INCOME TAX OFFICER (IT) 3(2)(1), MUMBAI V. FIRDAUS D MADON, MUMBAI

ITA 574/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4720 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SOMAIYA
• Assessee Lawyers: ISHRAQ CONTRACTOR
• Keywords: Cost of acquisition; Set aside; Capital Gains
• Section: 143(3); 201

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI R.C. SHARMA ( A M) & SHRI PAWAN SINGH ( J M) I.T.A. NO. 574 /MUM/ 201 8 (ASSESSMENT YEAR 20 14 - 15 ) ITO (IT) - 3(2)(1) 16 TH FLOOR ROOM NO. 1627 AIR INDIA BUILDING NARIMAN POINT MUMBAI - 400 021. V S . MR. FIRDAUS D. MADON CNK & ASSOCIATES LLP 3 RD FLOOR, MISTRY BHAVAN, DINSHAW VACHHA ROAD, CHURCHGATE, MUMBAI - 400 020. PAN : ANIPM2647L ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI ISHRAQ CONTRACTOR DEPARTMENT BY SHRI NISHANT SOMAIYA DATE OF HEAR ING 26 . 2 . 201 9 DATE OF PRONOUNCEMENT 26 . 2 . 201 9 O R D E R PER R.C. SHARMA (AM) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) FOR A.Y. 2014 - 15, IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE INCOME TAX ACT. 2. GRO UNDS TAKEN BY THE REVENUE READS AS UNDER : - 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ERRED IN INCLUDING THE PERIOD OF HOLDING OF THE ASSETS BY THE PREVIOUS OWNER FOR THE PURPOSE OF COMPUTATION OF L ONG TERM CAPITAL GAIN, WHEREAS THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE ASSESSEE HAD BECOME THE OWNER OF THE PROPERTY AFTER THE DEATH OF HIS PREVIOUS OWNER.' 2. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 3. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 2 3. RIVAL CONTENTIONS HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE WAS JOINT OWNER OF AN ANCESTRAL RESIDENTIAL PROPERTY, KNOWN AS GOOL VILLA ALONGWITH HIS BROTHER MR. NAUSHAD MADON. THE ASSESSEE HAS HAD INHERITED 50% SHARE THEREIN. DURING THE YEAR THE ASSESSEE SOLD PROPERTY AND CLAIMED CAPITAL GAIN AS PER INDEXATION COST OF HOUS E RELATING TO F.Y. 1981 - 82. THE LEARNED ASSESSING OFFICER VIDE HIS ORDER DATED 23.12.2016 HAS DISALLOWED THE APPELLANT'S CLAIM FOR INDEXATION FROM THE FINANCIAL YEAR 1981 - 82 ON THE GROUND THAT AS PER THE EXPLANATION (III) OF SECTION 48 OF THE INCOME TAX ACT, 1961 FOR COMPUTING THE INDEXED COST OF ACQUISITION, THE BASE YEAR HAS TO BE THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE AND NOT THE PREVIOUS OWNER OF THE ASSET. THE LEGAL FICTION OF THE PREVIOUS OWNER OF THE PROPERTY HAS BEEN CREATED ONLY FOR THE PURPOSE OF DETERMINING THE DATE OF ACQUISITION AND THE COST OF ACQUISITION. 4. BY THE IMPUGNED ORDER, LEARNED CIT(A) ALLOWED ASSESSEES CLAIM AFTER OBSERVING AS UNDER : - I AGREE WITH THE SUBMIS SION OF THE APPELLANT THAT THE DATE OF ACQUISITION OF THE PROPERTY SHOULD BE TAKEN 1981 - 82 WHEN THE FIRST OWNER PURCHASED IT. IN TERMS OF SECTION 49(1 )(2) OF THE IT ACT. THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS MANJULA SHAH IN APPEAL NO . 3378 OF 2010 HAS PUT TO REST THE CONTROVERSY. THE HON'BLE HIGH COURT HAS CATEGORICALLY GIVEN RULING THAT THE INDEX COST OF ACQUISITION HAS TO BE COMPUTED IN WHICH THE PREVIOUS OWNER HELD THE ASSET AND NOT THE YEAR IN WHICH THE APPELLANT BECOME THE OWNER OF THE ASSET. HENCE, I DIRECT THE AO TO RECOMPUTE CAPITAL GAINS BY TAKING THE INDEX COST OF ACQUISITION OF 1981 - 82. 5. AGAINST THE ABOVE ORDER OF LEARNED CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS A ND FOUND THAT THE PROPERTY WAS ACQUIRED BY THE ASSESSEE THROUGH INHERITANCE FROM HIS FATHER, THEREFORE WAS ELIGIBLE FOR INDEXATION OF COST AS PER THE YEAR OF HOLDING OF THE PROPERTY BY THE FATHER. SINCE FATHER HAD ACQUIRED PROPERTY PRIOR TO A.Y. 1981 - 82, T HE ASSESSEE HAS CORRECTLY CLAIMED DEDUCTION AS PER INDEXED COST OF ACQUISITION IN 3 A.Y. 1981 - 82 FOLLOW ING THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. MANJULA J. SHAH (16 TAXMAN 42) , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEA RNED CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 26 . 2 . 201 9 . SD/ - SD/ - (PAWAN SINGH ) (R.C. SHARMA ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 26 / 2 / 20 1 9 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// ( SENIOR P RIVATE S ECRETARY ) P S ITAT, MUMBAI