ITO (IT) 2(1), MUMBAI V. JAYESH SHETH, MUMBAI

ITA 6581/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8949 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 30-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J , MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL, J.M. AND SHRI N. K. BILLAIYA, A.M. ITA NO. : 6581/MUM/2011 ASSESSMENT YEAR : 2008-09 I.T.O. (INTERNATIONAL TAXATION) - 2(1), R.NO.014, SCINDIA HOUSE, BALLARD PIER, MUMBAI-400 038. VS. SHRI JAYESH SHETH VASAIKAR HOUSE, 296, CADELL ROAD, DADAR (W), MUMBAI-400 028 PAN NO: AVZPS 4465 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN RESPONDENT BY : NONE DATE OF HEARING : 30.08.2012 DATE OF PRO NOUNCEMENT : 05.09.2012 ORDER PER DINESH KUMAR AGARWAL, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 29.07.2011 PASSED BY THE LD. CIT(A)-11, MUMBA I FOR THE A.Y. 2008-09. 2. AT THE TIME OF HEARING NONE ATTENDED ON BEHALF O F THE ASSESSEE NOR FILED ANY APPLICATION FOR THE ADJOURNMENT OF THE CA SE. IT WAS, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL EXPARTE, QUA THE ASSESSEE, ON MERITS AFTER HEARING THE LD. DR. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE AN INDIVIDUAL IS A NON RESIDENT, FILED RETURN DECLARIN G TOTAL INCOME OF ITA NO : 6581/MUM/2011 SHRI JAYESH SHETH 2 `. 33,258/- WHICH WAS REVISED AT A TOTAL INCOME OF `. 11,54,657/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. OBSE RVED THAT THE ASSESSEE HAS SOLD HIS FLAT AT MALAVIYA ROAD, AT ROA D JUNCTION OF VIJAY PLOT STREET NO.10/11, RAJKOT FOR `. 98,00,000/- WHICH WAS INHERITED FROM HIS FATHER MR. JAMNADAS SHETH WHO EXPIRED ON 15.12. 2001. THE ASSESSEE REQUESTED THAT THE INDEX COST OF ACQUISITI ON OF FLAT SHOULD BE TAKEN FROM THE FIRST YEAR IN WHICH THE FLAT WAS HEL D BY HIS FATHER. HOWEVER, THE A.O. HAS ADOPTED INDEXED COST OF ACQUI SITION WITH REFERENCE TO FIRST YEAR IN WHICH THE FLAT WAS HELD BY THE ASS ESSEE AND HENCE THE A.O. APPLIED THE COST OF INFLATION INDEX AS APPLICA BLE TO FINANCIAL YEAR 2001-02 AND ACCORDINGLY HE WORKED OUT THE LONG TERM CAPITAL GAIN AT `. 71,19,420/-. 4. ON APPEAL, THE LD. CIT(A) AFTER DISCUSSING THE R ELEVANT PROVISIONS OF THE ACT RELIED ON THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MANJULA J. SHAH (2009) 318 ITR (AT) 417 (MUMBAI) [SB] AND DIRECTED THE A.O. TO COMPUTE THE CAPITAL G AIN BASED ON THE DATE OF INDEXATION IN THIS CASE FROM 01.04.1981 AS CLAIM ED BY THE ASSESSEE. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE A SSESSEE IS ENTITLED TO THE BENEFITS OF INDEXED COST OF ACQUISI TION W.E.F. 01.04.1981 WITHOUT APPRECIATING THAT CLAUSE (III) O F EXPLANATION TO THE PROVISO TO SEC.48 OF THE I.T. AC T, 1961 SPECIFICALLY ALLOWS INDEXATION FRO THE DATE OF HOLD ING OF THE ASSET BY THE ASSESSEE AND ACCORDINGLY THE LD. CIT(A ) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO CONSIDE R THE PERIOD OF HOLDING OF THE PREVIOUS OWNER FOR THE PURPOSE OF COMPUTING INDEXED COST OF ACQUISITION. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE AS SESSING OFFICER RESTORED. ITA NO : 6581/MUM/2011 SHRI JAYESH SHETH 3 6. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE A.O. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DI SPUTE THAT THE SAID FLAT WAS RECEIVED BY ASSESSEE BY WAY OF INHERITANCE FROM HIS FATHER SHRI JAMNADAS SHETH WHO WAS EXPIRED ON 15.12.2001. WE F URTHER FIND THAT THE SAID FLAT WAS PURCHASED BY SHRI JAMNADAS SHETH BEFORE 01.04.1981. AS THE FLAT WAS PURCHASED BEFORE 01.04.1981, THE VA LUE OF FLAT AS ON 01.04.1981 WAS SUBSTITUTED AT `. 20,57,000/- AS PER VALUATION REPORT. 8. WE FIND MERIT THAT THE ISSUE RAISED IN THIS APPE AL STANDS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL (SUPRA) UPHELD BY TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S MANJULA J. SHAH (2012) 204 TAXMAN 691(BOM) WHEREIN IT HAS BEEN OBSERVED AN D HELD (PAGE 702 OF 204 TAXMAN): 22. THE OBJECT OF GIVING RELIEF TO AN ASSESSEE BY ALLOWING INDEXATION IS WITH A VIEW TO OFFSET THE EFFECT OF I NFLATION. AS PER THE CBDT CIRCULAR NO. 636 DATED 31/8/1992 [SEE 198 ITR 1 (ST)] A FAIR METHOD OF ALLOWING RELIEF BY WAY OF IN DEXATION IS TO LINK IT TO THE PERIOD OF HOLDING THE ASSET. THE SAI D CIRCULAR FURTHER PROVIDES THAT THE COST OF ACQUISITION AND T HE COST OF IMPROVEMENT HAVE TO BE INFLATED TO ARRIVE AT THE I NDEXED COST OF ACQUISITION AND THE INDEXED COST OF IMPROVEMENT AND THEN DEDUCT THE SAME FROM THE SALE CONSIDERATION TO ARRI VE AT THE LONG TERM CAPITAL GAINS. IF INDEXATION IS LINKED T O THE PERIOD OF HOLDING THE ASSET AND IN THE CASE OF AN ASSESSEE CO VERED UNDER SECTION 49(1) OF THE ACT, THE PERIOD OF HOLDI NG THE ASSET HAS TO BE DETERMINED BY INCLUDING THE PERIOD FOR W HICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER, THEN OBV IOUSLY IN ARRIVING AT THE INDEXATION, THE FIRST YEAR IN WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER WOULD BE THE F IRST YEAR FOR WHICH THE SAID ASSET WAS HELD BY THE ASSESSEE. ITA NO : 6581/MUM/2011 SHRI JAYESH SHETH 4 23. SINCE THE ASSESSEE IN THE PRESENT CASE IS HELD LIABLE FOR LONG TERM CAPITAL GAINS TAX BY TREATING THE PERIOD FOR WHICH THE CAPITAL ASSET IN QUESTION WAS HELD BY THE PREVIOUS OWNER AS THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE ASSESSEE, THE INDEXED COST OF ACQUISITION HAS ALSO TO BE DETE RMINED ON THE VERY SAME BASIS. 24. IN THE RESULT, WE HOLD THAT THE ITAT WAS JUSTI FIED IN HOLDING THAT WHILE COMPUTING THE CAPITAL GAINS ARIS ING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSE E UNDER A GIFT, THE INDEXED COST OF ACQUISITION HAS TO BE COM PUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER F IRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BE CAME THE OWNER OF THE ASSET. 9. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT AND THE SPECIAL BENCH OF THE TRIBUNAL, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN HOLDING THAT THE INDEX COST OF ACQUISITION HAS TO BE COMPUTED WITH REFEREN CE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND D IRECTED THE AO TO APPLY INDEXATION FROM 1.4.1981. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 10. IN THE RESULT, REVENUES APPEAL STANDS DISMISS ED. ORDER PRONOUNCED ON THIS 5 TH DAY OF SEPTEMBER, 2012. SD/- - SD/- ( N. K. BILLAIYA ) ( DINESH KUMAR AGARWAL ) ACCOUNATANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 05.09.2012 ITA NO : 6581/MUM/2011 SHRI JAYESH SHETH 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI