DCIT 24(3), MUMBAI V. JAGDISHPRASAD PODDAR, MUMBAI

ITA 5286/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88394 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 11-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2013
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.5286/MUM/2013 ASSESSMENT YEAR: -2009-10 DCIT-24(3), R. NO. 701, C-11, 7 TH FLOOR, B.K.C, BANDRA (E) MUMBAI 51. VS.` JAGDISHPRASAD PODDAR, 65, UDOG BHAVAN, SONAWALA LANE, GOREGAON (E) MUMBAI 400063. PAN:- AABPP8024E APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14.5.2013 OF CI`T(A) FOR A.Y. 2009-10. THE REVENUE HAS RAISE D FOLLOWING GROUND:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT WHILE COMPUTING THE CAPITAL GAINS ARIS ING ON TRANSFER OF CAPITAL ASSETS ACQUIRED BY THE ASSESSEE FROM HIS FATHER, THE INDEX ED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PR EVIOUS OWNER FIRST HELD THE ASSETS IGNORING THE EXPLANATION TO SECTION 48 OF THE IT A CT WHICH STATES THAT THE AMOUNT WHICH WAS BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INFLATION INDEX FOR THE YEAR IN WHICH THE ASSETS IS TRANSFERRED BEA RS TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSETS WAS HELD BY THE ASSE SSEE. REVENUE BY SHRI HARI GOVIND SINGH ASSESSEE BY SHRI HARIDAS BHAT DATE OF HEARING 11.02.2015 DATE OF PRONOUNCEMENT 11.02.2015 ITA NO.5286/MUM/2013 ASSESSMENT YEAR: -2009-10 2 | P A G E 2. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN OF RS. 38,63,181/- ON SALE OF PROPERTY. THE PROPERTY IN Q UESTION WAS ACQUIRED BY THE ASSESSEE UNDER WILL FROM HIS FATHER IN THE YEAR 199 4-95. THE ASSESSEE HAS COMPUTED CAPITAL GAINS ON THE BASIS OF INDEXED COST OF ACQUISITION FROM THE YEAR IN WHICH THE PROPERTY IN QUESTION WAS PURCHASED BY THE FATHER OF THE ASSESSEE. THE ASSESSING OFFICER HAS REWORKED THE CAPITAL GAIN S CONSIDERING INDEXED COST OF ACQUISITION FROM THE YEAR IN WHICH THE PROPERTY WAS INHERITED BY THE ASSESSEE ON DEATH OF HIS FATHER IN THE YEAR 1994-95. 3. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF T HE ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE HIGH COURT IN THE CASE OF CIT VS. MANJULA SHAH 204 TAXMANN 691 (BOMBAY). IT IS PERTINENT TO NOTE THAT THERE IS NO DISPUTE AB OUT THE FACT THAT THE PROPERTY IN QUESTION WAS PURCHASE D BY THE FATHER OF THE ASSESSEE ON 30 TH SEPTEMBER 1972 AND HAS BEEN INHERITED BY THE ASSES SEE THROUGH WILL ON DEATH OF HIS FATHER ON 20.12.1994. THE ISSUE OF INDEXED COST OF PROPERTY IN QUESTION IS FULLY COVERED BY THE JUDGME NT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH ( SUPRA), THE HON'BLE HIGH COURT HAS HELD IN PARA 19 TO 22 AS UNDER:- 19) IT IS TRUE THAT THE WORDS OF A STATUTE ARE TO BE UNDERSTOOD IN THEIR NATURAL AND ORDINARY SENSE UNLESS THE OBJECT OF THE STATUTE SUG GESTS TO THE CONTRARY. THUS, IN CONSTRUING THE WORDS 'ASSET WAS HELD BY THE ASSESSE E' IN CLAUSE (III) OF EXPLANATION TO SECTION 48 OF THE ACT, ONE HAS TO SEE THE OBJECT WI TH WHICH THE SAID WORDS ARE USED IN ITA NO.5286/MUM/2013 ASSESSMENT YEAR: -2009-10 3 | P A G E THE STATUTE. IF ONE READS EXPLANATION 1(I)(B) TO SE CTION 2(42A) TOGETHER WITH SECTION 48 AND 49 OF THE ACT, IT BECOMES ABSOLUTELY CLEAR T HAT 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 UNDER A GIFT OR WILL AS PROVIDED UNDER SECTION 49 OF THE ACT WHERE THE ASSE SSEE IS DEEMED TO HAVE INCURRED THE COST OF ACQUISITION. THEREFORE, IF THE OBJECT O F THE LEGISLATURE IS TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ACQUIRED UNDER A G IFT 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 DEFEATED BY EXCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS H ELD 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 CLAUSE (III) OF THE EXPLANATION TO SECTION 48 OF THE ACT THAT THE WORDS 'ASSET WAS HEL D BY THE ASSESSEE' HAS TO BE CONSTRUED DIFFERENTLY, THE SAID WORDS SHOULD BE CON STRUED IN ACCORDANCE WITH THE OBJECT OF THE STATUTE, THAT IS, IN THE MANNER SET O UT IN EXPLANATION 1(I)(B) TO SECTION 2(42A) OF THE ACT. 20. TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE WORDS USED IN CLAUSE (III) OF THE EXPLANATION TO SECTION 48 OF TH E ACT HAS TO BE READ BY IGNORING THE PROVISIONS CONTAINED IN SECTION 2 OF THE ACT RUNS C OUNTER TO THE ENTIRE SCHEME OF THE ACT. SECTION 2 OF THE ACT EXPRESSLY PROVIDES THAT U NLESS THE CONTEXT OTHERWISE REQUIRES, THE PROVISIONS OF THE ACT HAVE TO BE CONSTRUED AS P ROVIDED UNDER SECTION 2 OF THE ACT. IN SECTION 48 OF THE ACT, THE EXPRESSION 'ASSET HEL D BY THE ASSESSEE' IS NOT DEFINED AND, THEREFORE, IN THE ABSENCE OF ANY INTENTION TO THE C ONTRARY THE EXPRESSION 'ASSET HELD BY THE ASSESSEE' IN CLAUSE (III) OF THE EXPLANATION TO SECTION 48 OF THE ACT HAS TO BE CONSTRUED IN CONSONANCE WITH THE MEANING GIVEN IN S ECTION 2(42A) OF THE ACT. IF THE MEANING GIVEN IN SECTION 2(42A) IS NOT ADOPTED IN C ONSTRUING THE WORDS USED IN SECTION 48 OF THE ACT, THEN THE GAINS ARISING ON TR ANSFER OF A CAPITAL ASSET ACQUIRED UNDER A GIFT OR WILL BE OUTSIDE THE PURVIEW OF THE CAPITAL GAINS TAX WHICH IS NOT INTENDED BY THE LEGISLATURE. THEREFORE, THE ARGUMEN T OF THE REVENUE WHICH RUNS COUNTER TO THE LEGISLATIVE INTENT CANNOT BE ACCEPTE D. 21) APART FROM THE ABOVE, SECTION 55(1)(B)(2)(II) O F THE ACT PROVIDES THAT WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE B Y ANY OF THE MODES SPECIFIED UNDER SECTION 49(1) OF THE ACT, NOT ONLY THE COST OF IMPR OVEMENT INCURRED BY THE ASSESSEE BUT ALSO THE COST OF IMPROVEMENT INCURRED BY THE PREVIO US OWNER SHALL BE DEDUCTED FROM THE TOTAL CONSIDERATION RECEIVED BY THE ASSESSEE WH ILE COMPUTING THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT. THE QUESTION OF DEDUCT ING THE COST OF IMPROVEMENT INCURRED BY THE PREVIOUS OWNER IN THE CASE OF AN AS SESSEE COVERED UNDER SECTION 49(1) OF THE ACT WOULD ARISE ONLY IF THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER IS INCLUDED IN DETERMINING THE PERIOD FOR WHI CH THE ASSET WAS HELD BY THE ASSESSEE. THEREFORE, IT IS REASONABLE TO HOLD THAT IN THE CASE OF AN ASSESSEE COVERED UNDER SECTION 49(1) OF THE ACT, THE CAPITAL GAINS L IABILITY HAS TO BE COMPUTED BY ITA NO.5286/MUM/2013 ASSESSMENT YEAR: -2009-10 4 | P A G E CONSIDERING THAT THE ASSESSEE HELD THE SAID ASSET F ROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER AND THE SAME ANALOGY HAS ALSO TO BE APPLIED IN DETERMINING THE INDEXED COST OF ACQUISITION. 22) THE OBJECT OF GIVING RELIEF TO AN ASSESSEE BY A LLOWING INDEXATION IS WITH A VIEW TO OFFSET THE EFFECT OF INFLATION. AS PER THE CBDT CIR CULAR NO.636 DATED 31/8/1992 [SEE 198 ITR 1 (ST)] A FAIR METHOD OF ALLOWING RELIEF BY WAY OF INDEXATION IS TO LINK IT TO THE PERIOD OF HOLDING THE ASSET. THE SAID CIRCULAR FURT HER PROVIDES THAT THE COST OF ACQUISITION AND THE COST OF IMPROVEMENT HAVE TO BE INFLATED TO ARRIVE AT .THE INDEXED COST OF ACQUISITION AND THE INDEXED COST OF IMPROVE MENT AND THEN DEDUCT THE SAME FROM THE SALE CONSIDERATION TO ARRIVE AT THE LONG T ERM CAPITAL GAINS. IF INDEXATION IS LINKED TO THE PERIOD OF HOLDING THE ASSET AND IN TH E CASE OF AN ASSESSEE COVERED UNDER SECTION 49(1) OF THE ACT, THE PERIOD OF HOLDING THE ASSET HAS TO BE DETERMINED BY INCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS H ELD BY THE PREVIOUS OWNER, THEN OBVIOUSLY IN ARRIVING AT THE INDEXATION, THE FIRST YEAR IN WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER WOULD BE THE FIRST YEAR FOR W HICH THE SAID ASSET WAS HELD BY THE ASSESSEE 4. SINCE THE ISSUE IS COVERED BY THE JUDGMENT OF HO NBLE JURISDICTIONAL HIGH COURT (SUPRA) AND THE CIT(A) HAS DECIDED THE ISSUE BY FOLLOWING THE ABOVE JUDGMENT OF HONBLE HIGH COURT, THEREFORE, WE DO NO T FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF CIT(A) QUA THIS ISSUE AND THE SAME IS UPHELD. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 11 TH DAY OF FEBRUARY 2015. SD/- SD/- (D.KARUNAKARA RAO) (VIJAY PAL RAO) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) MUMBAI DATED 11-02-2015 SKS SR. P.S, ITA NO.5286/MUM/2013 ASSESSMENT YEAR: -2009-10 5 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI