ITO (IT) 3(2)(1), MUMBAI V. CYRUS J.MEHTA, MUMBAI

ITA 5548/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0102 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Share purchase agreement; Cost of acquisition
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , , , BEFORE SHRI G. S. PANNU , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 5 54 8 / MUM/ 201 6 ( / ASSESSMENT YEAR: 20 1 2 - 13 ) INCOME TAX OFFICER (I NTERNATIONAL T AXATION ) 3(2)(1) ROOM NO.1628, 16 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400020 / VS. SHRI CYRUS J. MEHTA C/O. HASMUKH SHAH & CO., 409/410, DALAMAL CHAMBERS, NEW MARINE LINES, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AKRPM 5093 N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 08.08 .2017 / DATE OF PRONOUNCEMENT : 31 .0 8 .2017 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 15.06.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 56 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 12 - 13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - REVENUE BY : SHRI RAJESH KUMAR ASSESSEE BY: SHRI SANJAY PARIKH ITA NO. 5 54 8 /M/201 6 A.Y. 2012 - 13 2 1. WHETHER ON THE FACTS OR IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS ERRED IN ALLOWING THE INDEXATION WHILE COMPUTING THE CAPITAL GAINS ARISING ON THE TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSEE AFTER THE DEATH OF FATHER FROM THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET RELYING ON THE DECISION IN THE CASE OF MANJULA J. SHAH 355 ITR 474 (BOM) IGNORING THE FACT THAT THE REVENUES SLP IS PENDING AGAINST THE SAID DECISION. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND O R ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.2,46,19,735/ - ON 30.07.2012 FOR THE A.Y.2012 - 13. THE RETURN WAS PROCE SSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SH ORT THE ACT). THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICES U/S.143(2) AND 142(1) OF THE ACT WERE ISSUED AND DULY SERVED UPON THE ASSESSEE. THE ASSESSEE WAS A NON - RESIDENT INDIAN AND DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DECLARED HIS INCOME UNDER THE HEAD OF LONG TERM CAPITAL GAIN TO THE TUNE OF RS.2,26,52,375/ - AND INCOME FROM OTHER SOURCES TO THE TUNE OF RS.19,67,360/ - . AT THE TIME OF ASSESSMENT, THE ASSESSEE WAS ASK ED TO FURNISH THE COPY OF AGREEMENT, APPLICATION OF FUNDS AND WORKING OF LONG TERM CAPITAL GAIN. THE ASSESSEE SOLD THE IMMOVABLE PROPERTY FOR RS.7.50 CRORE. ON VERIFICATION OF THE AGREEMENT , IT WAS FOUND THAT THE PROPERTY WAS PURCHASED BY SHRI JAL MEHTA AND THE ASSESSEE SHRI CYRUS JAL MEHTA ON 11.07.1968. THE ASSESSEE ALSO FILED SHARE CERTIFICATE DATED 15 TH MAY 1972 IN THE NAME OF SHRI JAL JAMSHEDJI MEHTA AND THE ASSESSEE. SHRI JAL JAMSHEDJI MEHTA EXPIRED ON 05.01.2009. THEREFORE, THE ASSESSEE WAS ITA NO. 5 54 8 /M/201 6 A.Y. 2012 - 13 3 ASK ED TO EXPLAIN AS TO WHY 50% INDEXATION SHOULD NOT BE DISALLOWED BY ADOPTING FOR THE PURPOSE OF ACQUISITION THE SAID PROPERTY FROM F.Y.2008 - 09 AS SHRI JAL JAMSHEDJI MEHTA EXPIRED ON 05.01.2009. THE ASSESSEE TOOK THE PLEA OF SOLE OWNER BUT THE ASSESSING OFF ICER WAS NOT SATISFIED, THEREFORE THE 50% OF THE INDEXATION COST WAS DISALLOWED AND THE LONG TERM CAPITAL GAIN WAS ASSESSED TO THE TUNE OF RS. 2,78,48,310/ - AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 & 2 : - 4. UNDER THESE ISSUES THE REVENUE HAS FILED AN APPEAL AGAINST THE ALLOWANCE OF CLAIM OF LONG TERM CAPITAL GAIN ON THE GROUND THAT MANJULA J. SHAH 35 5 ITR 474 (BOMBAY) IS PENDING BEFORE THE HONBLE SUPREME COURT. HOWEVER, ON THE OTHER HAND, THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER IT IS NECESSARY TO ADVERT THE F INDING OF THE CIT(A) ON RECORD: - 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, CONTENTIONS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. ON PERUSAL OF THE SAME, IT CAN BE SEEN THAT THE APPELLANT HAS SHOWN INCOME OF RS.2,26,52,375/ - UNDER THE HE AD LONG TERM CAPITAL GAIN ON SALE OF A RESIDENTIAL HOUSE, IN WHICH THE APPELLANT SHARE WAS 100%. THE APPELLANT WAS OWING 50% SHARE IN PROPERTY SINCE PURCHASE OF THE PROPERTY IN 1968 AND GOT ADDITIONAL SHARE OF 50% IN THE PROPERTY AFTER DEATH OF THE ITA NO. 5 54 8 /M/201 6 A.Y. 2012 - 13 4 CO - OWN ER, HIS FATHER ON 05.01.2009. IN THE COMPUTATION OF LTCG ON SALE OF PROPERTY, THE APPELLANT HAS CLAIMED INDEXATION FROM 1981 - 82 ON VALUE OF PROPERTY AS ON 01.04.1981. HOWEVER THE AO CONSIDERED INDEXATION ON VALUE OF 50% SHARE IN PROPERTY FROM FINANCIAL Y EAR 2008 - 09 IN PLACE OF 1981 - 82. THE CONTENTION OF THE AO, IN THE MATTER OF SUCH CALCULATION OF INDEXED COST OF ACQUISITION, FOR THE PURPOSE OF TAXATION OF LONG TERM CAPITAL GAINS, IN THE CASE OF THE APPELLANT IS THAT, THE WORDS, FOR THE FIRST YEAR, UNDE R EXPLANATION (VII) TO SECTION 48 OF THE ACT, CLEARLY MEANS THE YEAR IN WHICH THE ASSESSEE HAS BECOME ELIGIBLE TO HOLD THE ASSET BY WAY OF ANY FORM OF OWNERSHIP. THE AO THUS CONTENDS THAT THE TERM, FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE A SSESSEE, MEANS THE YEAR IN WHICH THE ASSESSEE HAS FIRST POSSESSED THE PROPERTY IN PHYSICAL, CONSTRUCTIVE AND SYMBOLIC MANNER. THE LEARNED AO HAS THUS CONSIDERED THE FIRST YEAR UNDER EXPLANATION (III) TO SECTION 48, IN RESPECT OF THE 50% SHARE IN PROPER TY RECEIVED FROM HIS FATHER, TO MEAN THE FY 2008 - 09, BEING THE YEAR RELATED TO THE DEMISE OF HIS FATHER. THE CONTENTION OF AO REGARDING CONSIDERING THE YEAR OF ACQUISITION OF ADDITIONAL SHARE IN PROPERTY FOR INDEXATION IS NOT TENABLE. IN THIS CASE THE RE LIANCE IS PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. MANJULA J. SHAH, 355 ITR 474 (BOM), WHEREIN IT HAS ITA NO. 5 54 8 /M/201 6 A.Y. 2012 - 13 5 BEEN HELD THAT BY APPLYING THE DEEMING PROVISIONS CONTAINED IN THE EXPLANATION 1(I)(B) TO SECTION 2(42A) OF THE AC T, IN THE CASE OF PROPERTY ACQUIRED UNDER GIFT, WILL ETC. AS MENTIONED IN SECTION 49 OF THE ACT, THE ASSESSEE WILL BE DEEMED TO HAVE HELD AN ASSET FROM THE TIME IT WAS HELD BY THE PREVIOUS OWNER THEREOF. IN VIEW OF THE ABOVE DISCUSSION, THE APPELLANT IS J USTIFIED IN CONSIDERING THAT WHILE COMPUTING THE CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSEE AFTER THE DEATH OF FATHER, THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OW NER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET. ACCORDINGLY, THE AO IS DIRECTED TO GRANT THE INDEXATION BENEFIT ON 50% SHARE ACQUIRED BY THE APPELLANT DUE TO DEMISE OF HIS FATHER FROM FY 1981 - 82. THEREFORE, THE GROUND OF APPEAL IS ALLOWED. 5. ON APPRAISAL OF THE ABOVE MENTIONED ORDER , WE NOTICED THAT THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACTS OF THE CASE OF CIT VS. MANJULA J. SHAH, 355 ITR 474 (BOM). THE CIT(A) HAS RELIED UPON THE SAID C ASE AND ALLOWED THE CLAIM OF THE ASSESSEE. PENDING APPEAL BEFORE THE HON B LE SUPREME COURT NOWHERE BARRED ANY ADJUDICATION ON THE BASIS OF THE LAW SETTLED IN CIT VS. MANJULA J. SHAH, 355 ITR 474 (BOM). NO LAW OF ANY KIND CONTRARY TO THE LAW RELIED BY THE CIT(A) HAS BEEN PRODUCED BEFORE US. FINDING NO DISTINGUISHABLE MATERIAL, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIRE D TO BE ITA NO. 5 54 8 /M/201 6 A.Y. 2012 - 13 6 INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY , THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.3 : - 6. ISSUE NO. 3 IS FORMAL IN NATURE WHICH NOWHERE REQUIRE ANY ADJUDICATION. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER PRONOUNCED IN THE O PEN COURT ON 31.08. 2017 . SD/ - SD/ - ( G.S.PANNU ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 31.08. 2017 MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI