ITO, New Delhi V. Smt. Sapna Dimri, New Delhi

ITA 4958/DEL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7492 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Period of limitation; Cost of acquisition; Fair market value
• Section: 54F; 139; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G: NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T. A. NO.4958/DEL/2011 ASSESSMENT YEAR : 2008-09 INCOME-TAX OFFICER, SMT. SAPANA DIMRI, WARD NO.24(4), NEW DELHI. VS. L/H OF LATE SH. BIPIN CHANDRA, C-2/11, C/O JAIN ASSOCIATES, VASANT VIHAR, NEW DELHI. PAN: AHIPC5045Q (APPELLANT) (RESPONDEN T) APPELLANT BY: SHRI ROHIT GARG, DR. RESPONDENT BY: SHRI RANJAN CHO PRA, CA. O R D E R PER K.D. RANJAN, ACCOUNTAT MEMBER: THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2008 -09 ARISES OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS)-XXIII, NEW DELHI. 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER:- 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.818 317/- MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO BY DISALLOWING ASSUMPTION OF RS.4770000/- CLAIM U/S 54 OF IT ACT 1961. 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO DE LETION OF ADDITION OF RS.8,18,317/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF LONG TERM CAPITAL GAIN. THE FACTS OF THE CASE STATED IN BRIE F ARE THAT THE ASSESSEE SOLD PROPERTY AT 25, ARADHANA COLONY, SECTOR-13, R.K. PU RAM, NEW DELHI. AGAINST THE ASSESSEES 50% SHARE OF RS.75,00,000/-, THE ASSESSEE CLAIMED INDEX COST OF ACQUISITION AT RS.13,32,980/-. IT WA S SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAD INHERITED A SHARE IN THE PROP ERTY ON THE DEATH OF HIS WIFE SMT. PRABHA CHANDRA WHO DIED ON 28 TH NOVEMBER, 1994. PROPERTY WAS ACQUIRED BY SMT. PRABHA CHANDRA BY INHERITANCE FROM HER MOTHER SMT. KAMLA DEVI ON 29.04.1984 AND SMT. KAMLA DEVI WAS TH E OWNER OF THE PROPERTY PRIOR TO 1.4.1981. SINCE THE PROPERTY WAS INHERITED, THE ASSESSEE TOOK THE COST OF ACQUISITION AS FAIR MARKET VALUE O F THE ASSET AS ON 1.4.1981 AND CLAIMED BENEFIT OF INDEXATION FROM 1.4.1981. H OWEVER, THE AO HELD THAT THE ASSESSEE HAD BECOME OWNER OF THE PROPERTY ONLY ON THE DEATH OF SMT. PRABHA CHANDRA ON 28.11.1994. THE AO REWORKED THE COST OF 3 ACQUISITION TO THE ASSESSEE BY APPLYING COST INDEXA TION FROM THE YEAR 1994 AS AGAINST 1981-82 CLAIMED BY THE ASSESSEE AND ARRIVED AT THE INDEXED COST OF RS.5,14,663/- AND AFTER ALLOWING THE INDEXED COST O F IMPROVEMENT TO THE PROPERTY OF RS.7,13,239/-, COMPUTED LONG TERM CAPIT AL GAIN OF RS.62,72,098/- THE ASSESSEE INVESTED THE SALE CONSIDERATION IN HIS NEW RESIDENTIAL HOUSE WHICH WAS ACQUIRED FOR RS..47,70,000/- ON 15.10.200 8. THE ASSESSING OFFICER ON THE BASIS OF ABOVE FACTS OBSERVED THAT T HE SALE CONSIDERATION HAD NOT BEEN DEPOSITED IN CAPITAL GAIN ACCOUNT SCHEME B EFORE THE DUE DATE SPECIFIED FOR FILING OF RETURN OF INCOME, WHICH WAS 31 ST JULY, 2008. HOWEVER, THE AO HELD THAT THE PROVISIONS OF SEC. 54 (2) MADE IT CLEAR THAT THE DEPOSIT OF SALE CONSIDERATION IN THE SPECIFIED SCHE ME WAS TO BE MADE BEFORE THE DUE DATE FOR FURNISHING OF RETURN, WHICH WAS 31 ST JULY, 2008. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF EXEMPTION UNDER SEC. 54 AT RS.47,70,000/-. 4. BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED BY T HE ASSESSEE THAT UNDER SEC. 49(1) OF THE INCOME-TAX ACT, 1961, WHEN A CAPI TAL ASSET IS ACQUIRED BY AN ASSESSEE BY GIFT, INHERITANCE, PARTITION OF AN H UF, OR OTHER SPECIFIED MODE, THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER ACQUIRED IT. AS PER SEC. 48, THE COST OF ACQUISITION OF THE CAPITAL ASSET WILL BE INDEXED AS PER THE COS T INFLATION IN CASE IN THE FIRST 4 YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE OR OF THE YEAR BEGINNING ON 1.4.1981, WHICHEVER IS LATER. UNDER SEC. 55(2)(B)( II), WHERE A CAPITAL ASSET BECOMES THE PROPERTY OF THE ASSESSEE BY ANY OF THE MODES SPECIFIED IN SEC. 49(1) AND THE CAPITAL ASSET WAS ACQUIRED BY THE PRE VIOUS OWNER PRIOR TO 1.4.1981, THE ASSESSEE IS ENTITLED TO SUBSTITUTE TH E FAIR MARKET VALUE OF THE ASSET AS ON 1.4.1981 AS THE ACTUAL COST. IT WAS TH EREFORE, ARGUED BEFORE THE CIT(A) THAT THE READING OF THE SECTIONS TOGETHER, DENYING THE BENEFIT OF INDEXATION FOR THE PERIOD FOR WHICH THE ASSET WAS H ELD BY THE PREVIOUS OWNER, CONTRADICTS THE VERY PURPOSE OF THE PROVISIO NS. THE ASSESSEE RELIED ON SEVERAL DECISIONS OF ITAT INCLUDING THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DCIT VS. MANJULA J. SHAH, 318 I TR 417 (MUMBAI)(SB). 5. AS REGARDS SECOND GROUND, IT WAS ARGUED THAT THE AO HAD ADOPTED A HYPER TECHNICAL STAND TO DISALLOW THE CLAIM OF EXEM PTION UNDER SEC. 54 BY STATING THAT THE UNUTILIZED CAPITAL GAIN SHOULD HAV E BEEN DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE FO R FILING THE RETURN. THE COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DEC ISION OF HONBLE GUWAHATI HIGH COURT IN THE CASE OF CIT VS. RAJESH KUMAR JALA N, 286 ITR 274, WHEREIN IT WAS HELD THAT IN SEC. 54(2), SECTION 139 CANNOT MEAN ONLY SECTION 139(1), BUT IT MEAN ALL SUB SECTIONS OF SECTION 139 . UNDER SEC. 139(4), AN ASSESSEE COULD FILE THE RETURN OF INCOME UPTO ONE Y EAR FROM THE END OF THE 5 RELEVANT ASSESSMENT YEAR; HENCE AN ASSESSEE COULD F ULFILL THE REQUIREMENT UNDER SECTION 54 UNTIL THAT DATE. SINCE THE ASSESS EE HAD PURCHASED THE NEW PROPERTY BEFORE THE EXPIRY OF TIME UNDER SEC. 139(4 ), THE ASSESSING OFFICER SHOULD NOT HAVE DENIED THE BENEFIT OF SEC. 54F OF T HE ACT. 6. THE LEARNED CIT(A) RELYING ON THE DECISION OF SP ECIAL BENCH IN THE CASE OF MANJULA J. SHAH (SUPRA), HELD THAT FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAINS, THE FIRST YEAR IN WHICH THE CAP ITAL ASSET WAS HELD BY THE ASSESSEE HAS TO BE DETERMINED TO WORK OUT THE INDEX ED COST OF ACQUISITION AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH CAPI TAL ASSET WAS HELD BY THE PREVIOUS OWNER. HE, THEREFORE, HELD THAT THE INDEX ED COST OF ACQUISITION OF THE CAPITAL ASSET ACQUIRED BY THE ASSESSEE THROUGH INHERITANCE HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PR EVIOUS OWNER FIRST HELD THE ASSET. HE, THEREFORE, DECIDED THE FIRST ISSUE IN FAVOUR OF THE ASSESSEE. AS REGARDS THE SECOND GROUND, THE LEARNED CIT(A) HELD THAT THE ASSESSEE COULD HAVE FURNISHED THE RETURN OF INCOME UNDER SEC. 139( 4) FOR ANY PREVIOUS YEAR AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE REQUIREMENT OF SEC. 54 FOR EX EMPTION OF CAPITAL GAINS COULD BE FULFILLED WITHIN THE TIME LIMIT OF SEC. 13 9(4) AND NOT UNDER SEC. 139(1). HE ALSO OBSERVED THAT NO OTHER JUDGMENT OF THE HIGH COURTS HAS COME TO HIS KNOWLEDGE. HE, THEREFORE, RELIED ON TH E DECISION OF GUWAHATI 6 HIGH COURT IN THE CASE OF RAJESH KUMAR JALAN (SUPRA ) AND DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MANJULA J. SHA H (SUPRA) AND HELD THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION UNDER SEC. 5 4 FOR INVESTMENT OF CAPITAL GAINS IN NEW RESIDENTIAL HOUSE. 7. BEFORE US, THE LEARNED SR. DEPARTMENTAL REPRESEN TATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE BECAME OWNER OF THE PROPERTY IN 1994 AND THEREFORE, THE CO ST OF ACQUISITION SHOULD BE TAKEN WITH REFERENCE TO THE YEAR 1994. THE AO, THEREFORE, HAS CORRECTLY ARRIVED AT THE INDEXED COST FROM THE DATE WHEN HE B ECAME THE OWNER. AS REGARDS SECOND ISSUE, THE LEARNED SR. DR SUBMITTED THAT THE ASSESSEE SHOULD HAVE INVESTED THE SALE CONSIDERATION BEFORE THE DUE DATE OF FILING THE RETURN UNDER SEC. 139(1). ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE PLA CED RELIANCE ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MA NJULA J. SHAH (SUPRA) AS ALSO ON THE DECISION OF THE HONBLE GUWAHATI HIGH C OURT IN THE CASE OF RAJESH KUMAR JALAN (SUPRA) AND PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT VS. JAGRITI AGGARWAL, 339 ITR 610 (P&H). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACTS THAT THE ASSESSEE BECAME OWNER OF THE PROPERTY ON THE DEATH OF HIS WI FE WHO ACQUIRED 7 PROPERTY FROM HER MOTHER. THE SAID PROPERTY WAS AC QUIRED BY HER MOTHER BEFORE 1.4.1981. UNDER SEC. 49(1) WHERE THE CAPITA L ASSET BECOMES THE PROPERTY OF THE ASSESSEE UNDER THE MODES SPECIFIED THEREIN, THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT AS INCREASED BY T HE COST OF ANY IMPROVEMENT OF THE ASSET INCURRED OR BORNE BY THE P REVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. IN THE CASE BEFORE US, THE PREVIOUS OWNER OF THE PROPERTY WAS HIS WIFE, WHO ACQUIRED THE PROPERT Y BY WAY OF INHERITANCE. THE SAID PROPERTY WAS PURCHASED BY HER MOTHER BEFOR E 1.4.1981. IN THE CASE OF HIS WIFE COST OF ACQUISITION WILL BE TAKEN AS ON 1.4.1981. THEREFORE, THE COST OF PREVIOUS OWNER IN THE HANDS OF THE ASSESSEE WILL BE THE COST IN THE HANDS OF HIS WIFE. IN VIEW OF THESE FACTS, IT IS C LEAR THAT THE COST OF ACQUISITION HAS TO BE TAKEN AS ON 1.4.1981. 9. NOW, COMING TO THE COST OF INDEXATION, IN THE CA SE OF PREVIOUS OWNER, THE COST OF ACQUISITION IS TO BE AS ON 1.4.1981, IT WILL BE ILLOGICAL TO APPLY THE COST INDEXATION WITH REFERENCE TO THE DATE ON WHICH THE ASSESSEE BECAME THE OWNER OF THE PROPERTY. THEREFORE, COST OF INDEXATI ON HAS TO BE WITH EFFECT FROM 1.4.1981, THE DATE ON WHICH THE COST OF ACQUIS ITION WAS TAKEN IN THE HANDS OF THE PREVIOUS OWNER. IN VIEW OF THESE FACT S, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LEARNED CIT(A). OUR V IEW IS SUPPORTED BY THE 8 DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DC IT VS. MANJULA J. SHAH (SUPRA). 10. NOW, COMING TO SECOND ISSUE, THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MISS JAGRITI AGGARWAL (SUPRA) HAS HELD THAT SUB- SEC. (4) OF SEC. 139 PROVIDES THE EXTENSION PERIOD OF LIMITATION AS AN EXCEPTION TO SUB-SEC.(1) OF SEC. 139 OF THE ACT. S UB-SEC. (4) WAS IN RELATION TO THE TIME ALLOWED TO AN ASSESSEE UNDER SUB-SEC.(1 ) TO FILE THE RETURN. THEREFORE, SUCH PROVISION WAS NOT AN INDEPENDENT PR OVISION, BUT RELATES TO THE TIME CONTEMPLATED UNDER SUB-SEC.(1) OF SEC. 139 . THEREFORE, SUB-SEC.(4) HAS TO BE READ ALONG WITH SUB-SEC.(1). THEREFORE, THE DUE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SEC. 139(1) OF THE ACT W AS SUBJECT TO EXTENDED PERIOD PROVIDED UNDER SEC.139(4) OF THE ACT. SIMIL AR VIEW WAS TAKEN BY HONBLE GUWAHATI HIGH COURT IN THE CASE OF RAJESH K UMAR JALAN (SUPRA). DURING THE COURSE OF HEARING THE LEARNED SR. DR COU LD NOT CITE A CONTRARY DECISION TO WHAT HAS BEEN HELD BY THE HONBLE GUWAH ATI HIGH COURT AND HONBLE PUNJAB & HARYANA HIGH COURT. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT, IT IS HELD THAT SINCE THE ASSESSEE HAD INVESTED IN THE NEW PROPERTY WITHIN TH E TIME ALLOWED UNDER SEC. 139(4) OF THE ACT, THE ASSESSEE WILL BE ENTITLED FO R EXEMPTION UNDER SEC. 54 OF THE ACT TO THE EXTENT THE AMOUNT INVESTED IN THE NEW PROPERTY. 9 ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT(A) ALLOWING RELIEF IN RESPECT OF BOTH THE ISSUES. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 12. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 20 TH JANUARY, 2012. SD/- SD/- (DIVA SINGH) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20 TH JANUARY, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.