ACIT, Trivandrum V. Anjana Mohan, Trivandrum

ITA 50/COCH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2604 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 18-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-01-2011
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: K THOMAS JACOB
• Keywords: Capital asset; Gift; Cost of acquisition
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 50/COCH/2011 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 1,THIRUVANANTHAPURAM. VS. MS. ANJANA MOHAN, TC-29/1769, PADMA VILLA AIRPORT ROAD, TRIVANDRUM-695008. [PAN:ANUPM 8676R] (REVENUE-APPELLANT) (ASSESSEE- RESPONDENT) REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR ASSESSEE BY SHRI K.THOMAS JACOB, FCA DATE OF HEARING 18/02/2012 DATE OF PRONOUNCEMENT 12/04/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE CHALLENGIN G THE ORDER DATED 29-09-2010 PASSED BY LD CIT(A)-III, KOCHI FOR THE ASSESSMENT Y EAR 2006-07 ON THE FOLLOWING ISSUES:- (A) THE COST INFLATION INDEX TO BE ADOPTED FOR THE PURP OSE OF COMPUTATION OF LONG TERM CAPITAL GAIN. (B) LONG TERM CAPITAL GAIN ASSESSABLE ON THE SALE OF PR OPERTY SOLD BY THE FATHER OF THE ASSESSEE AS POWER OF ATTORNEY OF THE ASSESSEE. 2. THE FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. A PERSON NAMED SHRI P.K. PARAMESWARAN NAIR ACQUIRED AN AGRICULTURAL LAN D ADMEASURING 112.418 CENTS IN ANCHAMADA VILLAGE, KOWDIAR, TRIVANDRUM. H E TRANSFERRED THE SAID I.T.A. NO. 50/COCH/2011 2 PROPERTY IN THE YEAR 1980 IN FAVOUR OF HIS TWO CHIL DREN BY WAY OF A SETTLEMENT DEED VIZ., HIS SON NAMED SHRI SURESH BABU WAS GIVEN AN EXTENT OF 57 CENTS AND 47 SQUARE LINKS AND HIS DAUGHTER NAMED SMT. SHYAMAL A KUMARI WAS GIVEN AN EXTENT OF 55 CENTS AND 371 SQUARE LINKS. SMT. SHYA MALA KUMARI IS MARRIED TO SHRI V.K.MOHAN. THE ASSESSEE HEREIN AND HER YOUNGE R SISTER MS. ARCHANA MOHAN ARE THE CHILDREN OF THE SMT. SHYAMALA KUMARI AND SH RI V.K.MOHAN. 3. ON 09.07.1984, SHRI SURESH BABU GIFTED THE PROPERTY ACQUIRED BY HIM BY WAY OF GIFT FROM HIS FATHER, VIZ., 57 CENTS AND 47 AQUARE LINKS, IN FAVOUR OF HIS NIECES VIZ., MS. ANJANA MOHAN, THE ASSESSEE HEREIN AND MS. ARCHANA MOHAN. SINCE THEY WERE MINORS AT THAT POINT OF TIME, SHRI SURESH BABU EXECUTED A TRUST DEED AND APPOINTED THEIR PARENTS VIZ., SHRI V.K.MOH AN AND SMT. SHYAMALA KUMARI AS TRUSTEES WITH THE CONDITION THAT THE TRUS TEES SHALL HOLD THE PROPERTY IN TRUST AND FOR THE BENEFIT OF THE BENEFICIARIES VIZ. , MS. ANJANA MOHAN AND MS. ARCHANA MOHAN. FURTHER THEY SHOULD TRANSFER THE TR UST PROPERTY IN EQUAL SHARES IN FAVOUR OF THE BENEFICIARIES UPON THEIR ATTAINING MAJORITY. THUS, THE ASSESSEE HEREIN AND HER SISTER GOT RIGHTS OVER 28.5235 CENTS EACH OVER THE PROPERTY GIFTED BY THEIR MATERNAL UNCLE SHRI SURESH BABU AFTER THEY BECAME MAJORS. 4. SMT. SHYAMALA KUMARI, THE MOTHER OF THE ASSE SSEE HEREIN, SETTLED THE LAND ADMEASURING 55 CENTS AND 371 SQUARE LINKS BY WAY OF GIFT IN FAVOUR OF HER SPOUSE SHRI V.K.MOHAN IN THE YEAR 2005, VIDE SETTLE MENT DEED NO.850/2005. SHRI V.K.MOHAN, IN TURN SETTLED THE SAID PROPERTY I N FAVOUR MS. ANJANA MOHAN, THE ASSESSEE HEREIN, BY WAY OF GIFT ON 08-06-2005, VIDE SETTLEMENT DEED NO.2244/05/I. ACCORDINGLY, THE ASSESSEE HEREIN BEC AME THE OWNER OF 55 CENTS AND 371 CENTS, WHICH WAS ORIGINALLY ACQUIRED BY HER MOTHER SMT. SHYAMALA KUMARI BY WAY OF GIFT FROM SHRI PARAMESWARAN NAIR. 5. FOR THE SAKE OF CONVENIENCE, WE SHALL DESCRIB E THE 28.5235 CENTS OF LAND REFERRED TO IN PARAGRAPH 3 SUPRA AS PROPERTY NO.1 AND THE 55 CENTS AND 371 SQUARE LINKS REFERRED TO IN PARAGRAPH 4 SUPRA AS P ROPERTY NO.2. I.T.A. NO. 50/COCH/2011 3 6. SUBSEQUENTLY, THE ASSESSEE HEREIN EXECUTED AN IRREVOCABLE POWER OF ATTORNEY ON 13-07-2005 IN FAVOUR OF HER FATHER SHRI V.K.MOHA N TO MANAGE AND DEAL WITH HER PROPERTIES VIZ., PROPERTY NO.1 AND PROPERTY NO. 2. ON THE VERY SAME DAY, MS. ARCHANA MOHAN, THE SISTER OF THE ASSESSEE HEREIN AL SO EXECUTED A POWER OF ATTORNEY IN FAVOUR OF SHRI V.K.MOHAN IN RESPECT OF 28.5235 CENTS (HER SHARE IN PROPERTY NO.1) OF LAND. THUS, SHRI V.K.MOHAN BECAM E POWER OF ATTORNEY HOLDER OF ENTIRE EXTENT OF 112.418 CENTS. 7. THE ENTIRE EXTENT OF 112.418 CENTS WAS LATER SOLD A CONSTRUCTION COMPANY NAMED M/S NIKUNJAM CONSTRUCTION (P) LTD BY WAY OF A SALE DEED DATED 28.05.2005. THOUGH THE SALE DEED WAS DATED 28.05.2 005, THE ACTUAL REGISTRATION TOOK PLACE ON 17.08.2005. IT IS PERTINENT TO MENTI ON ABOUT CERTAIN INFIRMITIES IN THE SAID SALE DEED. AS STATED EARLIER, THE SALE DE ED IS DATED 28.05.2005. THE POWER OF ATTORNEY IN FAVOUR OF SHRI V.K.MOHAN WAS E XECUTED BOTH BY THE ASSESSEE HEREIN AND HER SISTER MS. ARCHANA MOHAN ON 13-07-2005, I.E., SUBSEQUENT TO 28.05.2005. HOWEVER, IN PAGE NO.2 OF THE SALE DEED DATED 28.05.2005, THE PARTIES HAVE REFERRED TO THE POWER OF ATTORNEY EXECUTED ON 13.07.2005. SIMILARLY, REFERENCE TO THE SETTLEMENT DEED EXECUTED BY SHRI V.K.MOHAN ON 08.06.2005 (SUBSEQUENT TO 28.05.2005) IN FAVOUR OF THE ASSESSEE HEREIN, ALSO FINDS PLACE IN PAGE 3 OF THE SALE DEED . ALL THESE FACTS SHOW THAT THE DATE OF EXECUTION OF SALE DEED CANNOT BE 28.05.2005 , AS MENTIONED IN THE CONVEYANCE DEED. UNDER THESE SET OF FACTS, THE DAT E OF EXECUTION OF SALE DEED COULD BE SOME TIME BETWEEN 13.07.2005 (DATE OF EXEC UTION OF POWER OF ATTORNEY) AND 17.8.2005 (THE DATE OF REGISTRATION). 8. THE ASSESSEE HEREIN DECLARED LONG TERM CAPIT AL GAINS ON SALE OF PROPERTY NO.1. BUT SHE DID NOT DECLARE ANY CAPITAL GAIN ON THE SALE OF PROPERTY NO.2 ON THE PLEA THAT SHE NEVER GOT THE POSSESSION OF THAT PROPERTY AND FURTHER THE SALE PROCEEDS WERE RECEIVED AND ENJOYED BY HER FATHER SH RI V.K.MOHAN. IT IS ALSO PERTINENT TO NOTE THAT SHRI V.K.MOHAN DECLARED THE LONG TERM CAPITAL GAINS ON I.T.A. NO. 50/COCH/2011 4 SALE OF PROPERTY NO.2 IN HIS RETURN OF INCOME AND C LAIMED EXEMPTION U/S 54 ON THE VALUE OF RESIDENTIAL HOUSE PROPERTY ACQUIRED BY HIM. 9. THE ASSESSING OFFICER RE-COMPUTED THE LONG T ERM CAPITAL GAIN ON SALE OF PROPERTY NO.1 BY MAKING MANY ADJUSTMENTS. ONE OF S UCH ADJUSTMENTS RELATE TO THE COST INFLATION INDEX RELATING TO THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. THE ASSESSEE ADOPTED THE COST INFLAT ION INDEX OF 125 APPLICABLE FOR THE FINANCIAL YEAR 1984-85, SINCE SHE BECAME TH E OWNER OF THE PROPERTY NO.1, BY VIRTUE OF SETTLEMENT DEED DATED 09-07-1984. HOW EVER, THE ASSESSING OFFICER DID NOT ACCEPT THE SAME. HE REFERRED TO CLAUSE (II I) OF EXPLANATION TO SEC. 48 OF THE ACT, WHICH DEFINES THE TERM INDEXED COST OF AC QUISITION AS UNDER:- INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INFLATION I NDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST IN FLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSES SEE OR FOR THE YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 1981, WHICHEVER IS LATER. THE ASSESSING OFFICER PLACED RELIANCE ON THE WORDS FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE AND ACCORDINGLY HELD THAT THE ASSESSEE CAN BE CONSIDERED TO HAVE HELD THE PROPERTY ONLY FROM THE DATE WHEN SHE BECAME MAJOR. SINCE THE DATE OF BIRTH OF THE ASSESSEE HER EIN WAS 08-04-1974, THE ASSESSING OFFICER HELD THAT THE ASSESSEE BECAME MAJ OR IN THE FINANCIAL YEAR 1992- 93 AND ACCORDINGLY ADOPTED THE COST INFLATION INDEX OF 223 APPLICABLE TO THE FINANCIAL YEAR 1992-93, FOR THE PURPOSE OF WORKING OUT CAPITAL GAIN. 10. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED TH AT THE PROVISIONS OF SEC. 49(1) PROVIDES FOR ADOPTION OF THE COST TO THE PREVIOUS O WNER AS THE COST OF THE CAPITAL ASSET TO THE ASSESSEE ALSO, IF THE PROPERTY IS RECE IVED UNDER A GIFT OR WILL. IT WAS FURTHER SUBMITTED THAT, AS PER THE PROVISIONS OF SE C. 2(42A) OF THE ACT, THE PERIOD OF HOLDING OF THE ASSET BY THE PREVIOUS OWNER SHALL ALSO BE INCLUDED FOR DETERMINING THE TIME PERIOD IN THE HANDS OF THE ASS ESSEE, IN A CASE WHERE THE CAPITAL ASSET BECOME THE PROPERTY OF THE ASSESSEE B Y WAY OF GIFT OR WILL. FURTHER I.T.A. NO. 50/COCH/2011 5 IT WAS SUBMITTED THAT, AS PER THE PROVISIONS OF SEC . 55(2)(B)(II), THE ASSESSEE WAS HAVING AN OPTION TO ADOPT THE MARKET VALUE AS ON 1. 4.1981, SINCE THE PROPERTY WAS ACQUIRED BY SHRI PARAMESWARAN NAIR BEFORE THAT DATE. ACCORDINGLY IT WAS CONTENDED THAT THE ASSESSEE SHALL BE DEEMED TO HAVE HELD THE PROPERTY FROM 1980 ONWARDS AND HENCE THE COST INFLATION INDEX REL ATING TO THE FINANCIAL YEAR 1981-82 SHOULD BE CONSIDERED FOR THE PURPOSE OF COM PUTING THE INDEXED COST OF ACQUISITION. THE ASSESSEE ALSO PLACED RELIANCE ON CERTAIN DECISION RENDERED BY VARIOUS BENCHES OF THE TRIBUNAL. THE LD CIT(A) WAS CONVINCED WITH THE SUBMISSIONS MADE BY THE ASSESSEE AND ACCORDINGLY DI RECTED THE ASSESSING OFFICER TO ADOPT THE COST INFLATION INDEX PERTAINING TO THE FINANCIAL YEAR 1981-82. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH IS ISSUE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. BEFORE US THE LD COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DEC ISION DATED 13-02-2012 RENDERED BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF ARUN SHUNGLOO TRUST VS. CIT IN ITA NO.116/2011, WHEREIN AN IDENTICAL IS SUE WAS DECIDED BY THE HIGH COURT IN FAVOUR OF THE ASSESSEE. IN THE ABOVE SAID CASE, A REFERENCE WAS MADE TO THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. MANJULA J SHAH (2012)(204 TAXMAN 691)(2012)(249 CTR (BOM) 270 ) (WRONGLY MENTIONED BY LD CIT(A) AS (2011)(16 TAXMAN 42)) AND THE HONB LE DELHI HIGH COURT EXTRACTED WITH APPROVAL THE FOLLOWING OBSERVATIONS MADE BY HONBLE BOMBAY HIGH COURT IN THE CASE CITED ABOVE:- 17. WE SEE NO MERIT IN THE ABOVE CONTENTION. AS RI GHTLY CONTENDED BY MR. RAI, LEARNED COUNSEL FOR THE ASSESSEE, THE INDEXED COST OF ACQUISITION HAS TO BE DETERMINED WITH REFERENCE TO THE COST INFLATI ON INDEX FOR THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE AS SESSEE. SINCE THE EXPRESSION HELD BY THE ASSESSEE IS NOT DEFINED UN DER S. 48 OF THE ACT, THAT EXPRESSION HAS TO BE UNDERSTOOD AS DEFINED UND ER S. 2 OF THE ACT. EXPLANATION 1(I)(B) TO S. 2(42A) OF THE ACT PROVIDES THAT IN DETERMINING THE PERIOD FOR WHICH AN ASSET IS HELD BY AN ASSESSEE UN DER A GIFT, THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS O WNER SHALL BE INCLUDED. AS THE PREVIOUS OWNER HELD THE CAPITAL ASSET FROM 2 9TH JAN., 1993, AS PER EXPLN. 1(I)(B) TO S. 2(42A) OF THE ACT, THE ASSESSEE IS DEEMED TO HAVE HELD I.T.A. NO. 50/COCH/2011 6 THE CAPITAL ASSET FROM 29TH JAN., 1993. BY REASON O F THE DEEMED HOLDING OF THE ASSET FROM 29TH JAN., 1993, THE ASSESSEE IS DEEMED TO HAVE HELD THE ASSET AS A LONG-TERM CAPITAL ASSET. IF THE LONG -TERM CAPITAL GAINS LIABILITY HAS TO BE COMPUTED UNDER S. 48 OF THE ACT BY TREATING THAT THE ASSESSEE HELD THE CAPITAL ASSET FROM 29TH JAN., 199 3, THEN, NATURALLY IN DETERMINING THE INDEXED COST OF ACQUISITION UNDER S . 48 OF THE ACT, THE ASSESSEE MUST BE TREATED TO HAVE HELD THE ASSET FRO M 29TH JAN., 1993 AND ACCORDINGLY THE COST INFLATION INDEX FOR 1992-93 WO ULD BE APPLICABLE IN DETERMINING THE INDEXED COST OF ACQUISITION. 18. IF THE ARGUMENT OF THE REVENUE THAT THE DEEMING FICTION CONTAINED IN EXPLN. 1(I)(B) TO S. 2(42A) OF THE ACT CANNOT BE APP LIED IN COMPUTING THE CAPITAL GAINS UNDER S. 48 OF THE ACT IS ACCEPTED, T HEN, THE ASSESSEE WOULD NOT BE LIABLE FOR LONG-TERM CAPITAL GAINS TAX, BECA USE, IT IS ONLY BY APPLYING THE DEEMED FICTION CONTAINED IN EXPLN. 1(I)(B) TO S. 2(42A) AND S. 49(1)(II) OF THE ACT, THE ASSESSEE IS DEEMED TO HAVE HELD THE ASSET FROM 29TH JAN., 1993 AND DEEMED TO HAVE INCURRED THE COST OF ACQUIS ITION AND ACCORDINGLY MADE LIABLE FOR THE LONG-TERM CAPITAL GAINS TAX. TH EREFORE, WHEN THE LEGISLATURE BY INTRODUCING THE DEEMING FICTION SEEK S TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED UND ER A GIFT OR WILL AND THE CAPITAL GAINS UNDER S. 48 OF THE ACT HAS TO BE COMP UTED BY APPLYING THE DEEMED FICTION, IT IS NOT POSSIBLE TO ACCEPT THE CO NTENTION OF REVENUE THAT THE FICTION CONTAINED IN EXPLN. 1(I)(B) TO S. 2(42A) OF THE ACT CANNOT BE APPLIED IN DETERMINING THE INDEXED COST OF ACQUISIT ION UNDER S. 48 OF THE ACT. 19. IT IS TRUE THAT THE WORDS OF A STATUTE ARE TO B E UNDERSTOOD IN THEIR NATURAL AND ORDINARY SENSE UNLESS THE OBJECT OF THE STATUTE SUGGESTS TO THE CONTRARY. THUS, IN CONSTRUING THE WORDS ASSET WAS HELD BY THE ASSESSEE IN CL. (III) OF EXPLN. TO S. 48 OF THE ACT, ONE HAS TO SEE THE OBJECT WITH WHICH THE SAID WORDS ARE USED IN THE STATUTE. IF ON E READS EXPLN. 1(I)(B) TO S. 2(42A) TOGETHER WITH SS. 48 AND 49 OF THE ACT, I T BECOMES ABSOLUTELY CLEAR THAT THE OBJECT OF THE STATUTE IS NOT MERELY TO TAX THE CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY AN ASSESSEE BY INCURRING THE COST OF ACQUISITION, BUT ALSO TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ASSET INTER ALIA ACQUIRED BY AN ASSESSEE UN DER A GIFT OR WILL AS PROVIDED UNDER S. 49 OF THE ACT WHERE THE ASSESSEE IS DEEMED TO HAVE INCURRED THE COST OF ACQUISITION. THEREFORE, IF THE OBJECT OF THE LEGISLATURE IS TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITA L ASSET ACQUIRED UNDER A GIFT OR WILL BY INCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER IN DETERMINING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE ASSESSEE, THEN THAT OBJECT CANNOT BE DE FEATED BY EXCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER WHILE DETERMINING THE INDEXED COST OF ACQUISITION OF THAT ASSET TO THE ASSESSEE. I.T.A. NO. 50/COCH/2011 7 IN OTHER WORDS, IN THE ABSENCE OF ANY INDICATION IN CL. (III) OF THE EXPLANATION TO S. 48 OF THE ACT THAT THE WORDS ASSE T WAS HELD BY THE ASSESSEE HAS TO BE CONSTRUED DIFFERENTLY, THE SAID WORDS SHOULD BE CONSTRUED IN ACCORDANCE WITH THE OBJECT OF THE STAT UTE, THAT IS, IN THE MANNER SET OUT IN EXPLN. 1(I)(B) TO S. 2(42A) OF THE ACT. 19. IT IS TRUE THAT THE WORDS OF A STATUTE ARE TO B E UNDERSTOOD IN THEIR NATURAL AND ORDINARY SENSE UNLESS THE OBJECT OF THE STATUTE SUGGESTS TO THE CONTRARY. THUS, IN CONSTRUING THE WORDS ASSET WAS HELD BY THE ASSESSEE IN CL. (III) OF EXPLN. TO S. 48 OF THE ACT, ONE HAS TO SEE THE OBJECT WITH WHICH THE SAID WORDS ARE USED IN THE STATUTE. IF ON E READS EXPLN. 1(I)(B) TO S. 2(42A) TOGETHER WITH SS. 48 AND 49 OF THE ACT, I T BECOMES ABSOLUTELY CLEAR THAT THE OBJECT OF THE STATUTE IS NOT MERELY TO TAX THE CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY AN ASSESSEE BY INCURRING THE COST OF ACQUISITION, BUT ALSO TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ASSET INTER ALIA ACQUIRED BY AN ASSESSEE UN DER A GIFT OR WILL AS PROVIDED UNDER S. 49 OF THE ACT WHERE THE ASSESSEE IS DEEMED TO HAVE INCURRED THE COST OF ACQUISITION. THEREFORE, IF THE OBJECT OF THE LEGISLATURE IS TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITA L ASSET ACQUIRED UNDER A GIFT OR WILL BY INCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER IN DETERMINING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE ASSESSEE, THEN THAT OBJECT CANNOT BE DE FEATED BY EXCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER WHILE DETERMINING THE INDEXED COST OF ACQUISITION OF THAT ASSET TO THE ASSESSEE. IN OTHER WORDS, IN THE ABSENCE OF ANY INDICATION IN CL. (III) OF THE EXPLANATION TO S. 48 OF THE ACT THAT THE WORDS ASSE T WAS HELD BY THE ASSESSEE HAS TO BE CONSTRUED DIFFERENTLY, THE SAID WORDS SHOULD BE CONSTRUED IN ACCORDANCE WITH THE OBJECT OF THE STAT UTE, THAT IS, IN THE MANNER SET OUT IN EXPLN. 1(I)(B) TO S. 2(42A) OF THE ACT. 20. TO ACCEPT THE CONTENTION OF THE REVENUE THAT TH E WORDS USED IN CL. (III) OF THE EXPLN. TO S. 48 OF THE ACT HAS TO BE RE AD BY IGNORING THE PROVISIONS CONTAINED IN S. 2 OF THE ACT RUNS COUNTE R TO THE ENTIRE SCHEME OF THE ACT. SEC. 2 OF THE ACT EXPRESSLY PROVIDES TH AT UNLESS THE CONTEXT OTHERWISE REQUIRES, THE PROVISIONS OF THE ACT HAVE TO BE CONSTRUED AS PROVIDED UNDER S. 2 OF THE ACT. IN S. 48 OF THE ACT , THE EXPRESSION ASSET HELD BY THE ASSESSEE IS NOT DEFINED AND, THEREFORE , IN THE ABSENCE OF ANY INTENTION TO THE CONTRARY THE EXPRESSION ASSET HEL D BY THE ASSESSEE IN CL. (III) OF THE EXPLANATION TO S. 48 OF THE ACT HAS TO BE CONSTRUED IN CONSONANCE WITH THE MEANING GIVEN IN S. 2(42A) OF T HE ACT. IF THE MEANING GIVEN IN S. 2(42A) IS NOT ADOPTED IN CONSTR UING THE WORDS USED IN S. 48 OF THE ACT, THEN THE GAINS ARISING ON TRANSFE R OF A CAPITAL ASSET ACQUIRED UNDER A GIFT OR WILL WILL BE OUTSIDE THE P URVIEW OF THE CAPITAL GAINS TAX WHICH IS NOT INTENDED BY THE LEGISLATURE. THEREFORE, THE I.T.A. NO. 50/COCH/2011 8 ARGUMENT OF THE REVENUE WHICH RUNS COUNTER TO THE L EGISLATIVE INTENT CANNOT BE ACCEPTED. THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. MANJULA J.SHAH (318 ITR (AT) 417) HAS BEEN UPHELD BY HONBLE BOMBAY HIGH COURT. THE DECISION OF LD CIT(A) IS IN ACCORDANCE WITH THE DECISION OF HONBLE BOMBA Y HIGH COURT REFERRED SUPRA. HENCE WE UPHOLD HIS ORDER ON THIS ISSUE. 12. THE NEXT ISSUE CONTESTED BY THE REVENUE IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN DELETING THE CAPITAL GAIN RELATING TO PROPERTY NO.2. LET US RECAPITULATE THE FACTS RELATING TO THE SAME. THE M OTHER OF THE ASSESSEE SMT. SHYAMALA KUMARI OBTAINED THE PROPERTY NO.2 BY WAY O F GIFT FROM HER FATHER AND SHE TRANSFERRED IT BY WAY OF A SETTLEMENT DEED IN F AVOUR OF HER SPOUSE SHRI V.K.MOHAN. THE SAID SHRI V.K.MOHAN, IN TURN, TRANS FERRED IT BY WAY OF A SETTLEMENT DEED IN FAVOUR OF HER DAUGHTER MS. ANJAN A MOHAN, THE ASSESSEE HEREIN ON 08-06-2005. MS. ANJANA MOHAN EXECUTED A POWER OF ATTORNEY IN FAVOUR OF SHRI V.K.MOHAN ON 13-07-2005, WHO SOLD TH E SAME TO A CONSTRUCTION COMPANY. THE SALE PROCEEDS WERE RECEIVED BY SHRI V .K.MOHAN AND HE UTILIZED THE SAME FOR PURCHASING ANOTHER PROPERTY. 13. SINCE THE ASSESSEE BECAME THE OWNER OF THE P ROPERTY NO.2, BY VIRTUE OF THE GIFT DEED EXECUTED BY SHRI V.K.MOHAN IN HER FAV OUR ON 08-06-2005, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HEREIN IS ONLY THE OWNER OF THE PROPERTY NO.2 AND HER FATHER SHRI V.K. MOHAN HAS EXECUTED TH E SALE DEED ONLY AS A POWER OF ATTORNEY HOLDER OF THE ASSESSEE HEREIN. ACCORDI NGLY, THE ASSESSING OFFER HELD THAT THE ASSESSEE HEREIN IS THE PRINCIPAL AND HER F ATHER IS HER AGENT. ACCORDINGLY HE ASSESSED THE CAPITAL GAIN ARISING ON ITS SALE, W HICH WAS WORKED OUT TO RS.1,45,28,987/-, IN THE HANDS OF THE ASSESSEE HERE IN. SINCE THE NEW HOUSE WAS PURCHASED IN THE NAME OF SHRI V.K.MOHAN, THE ASSESS ING OFFICER REJECTED THE CLAIM OF EXEMPTION U/S 54F. 14. BEFORE LD CIT(A), THE ASSESSEE CONTENDED AS UN DER:- I.T.A. NO. 50/COCH/2011 9 (A) THE PROPERTY NO.2 WAS SOLD BY SHRI V.K.MOHAN AND ENTIRE SALE PROCEEDS WAS RECEIVED BY HIM THROUGH HIS BANK ACCOU NT. FURTHER HE HAS APPROPRIATED THE SALE PROCEEDS FOR PURCHASE OF PROP ERTIES IN HIS NAME. (B) SHRI V.K.MOHAN MADE THE SETTLEMENT IN FAVOUR OF THE ASSESSEE WITHOUT THE KNOWLEDGE OR CONSENT OF THE ASSESSEE. FURTHER NEITHER THE POSSESSION NOR THE SALE CONSIDERATION WAS TRANSFERR ED TO THE ASSESSEE. HENCE THE ASSESSEE HEREIN NEVER BECAME THE BENEFICIAL OWN ER OF THE PROPERTY NO.2. (C) SHRI V.K.MOHAN HAS DECLARED THE CA PITAL GAIN ARISING OUT OF SALE OF PROPERTY NO.2 IN HIS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2006-07 AS PER THE PROVISIONS OF SEC. 60 OF THE ACT. (D) AS PER THE PROVISIONS OF SEC. 60 OF THE ACT, ALL INCOME ARISING TO ANY PERSON BY VIRTUE OF A TRANSFER SHALL, WHERE THERE I S NO TRANSFER OF ASSET FROM WHICH THE INCOME ARISES, BE CHARGEABLE TO INCOME TA X AS THE INCOME OF THE TRANSFEROR AND SHALL BE INCLUDED IN HIS TOTAL INCOM E. THE ASSESSEE ALSO RELIED UPON CERTAIN CASE LAW. 15. THE LD CIT(A) WAS CONVINCED WITH THE CONTE NTIONS MADE BY THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION OF RS.1,45,28, 987/- ON THE FOLLOWING REASONING:- (A) SHRI V.K. MOHAN HAS DECLARED THE CAPITAL GAIN ARISING ON SALE OF PROPERTY NO.2 AND THE SAME WAS ACCEPTED BY HIS INCO ME TAX OFFICER IN THE ORDER PASSED U/S 143(3) OF THE ACT. (B) SECTION 47(III) STATES AS TO WHAT DOES NOT CO NSTITUTE A TRANSFER. AS PER SEC. 47(III) ANY TRANSFER OF A CAPITAL ASSET UNDER A GIFT OR WILL OR AN IRREVOCABLE TRUST DOES NOT CONSTITUTE TRANSFER. HENCE THE PROP ERTY GIFTED TO THE ASSESSEE WAS NOT A TRANSFER AND HENCE THE PROPERTY SHALL BELONG TO SHRI V.K.MOHAN. (C) THE PROVISIONS OF SEC. 60 OF THE ACT, THE INC OME ARISING TO A PERSON BY VIRTUE OF A TRANSFER, WHERE THERE IS NO TRANSFER OF ASSET FROM WHICH THE INCOME IS RECEIVED, SHALL BE CHARGEABLE TO TAX AS THE INCOME OF THE TRANSFEROR. (D) SHRI V.K. MOHAN INITIALLY GIFTED THE PROPERTY WITH A REVOCABLE GIFT DEED TO HIS DAUGHTER AND DID NOT PART AWAY WITH THE POS SESSION OF THE SAME TO HER. I.T.A. NO. 50/COCH/2011 10 (E) BY VIRTUE OF THE POWER OF ATTORNEY GIVEN BY T HE ASSESSEE, SHRI V.K.MOHAN BECAME ABSOLUTE OWNER AND HENCE HE HAS AC TED AS THE UNDISPUTED OWNER OF THE PROPERTY NO.2. HENCE HE RECEIVED THE ENTIRE SALE CONSIDERATION THROUGH HIS BANK ACCOUNT AND ALSO MADE REINVESTMENT IN HIS NAME IN ORDER TO CLAIM EXEMPTION FROM CAPITAL GAIN. HENCE HE WAS AC TING AS A PRINCIPAL HIMSELF AND NOT AS AN AGENT OF THE ASSESSEE HEREIN. (F) THE GIFT DEED ALSO SUFFERS FROM ONE MORE MAJO R LACUNAE FOR THE REASON THAT IT HAS NOT BEEN POINTED OUT S TO WHETHER THE A SSESSEE HEREIN, AS A DONEE, ACCEPTED THE GIFT OR NOT. ACCEPTANCE OF GIFT BY TH E DONEE IS MANDATORY UNDER THE TRANSFER OF PROPERTY ACT. (G) SINCE THE CAPITAL GAIN HAS ALREADY BEEN ASSES SED IN THE HANDS OF SHRI V.K.MOHAN, THERE IS NO LOSS OF REVENUE TO THE DEPAR TMENT. NO MALAFIDE INTENTIONS ARE PROVED IN SHOWING THE CAPITAL GAIN I N THE HANDS OF SHRI V.K.MOHAN AND NOT IN THE CASE OF APPELLANT. 16. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THE LD CIT(A) HAS HELD THAT THERE WA S NO TRANSFER OF ASSET BY SHRI V.K.MOHAN TO THE ASSESSEE HEREIN BY VIRTUE OF THE S ETTLEMENT DEED EXECUTED ON 08-06-2005, MAINLY ON THE FOLLOWING REASONING:- (A) THE POSSESSION WAS NEVER HANDED OVER THE ASSE SSEE HEREIN. (B) THE ASSESSEE HAS NOT ACCEPTED THE GIFT. (C) THE PROVISIONS OF SEC. 60 OF THE ACT ARE APP LICABLE IN THE INSTANT CASE. (D) AS PER THE PROVISIONS OF SEC. 47(III) OF THE ACT, THE TRANSFER BY WAY OF GIFT IS NOT CONSIDERED AS A TRANSFER AND HENCE SHRI V.K.MOHAN CONTINUED TO BE THE OWNER OF THE PROPERTY NO.2. 17. FOR EXAMINING THE VARIOUS REASONING CITED B Y THE LD CIT(A), IT IS PERTINENT TO EXTRACT BELOW THE RECITALS MADE IN THE GIFT DEED DATED 08-06-2005:- (EXTRACT IS FROM FREE HAND TRANSLATION OF THE MALAYALAM VERSION ) I.T.A. NO. 50/COCH/2011 11 SETTLEMENT DEED EXECUTED ON THIS 8 TH DAY OF JUNE, 2005 BY V.K.MOHAN , S/O M.K. PILLAI, AGED 61, BUSINESS, PADMAVILLA, T.C .29/1736, PALKULANGARA MURI, PETTAH VILLAGE, THIRUVANANTHAPURAM TALUK, IN FAVOUR OF DAUGHTER ANJANA MOHAN , D/O SHYAMALA, AGED 31 YEARS, PADMAVILLA, T.C.29/1 736, PALKULANGARA MURI, PETTAH VILLAGE, THIRUVANANTHAPUR AM TALUK. THE SAID ANJANA MOHAN IS MY DAUGHTER AND MEMBER OF THE FAMIL Y AND SHE DEPENDING ON ME AND TOWARDS MY LOVE AND AFFECTION T O HER AND FOR HER FUTURE WELL BEING I HAVE EXECUTED THIS SETTLEMENT DEED VOLUNTARILY CONVEYING MY 55.371 CENTS OF PROPERTY AND BUILDING BEARING N O. T.C.9/145, SITUATED THEREIN AS DETAILED IN THE SCHE DULE HEREIN SITUATED IN SASTHAMANGALAM VILLAGE IN YOUR FAVOUR RELINQUISHING MY OWNERSHIP, POSSESSION, LIBERTY, EASEMENT AND ALL OTHER RIGHTS OVER THE SAID PROPERTY AND HANDED OVER THE POSSESSION OF THE PROP ERTY TO YOU ON THIS DAY . FROM THIS DAY ONWARDS YOU CAN POSSESS ENJOY THE PROPERTY AS ABSOLUTE OWNER AND EFFECT MUTATION AND PAY PROPERTY TAX AND CHANGE THE OWNERSHIP OF THE ELECTRICITY AND WAT ER METER IN THE NAME OF ANJANA MOHAN AND YOU CAN USE THE PATHWAY NOW EXI ST FOR TRANSPORTATION AND HAS EVERY RIGHT OF ALIENATION AL SO. AND I AGREED AND CONSENTED FOR THE SAME. A PLAIN READING OF THE RECITALS WOULD SHOW THAT SHR I V.K.MOHAN HAS HANDED OVER THE POSSESSION OF THE PROPERTY NO.2 TO THE ASSESSEE HEREIN. 18. FURTHER FOLLOWING RECITALS MADE IN THE IRREVO CABLE POWER OF ATTORNEY DATED 13-07-2005 EXECUTED BY THE ASSESSEE HEREIN IN FAVOU R OF SHRI V.K. MOHAN SHOW THAT THE ASSESSEE HEREIN ACCEPTED THE GIFT AND WAS ALSO IN POSSESSION OF THE PROPERTY:- ..AND WHEREAS THE PROPERTY HAVING AN EXTENT OF 55.371 CEN TS (22.40 ARES) OF LAND COMPRISED IN SY. NO.217/9-33-1 (22.500 CENTS) 217/9 (1.200 CENTS), 206/4 (21.371 CENTS) 217/9-34 (3 CEN TS) AND 209/8-13 (7.250 CENTS) OF SASTHAMANGALAM VILLAGE HAS BEEN ACQUIRED BY ME AS I.T.A. NO. 50/COCH/2011 12 PER SETTLEMENT DEED NO. 2244/05 DATED 08-06-05 OF SASTHAMANGALAM SUB REGISTRAR OFFICE, THIRUVANANTHAP URAM. 19. AS PER THE PROVISIONS OF SEC. 47(III) OF THE ACT, THE TRANSFER OF PROPERTY BY WAY OF SETTLEMENT DEED BY SHRI V.K.MOHAN TO THE ASS ESSEE HEREIN IS NOT CONSIDERED AS A TRANSFER AND HENCE THE SAME IS NO T ASSESSABLE TO CAPITAL GAINS. ON THE EXECUTION OF THE SETTLEMENT DEED, THE ASSESS EE HEREIN BECAME ABSOLUTE OWNER OF THE PROPERTY NO.2 AS PER THE TRANSFER OF P ROPERTY ACT. THE PROVISIONS OF TRANSFER OF PROPERTY ACT ARE NOT OVERRIDDEN BY SEC. 47(III) OF THE ACT. HENCE, IN OUR VIEW, THE LD CIT(A) HAS MISDIRECTED HIMSELF IN INTERPRETING THE SCOPE OF PROVISIONS OF SEC. 47(III) OF THE ACT. 20. SINCE THERE WAS ABSOLUTE TRANSFER OF PROPERTY NO.2 BY WAY OF SETTLEMENT DEED, THERE IS NO SCOPE TO INTERPRET THAT THERE WAS TRANSFER OF INCOME ONLY WITHOUT TRANSFER OF ASSET SO AS TO ATTRACT THE PROV ISIONS OF SEC. 60 OF THE ACT. 21. THE FOREGOING DISCUSSIONS WOULD SHOW THAT T HE VARIOUS REASONING GIVEN BY LD CIT(A) ARE NOT IN ACCORDANCE WITH THE LAW AND AR E LIABLE TO BE STRUCK DOWN. ACCORDINGLY, WE HOLD THAT THE ASSESSEE HEREIN BECAM E THE ABSOLUTE OWNER OF THE PROPERTY NO.2 UPON THE EXECUTION OF SETTLEMENT DEED BY HER FATHER SHRI V.K.MOHAN. FURTHER WE ALSO HOLD THAT SHRI V.K.MOHA N HAS EXECUTED THE SALE DEED IN FAVOUR OF THE CONSTRUCTION COMPANY ONLY AS THE POWER OF ATTORNEY HOLDER AND HENCE HE CAN ONLY BE CONSIDERED AS AN AGENT OF THE ASSESSEE HEREIN. THOUGH THE SALE PROCEEDS WERE RECEIVED BY SHRI V.K. MOHAN AND ALSO APPROPRIATED BY HIMSELF, HE IS STILL ACCOUNTABLE FO R THE SAME TO THE ASSESSEE HEREIN. ACCORDINGLY, THE ASSESSING OFFICER WAS RIG HT IN LAW IN ASSESSING THE CAPITAL GAIN ARISING ON TRANSFER OF PROPERTY NO.2 I N FAVOUR OF THE CONSTRUCTION COMPANY. FURTHER THE ASSESSEE WOULD NOT BE ENTITLE D FOR EXEMPTION U/S 54F OF THE ACT ON THE PURCHASE OF PROPERTY BY HER FATHER. I.T.A. NO. 50/COCH/2011 13 22. IN VIEW OF THE FOREGOING, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE ADDITION OF RS.1,45,28,987/- PERTAI NING TO THE LONG TERM CAPITAL GAIN ARISING ON SALE OF PROPERTY NO.2, MADE BY THE ASSESSING OFFICER. 23. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 12-04-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 12TH APRIL, 2013 GJ COPY TO: 1. MS. ANJANA MOHAN, PADMA VILLA, TC-29/1769, AIRPO RT ROAD, TRIVANDRUM- 695008. 2.THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 1,THIRUVANANTHAPURAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, KOC HI. 4.THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR ) I.T.A.T, COCHIN