INCOME TAX OFFICER (IT) - 3(2)(1), MUMBAI V. ARUN C MAHALE, MUMBAI

ITA 623/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3256 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S H USMANI
• Assessee Lawyers: GIRISH P JAIN
• Keywords: Cost of acquisition; Tax effect
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 623/MUM/2018 ASSESSMENT YEAR: 2014 - 15 INCOME TAX OFFICER (INTERNATIONAL TAXATION) 3(2)(1), 16 TH FLOOR, ROOM NO. 1627, AIR INDIA BLDG. NARIMAN POINT, MUMBAI - 21. VS. SHRI ARUN C MAHALE 101 - 102, PEACE HAVEN, N.M. KALE MARG, OFF GOKHALE ROAD, DADAR, MUMBAI - 400028. PAN NO. ARXPM8033D APPELLANT RESPONDENT REVENUE BY : MR. S.H. USMANI , SR. DR ASSESSEE BY : MR. GIRISH P. JAIN , AR DATE OF HEARING : 05 /0 2 /201 9 DATE OF PRONOUNCEMENT : 07/02/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2014 - 15. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 57, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). SHRI ARUN C. MAHALE ITA NO. 623/MUM/2018 2 2. THE GROUND OF APPEAL FILED BY THE REVENUE READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN INCLUDING THE PERIOD OF HOLDING OF THE ASSETS BY THE PREVIOUS OWNER FOR THE PURPOSE OF COMPUTATION OF LONG 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 FATHER AND MOTHER. 3. IN A NUTSHELL, THE FACTS ARE THAT THE A SSESSEE IS A NON - RESIDENT INDIVIDUAL HAVING INCOME FROM CAPITAL GAINS AND INCOME FROM OTHER SOURCES DURING THE YEAR FOR WHICH APPEAL HAS BEEN PREFERRED. THE ASSESSEE ALONG WITH HIS SISTER HAD SOLD AN IMMOVABLE ANCESTRAL PROPERTY AT 17 - A, JALDARSHAN, NEPEAN SEA ROAD, MUMBAI - 400036. THE SAID PROPERTY WAS OWNED BY THEIR PARENTS. THE PARENTS HAD PURCHASED THE PROPERTY ON 27.10.1970 WHICH WAS INHERITED BY THE ASSESSEE AND HIS SISTER AFTER THE DEATH OF THEIR PARENTS ON 29.03.2009. IN THE RETURN OF INCOME FILED FO R THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE , RELYING ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT V. MANJULA J. SHAH (2012) 204 TAXMAN 42 (BOM) , HAD CLAIMED INDEXATION BENEFITS ON THE LONG TERM CAPITAL HELD BY HIM FROM 01.04.1981 AND NOT FROM T HE DATE OF INHERITANCE. HOWEVER, THE ASSESSING OFFICER (AO) OBSERVED THAT THE R EVENUE HAS FILED SLP AGAINST THE ABOVE ORDER BEFORE THE SUPREME COURT. FURTHER, THE AO AFTER REFERRING TO SECTION 48, 49 AND 55 OF THE ACT , REJECTED THE CLAIM OF THE ASSESSEE AN D HELD THAT THE BENEFIT OF INDEXATION HAS TO BE TAKEN FROM THE YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. SHRI ARUN C. MAHALE ITA NO. 623/MUM/2018 3 4. IN APPEAL, THE LD. CIT(A), RELYING ON THE DECISION IN MANJULA J. SHAH (SUPRA) , HELD THAT THE BENEFIT OF INDEXATION HAS TO BE TAKEN FROM THE YEAR IN WHICH THE ASSET WAS FIRST HELD BY PREVIOUS OWNER AND NOT FROM THE YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER PASSED BY THE AO. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE DE CISION IN MANJULA J. SHAH (SUPRA) AND SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE FACTS DELINEATED AT PARA 3 HEREINBEFORE ARE NOT IN DISPUTE. THE ONLY QUESTION IS W HETHER, THE BENEFIT OF INDEXATION HAS TO BE TAKEN FROM THE YEAR IN WHICH THE ASSET WAS FIRST HELD BY PREVIOUS OWNER AND NOT FROM THE YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE? IT HAS BEEN HELD IN MANULA J. SHAH (SUPRA) THAT THE EXPRESSION HELD BY T HE ASSESSEE USED IN EXPLANATION (III) TO SECTION 48 HAS TO BE UNDERSTOOD IN THE CONTEXT AND HARMONIOUSLY WITH OTHER SECTIONS AND AS THE COST OF ACQUISITION STIPULATED IN SECTION 49 MEANS THE COST FOR WHICH THE PREVIOUS OWNER HAD ACQUIRED THE PROPERTY, THE TERM HELD BY THE ASSESSEE SHOULD BE INTERPRETED TO INCLUDE THE PERIOD DURING WHICH THE PROPERTY WAS HELD BY THE PREVIOUS OWNER. HENCE, INDEXATION OF COST OF IMPROVEMENT SHALL BE ALLOWED FROM THE DATE THE PREVIOUS OWNER ACQUIRED THAT ASSET. THE SLP FILED BY THE R EVENUE AGAINST THE ABOVE ORDER HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE ORDER DATED 18.09.2018 ON SHRI ARUN C. MAHALE ITA NO. 623/MUM/2018 4 TAX EFFECT BEING LESS THE THRESHOLD LIMIT MENTIONED IN CIRCULAR DATED 11.07.2018 AS AMENDED BY CIRCULAR DATED 20.08.2018 IS SUED BY CBDT. FURTHER, THE HONBLE DELHI HIGH COURT IN CASE OF ARUN SHUNGLOO TRUST (2012) 18 TAXMANN.COM 261 (DEL) , HAS ALSO HELD THAT BENEFIT OF INDEXATION COST OF IMPROVEMENT BY PREVIOUS OWNERS IN CASES COVERED BY SECTION 49 WOULD BE ALLOWED. RESPECT FULLY FOLLOWING THE ABOVE DECISIONS, WE UPHOLD THE ORDER OF THE LD. CIT(A) . 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/02/2019. SD/ - SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 07/02/2019 RAHUL SHARMA, SR. P.S. 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI