AS ON 1.4.81 WH ICH HAS BEEN DENIED BY THE ASSESSING OFFICER FOLLOWING THE DECISION O F THE TRIBUNAL IN THE CASE OF DCIT VS. KISHORE KANUNGO 290 ITR (AT) 298 (MUM) WHICH DECISION LATER ON HAS BEEN DISAPPROVED BY THE SPECIAL BENCH IN THE CASE OF DCIT VS. MANJULA J. SHAH 318 ITR (AT) 417 (MU M) (SB) IN WHICH IT HAS BEEN HELD THAT U/S 49(1) THE INDEXATION SHOULD BE WITH REFERENCE TO YEAR IN WHICH THE PREVIOUS OWNER ACQUIRED THE ASSET S. IT IS ALSO THE CASE OF THE LEARNED AR THAT RECENTLY HONBLE BOMBAY HIGH COURT VIDE THEIR ORDER DATED 11 TH OCTOBER, 2011 HAS UPHELD THE AFOREMENTIONED DECISION OF SPECIAL BENCH AND DEPARTMENTAL APPEAL IN THE CASE OF CIT VS. MANJULA J. SHAH WAS DISMISSED IN INCOME-TAX APPEAL N O.3378 OF 2010. HE SUBMITTED THAT THE COPY OF THE SAID DECISION IS FILED BY THE ASSESSEE AT PAGES 17 23 OF THE PAPER BOOK. THUS, IT IS THE CASE OF THE LEARNED AR THAT THE BENEFIT OF INDEXATION FROM 1.4.1981 HAS WRONGLY BEEN DENIED TO THE ASSESSEE AND IN ACCORDANCE W ITH THE AFOREMENTIONED CASE LAW THE SAME SHOULD BE GIVEN TO TH E ASSESSEE AND THE APPEAL OF THE ASSESSEE SHOULD BE ALLOWED. 7. ON THE OTHER HAND, LD. CIT ,DR VEHEMENTLY CONTEST ED THE SUBMISSION OF THE ASSESSEE. SHE SUBMITTED THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE DIFFERENT. SHE SUBMITTED THAT IN TH E CASE OF DCIT VS. MANJULA J. SHAH, THE FACTS WERE DIFFERENT AS THE SA ID CASE WAS RELATING TO GIFT. SHE SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE DISPUTE WAS GOING ON AND THE MATTER WAS SETTLED BY THE COURT OF LAW. THEREFORE, SHE SUBMITTED THAT BEFORE THE DISPUTE WAS SET TLED BY THE COURT OF LAW THE ASSESSEE COULD NOT BE SAID TO BE THE OW NER OF THE SAID PROPERTY AND THE ASSESSEE WOULD BECOME THE OWNER ONLY O N THE DATE WHEN HE ENTERED INTO THE MEMORANDUM OF ORAL AGREEME NT DATED 2 ND JUNE, 2006. THEREFORE, SHE SUBMITTED THAT THE ASSESSEE I S NOT ENTITLED ITA NO.4834/DEL/2010 7 TO GET THE BENEFIT OF INDEXATION FROM 1.4.1981 AND, THEREFORE, LEARNED CIT (A) IS RIGHT IN UPHOLDING THE ACTION OF THE ASSESSIN G OFFICER. SHE SUBMITTED THAT THE ASSESSEES APPEAL SHOULD BE DISMISSED. 8. IN A REJOINDER, IT WAS SUBMITTED BY THE LEARNED AR THAT THE ONLY OBJECTION OF THE ASSESSING OFFICER IS REGARDING GRANT OF INDEXATION BENEFIT. HE HAS TAKEN THE COST OF THE PROPERTY AS ON 1.4.81. HE SUBMITTED THAT IF THE CASE OF THE LEARNED DR IS TO BE ACCEPTED, THEN THE ASSESSEE HAD SOLD HIS SHARE ON 14 TH NOVEMBER, 2006 AND IT WILL BE A CASE OF SHORT-TERM CAPITAL GAIN WHICH IS NOT EVEN THE CASE OF ASSESSING OFFICER. HE PLEADED THAT SECTION 49 IS WIDE ENOUGH TO COVER THE CASES FALLING UNDER DISTRIBUTION OF ASSETS ON TOTAL OR PARTIA L PARTITION OF HINDU UNDIVIDED FAMILY; GIFT; WILL; SUCCESSION; INHERITANCE OR DEVOLUTION AND IT HAS BEEN MANDATED IN SECTION 49 THAT THE COST OF ACQ UISITION OF ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY PREVIOUS OWNER OR THE A SSESSEE, AS THE CASE MAY BE. HE SUBMITTED THAT INTERPRETING EXPLANAT ION (III) TO SECTION 48 READ WITH SECTION 49, IT HAS BEEN HELD BY THE BOMBAY HIGH COURT IN AFOREMENTIONED CASE THAT THE INDEXATION BEN EFIT HAS TO BE GIVEN TO THE PERSON WHO HAS BECOME OWNER OF THE PROPE RTY IN CERTAIN SPECIFIED CIRCUMSTANCES WHICH INCLUDE GIFT, WILL, SUCCE SSION, INHERITANCE OR DEVOLUTION. THEREFORE, HE SUBMITTED THAT THE CASE OF THE ASSESSEE WILL FALL UNDER THE PROVISIONS OF SECTION 49 READ WIT H EXPLANATION (III). HE SUBMITTED THAT SECTION 276 OF INDIAN SUCCESSION ACT , 1925 IS A PROVISION FOR A PROBATE OF THE WILL AND WHAT WAS FILE D BEFORE HONBLE COURT WAS TO OBTAIN THE PROBATE OF THE WILL AND, THU S, THE CASE OF THE ASSESSEE WILL CLEARLY FALL WITHIN THE PURVIEW OF SECTIO N 49 OF THE ACT. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. NO DOUBT THE AFOREME NTIONED PROPERTY HAS BEEN OBTAINED BY THE ASSESSEE BEING LEGAL HEIR OF HI S FATHER. THE ITA NO.4834/DEL/2010 8 LEARNED DR HAS INVITED OUR ATTENTION TOWARDS THE WILL , THE COPY OF WHICH IS FILED BY THE ASSESSEE IN THE PAPER BOOK. A SUIT E U/S 276 OF THE INDIAN SUCCESSION ACT WAS FILED BY THE LEGAL HEIRS OF T HE DECEASED. IT IS PURSUANT TO THAT SUITE ONLY A FAMILY SETTLEMENT AGREEM ENT WAS ARRIVED AT. THE NET RESULT IS THAT THE SHARE HAS DEVOLVED UPON THE ASSESSEE BEING THE LEGAL HEIR OF THE PREVIOUS OWNER OF THE PR OPERTY. SECTION 49 OF THE INCOME-TAX ACT IS WIDE ENOUGH TO COVER ALL SUC H CASES AND SECTION 49 READ WITH EXPLANATION (III) TO SECTION 4 8 HAS BEEN INTERPRETED BY THE SPECIAL BENCH IN THE CASE OF DCIT VS. MANJULA J. SHAH AND IT HAS BEEN OPINED THAT INDEXATION BENEFIT HAS TO BE GIVEN TO THE LEGAL HEIR OR THE RECIPIENT OF THE PROPERTY THR OUGH MODES DESCRIBED IN SECTION 49 FROM THE DATE WHEN PREVIOUS OWNER OF T HE PROPERTY ACQUIRED THE PROPERTY. THE CASE OF THE ASSESSING OFFICER AND CIT (A) IS BASED ON THE EARLIER DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. KISHORE KANUNGO (SUPRA) WHICH IS NO MORE A GOOD LAW IN VIEW OF THE AFOREMENTIONED SPECIAL BENCH DECISION OF THE ITAT WH ICH HAS BEEN APPROVED BY HONBLE BOMBAY HIGH COURT VIDE THEIR DE CISION DATED 11 TH OCTOBER, 2011. THEREFORE, WE ARE OF THE OPINION TH AT THE COST INDEXATION BENEFIT HAS TO BE GRANTED TO THE ASSESSEE BY TAKING THE COST AS ON 1.4.81 AND DATE OF EXECUTION OF MEMORANDUM OF FAMILY SETTLEMENT CANNOT BE BASIS FOR COMPUTING THE INDEXATIO N BENEFIT. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO COMPUTE C APITAL GAIN ON THE SALE OF PROPERTY AFTER GIVING THE INDEXATION BEN EFIT TO THE ASSESSEE ON THE COST DETERMINED AS ON 1.4.81 FROM 1.4.81 AND N OT FROM FINANCIAL YEAR 2006-07. ITA NO.4834/DEL/2010 9 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED IN THE MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.20 11. SD/- SD/- [G.D. AGRAWAL] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 29.12.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES