DCIT, Chandigarh V. M/s Sunena Garg, Chandigarh

ITA 543/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5449 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: RAJESH GARG
• Keywords: Capital asset; Gift; Cost of acquisition; Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 543/CHD/2010 ASSESSMENT YEAR: 2006-07 THE DCIT, VS. MS. SUNENA GARG, CIRCLE 5(1), CHANDIGARH CHANDIGARH PAN NO. AHJPG2645K (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAISHREE SHARMA RESPONDENT BY: SHRI RAJESH GARG ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A), CHANDIGARH RELATING TO ASSESSMENT YEAR 2006-07 AGAI NST THE ORDER PASSED UNDER SECTION 143(3) THE I.T. ACT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS OF APPEAL :- 2. WHETHER THE CIT(A) HAS NOT ERRED IN OBSERVING THE WORKING OF INDEXED COST OF ACQUISITION OF INCLUDE T HE AMOUNT OF INTEREST PAID ON BORROWED CAPITAL. 3. WHETHER THE CIT(A) HAS NOT ERRED IN OBSERVING THE APPRECIATE POSITION OF LAW AS LAID DOWN THROUGH INSERTION OF SECTION 55 OF THE INCOME TAX ACT, 1961 . 2 3. THE LIMITED ISSUE RAISED IN THE PRESENT APPEAL I S IN CONNECTION WITH THE COMPUTATION OF COST OF ACQUISITION OF THE ASSET S BY INCLUDING THE AMOUNT OF INTEREST ON BORROWED CAPITAL AND PART OF COST OF ACQUISITION AND THEREAFTER INDEXING THE SAME, WHICH IN TURN WAS DIR ECTED TO BE EXCLUDED FROM THE VALUE OF SALE CONSIDERATION OF COMPUTING T HE INCOME FROM LONG TERM CAPITAL GAINS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD SOLD THE PROPERTY AT MANIMAJRA FOR A TOTAL CONSIDERATION OF RS. 1.75 CRORES DURING THE YEAR. THE ASSESSEE HAD DECLARED LONG TERM CAPI TAL GAINS OF RS. 1.08 CRORES. THE ASSESSEE HAD COMPUTED THE INDEXED COST OF ACQUISITION OF PROPERTY AT RS. 66,81,747/- BY INDEXING THE TOTAL C OST OF THE PLOT AT RS. 7,40,000/- FROM FINANCIAL YEAR 1981-82. THEREAFT ER, THE INTEREST PAID ON LATE INSTALLMENT/S WAS TABULATED FROM YEAR TO YEAR I.E. STARTING FROM FINANCIAL YEARS 1981-82 TO 1987-88 AND THE SAME WAS INDEXED BY THE ASSESSEE. FURTHER, THE PAYMENTS TOWARDS CONSTRUCTI ON COST WAS MADE IN FINANCIAL YEAR 1994-95, 1995-96 AND 2000-01 AND THE SAME WAS ALSO INDEXED TO COMPUTE THE INDEXED COST OF ACQUISITION OF THE PROPERTY AT RS. 66.81 LACS. THE TABULATED DETAILS OF INDEXED COST OF ACQUISITION ARE INCORPORATED AT PAGES 2 & 3 OF THE ASSESSMENT ORDER AND AT PAGE 3 OF THE APPELLATE ORDER. THE ASSESSING OFFICER WAS OF THE V IEW THAT THE INDEXED COST OF ACQUISITION WAS NOT AS PER THE PROVISIONS O F SECTION 48 OF THE ACT. THE ASSESSING OFFICER WAS FURTHER OF THE VIEW THAT THE INDEXED COST ACQUISITION OF THE PROPERTY IS TO BE CALCULATED ON THE BASIS OF PAYMENTS OF PRINCIPAL (ACTUAL COST OF ACQUISITION) AMOUNT AS TA KEN FROM THE ALLOTMENT LETTER OF NOTIFIED AREA COMMITTEE DATED 9.12.1980 AND ACCORDINGLY THE ASSESSING OFFICER RECOMPUTED THE INDEXED COST BY CO NSIDERING THE INSTALLMENTS PAID FROM FINANCIAL YEARS 1981-82 TO 2 000-01 AND COMPUTED 3 THE SAME AT RS. 52,53,734/-. THE ASSESSEES CLAIM OF CONSIDERING THE TOTAL COST AS THE COST OF ACQUISITION IN THE FINANCIAL YE AR 1981-82 WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND FURTHER THE I NTEREST PAID IN ADDITION TO THE INSTALLMENTS PAID WAS NOT CONSIDERED AS PART OF COST OF ACQUISITION OF ASSET BY THE ASSESSING OFFICER. IN APPEAL THE C IT(A) HELD AS UNDER:- 9.I HAVE PERUSED THE ASSESSMENT RECORDS, THE SUBMI SSIONS OF THE COUNSEL AND THE REPORTED CASES RELIED UPON. I H AVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 48 & 55 OF T HE INCOME TAX ACT, 1961. AFTER A CAREFUL CONSIDERATION OF AL L THE FACTS OF THE CASE, I AGREE WITH THE COUNSEL THAT COST OF ACQUISITION OF PROPERTY SHALL MEAN TOTAL COST OF PROPERTY WHICH SHALL ALSO INCLUDE INTEREST PAID WHILE ACQUIRING THE PROPERTY THROUGH INSTALLMENTS. THE SO CALLED AMENDMENT IN SECTION 48 HAS IN NO WAY CHANGED THE DEFINITION OF COST. THE COST OF PROPERTY SHALL REMAIN THE AMOUNT AT WHICH THE SAME WAS PURCH ASED IRRESPECTIVE OF THE MANNER IN WHICH THE PAYMENT WAS MADE. IN THIS CASE, AS PER LETTER OF ALLOTMENT, THE TOTAL CONSIDERATION WAS SETTLED AT RS. 74,000/-. THIS IS THE COST OF ACQUISITION AND NOT THE AMOUNTS OF INSTALLMENTS PAI D IN DIFFERENT YEARS AND THE INDEXATION IS DEFINITELY TO BE DONE ON THIS AMOUNT. 10. THE PAYMENT OF INTEREST SHALL ALSO FORM A PART OF COST OF ACQUISITION AND INDEXED SEPARATELY PAYMENT WISE. T HE COST OF ACQUISITION AT RS. 66,81,747/- HAS THEREFORE, B EEN WORKED OUT CORRECTLY. 5. THE REVENUE IS IN APPEAL ONLY AGAINST THE WORKIN G OF INDEXED COST OF ACQUISITION OF THE AMOUNT OF INTEREST PAID ON DE LAYED PAYMENTS. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. THE LD. AR FOR THE ASSESSEE MADE A REFEREN CE TO THE MEANING OF 4 THE TERM COST OF ACQUISITION AND COST OF IMPROVEMENT AS PROVIDED U/S 55 OF THE ACT AND POINTED OUT THAT THERE WAS NO MER IT IN THE WORKING OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. UNDER THE PROVISIONS OF SECTION 48 & 55 OF THE ACT, THE M ODE OF COMPUTATION AND COST OF IMPROVEMENT & COST OF ACQUISITION READS AS UNDER:- MODE OF COMPUTATION 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAI NS SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY : (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO: PROVIDED THAT IN THE CASE OF AN ASSESSEE, WHO IS A NON-RESI DENT, CAPITAL GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BEING SHARES IN, OR DEBENTURES OF, AN INDIAN COMPANY SHALL BE COMPUTED BY CONVERTING T HE COST OF ACQUISITION, EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER AND THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET INTO THE SAME FOREIGN CURRENCY AS WAS INITIALLY UTILISED IN THE PURCHASE OF THE SHARES OR DEBENTURE S, AND THE CAPITAL GAINS SO COMPUTED IN SUCH FOREIGN CURRENCY SHALL BE RECONVER TED INTO INDIAN CURRENCY, SO, HOWEVER, THAT THE AFORESAID MANNER OF COMPUTATI ON OF CAPITAL GAINS SHALL BE APPLICABLE IN RESPECT OF CAPITAL GAINS ACCRUING OR ARISING FROM EVERY REINVESTMENT THEREAFTER IN, AND SALE OF, SHARES IN, OR DEBENTURES OF, AN INDIAN COMPANY : PROVIDED FURTHER THAT WHERE LONG-TERM CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, OTHER THAN CAPITAL GAIN ARISING TO A NON-RESIDENT FROM THE TRANSFER OF SHARES IN, OR DEBENTURES OF, A N INDIAN COMPANY REFERRED TO IN THE FIRST PROVISO, THE PROVISIONS OF CLAUSE (II) SHALL HAVE EFFECT AS IF FOR THE WORDS COST OF ACQUISITION AND COST OF ANY IMPROV EMENT, THE WORDS INDEXED COST OF ACQUISITION AND INDEXED COST OF ANY IMPROVEMENT HAD RESPECTIVELY BEEN SUBSTITUTED: [ PROVIDED ALSO THAT NOTHING CONTAINED IN THE SECOND PROVISO SHALL APPLY TO THE LONG-TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET BEING BOND OR DEBENTURE OTHER THAN CAPITAL INDEXED BONDS ISSUED BY THE GOVERNMENT :] 5 [ PROVIDED ALSO THAT WHERE SHARES, DEBENTURES OR WARRANTS REFERRED TO IN THE PROVISO TO CLAUSE (III) OF SECTION 47 ARE TRANSFERRED UNDER A GIFT OR AN IRREVOCABLE TRUST, THE MARKET VALUE ON THE DATE OF SUCH TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR A CCRUING AS A RESULT OF TRANSFER FOR THE PURPOSES OF THIS SECTION :] [ PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IN RESPEC T OF ANY SUM PAID ON ACCOUNT OF SECURITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE (NO. 2) ACT, 2004.] SECTION 55 READS AS UNDER:- MEANING OF COST OF IMPROVEMENT AND COST OF ACQUI SITION. (1) FOR THE PURPOSES OF SECTIONS 48 AND 49, ( A ) .. (B) COST OF ANY IMPROVEMENT, (1) IN RELATION TO A CAPITAL ASSET BEING GOODWILL OF A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR T HING OR RIGHT TO CARRY ON ANY BUSINESS] SHALL BE TAKEN TO BE NIL ; AND (2) IN RELATION TO ANY OTHER CAPITAL ASSET,] (I) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER OR THE ASSESSEE BEFORE THE [1ST DAY OF APRIL, [1981], MEANS ALL EXPENDITURE OF A CAPITAL NATURE INCURRED IN MAKING ANY ADDITIONS OR ALTERATIONS TO THE CAPITAL ASSET O N OR AFTER THE SAID DATE BY THE PREVIOUS OWNER OR THE ASSESSEE , AND (II) IN ANY OTHER CASE, MEANS ALL EXPENDITURE OF A CAPITAL NATURE INCURRED IN MAKING ANY ADDITIONS OR ALTERATIONS TO THE CAPITAL ASSET BY THE ASSESSEE AFTER IT BECAME HIS PROPERTY, AND, WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESS EE BY ANY OF THE MODES SPECIFIED IN SUB-SECTION (1) OF SECTIO N 49, BY THE PREVIOUS OWNER, BUT DOES NOT INCLUDE ANY EXPENDITURE WHICH IS DED UCTIBLE IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD INT EREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, OR INCOME FROM OTHER S OURCES, AND THE EXPRESSION IMPROVEMENT SHALL BE CONSTRUED ACC ORDINGLY. (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, COST OF ACQUISITION, (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWIL L OF A BUSINESS OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THIN G OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIA GE PERMITS OR LOOM HOURS, (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY TH E ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURC HASE PRICE ; AND 6 (II) IN ANY OTHER CASE NOT BEING A CASE FALLING UN DER SUB-CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 49, SHALL BE TAK EN TO BE NIL ; .. 7. UNDER THE PROVISIONS OF SECTION 48 OF THE INCOME TAX ACT, IT IS PROVIDED THAT WHILE COMPUTING THE INCOME FROM LONG TERM CAPITAL GAINS, THE INDEXED COST OF ACQUISITION AND INDEX COST OF IMPROVEMENT INCLUDING ANY EXPENDITURE INCURRED IN CONNECTION WITH THE TRA NSFER IS TO BE DEDUCTED FROM THE SALE CONSIDERATION. THE TERM COST OF AC QUISITION IS DEFINED U/S 55 (1)(C ) OF THE ACT WHICH TALKS ABOUT THE COST TO BE ADOPTED IN THE HANDS OF THE ASSESSEE IN RELATION TO THE ASSET(S) ACQUIRE D BY THE ASSESSEE VIDE DIFFERENT MODES OF ACQUISITION. THE COST OF ANY IM PROVEMENT TO THE CAPITAL ASSET IS DEFINED U/S 55(1)(B) OF THE ACT A S EXPENDITURE INCURRED AFTER THE ACQUISITION OF ASSETS BEING CAPITAL IN NA TURE INCLUDING THE COST OF ANY ADDITIONS / OR ALTERATIONS MADE TO THE CAPITAL ASSET AFTER ITS ACQUISITION. HOWEVER, THE SAID COST OF ANY IMPROVE MENTS DOES NOT INCLUDE ANY EXPENDITURE WHICH IS DEDUCTIBLE IN COMPUTING TH E INCOME CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES, INCOME FR OM HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, OR INCOME FROM OTHER SOURCES. UNDER SECTION 24(B) OF THE ACT, DEDUCTI ON OUT OF INCOME FROM HOUSE PROPERTY IS ALLOWABLE IN RESPECT OF ANY INTER EST PAYABLE ON THE CAPITAL RAISED FOR THE ACQUISITION OF THE PROPERTY, ITS CONSTRUCTION / RENOVATION / RENEWAL OR RE-CONSTRUCTION WITH BORROW ED CAPITAL. THE SAID PROVISION IS APPLICABLE WHILE DETERMINING THE COST OF IMPROVEMENT OF ANY CAPITAL ASSETS. HOWEVER, IN THE INSTANT CASE BEFOR E US, THE ISSUE RAISED IS IN CONNECTION WITH THE COST OF ACQUISITION OF THE P ROPERTY WHEREIN THE PRINCIPLE AMOUNT PAYABLE TO THE PRESCRIBED AUTHORIT Y WAS PAID IN INSTALLMENTS, AGAINST WHICH INTEREST WAS CHARGED BY THE SAID AUTHORITY FOR THE DELAY IN PAYMENT OF THE COST OF THE ASSET(S). S UCH INTEREST PAID BY THE 7 ASSESSEE IS TO BE INCLUDED AS PART OF THE COST OF A CQUISITION OF THE ASSETS FROM YEAR TO YEAR AND IS ENTITLED TO THE BENEFIT OF INDEXATION WHILE COMPUTING THE INDEXED COST OF ACQUISITION OF THE CA PITAL ASSET WHICH WAS SOLD DURING THE YEAR. WE UPHOLD THE ORDER OF CIT(A ) IN THIS REGARD AND ACCORDINGLY DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF MAY, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MAY, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH