ITO (IT) 3(1), MUMBAI V. KAUSTUBH HARI KANADE, MUMBAI

ITA 6701/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3349 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MORYA PRATAP
• Assessee Lawyers: VIJAY KOTHARI; AJIT SHETTY
• Keywords: Capital asset; Gift; Cost of acquisition
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 6701/MUM/2014 ASSESSMENT YEAR: 2011-12 THE ITO (IT) 3 (1 ) , ROOM NO. 114, 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, N.M.ROAD, MUMBAI- 400038. VS. MR. KAUSTUBH HARI. KANADE, FLAT NO. 105, VIP PLAZA, VEERA INDUSTRIAL ESTATE, ANDHERI(W), MUMBAI- 400053. PAN:-ATWPK9633N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. MORYA PRATAP RESPONDENT BY : SHRI. VIJAY KOTHARI & AJIT SHETTY DATE OF HEARING: 3 1/05/2016 DATE OF PRONOUNCEMENT: 02/06/20 16 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST O RDER DATED 30/06/2014 PASSED BY THE LD. CIT(APPEALS)-10, MUMBA I, FOR THE ASST. YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS.3,42,316/-. THE RE TURN WAS PROCESSED U/S 143(1) AND AFTER SCRUTINY THE AO DETERMINED THE TOT AL INCOME AT RS. 2,23,42,320/- THE ASSESSMENT ORDER WAS CHALLENGED B Y THE ASSESSEE BY FILING FIRST APPEAL BEFORE THE LD. CIT(A), ON THE GROUND T HAT THE AO HAS ERRED IN COMPUTING THE LONG TERM CAPITAL GAINS WITHOUT CONSI DERING THE INDEXED COST OF ACQUISITION WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER HAD HELD THE ASSET AND FURTHER ERRED IN NOT ALLOWING DEDUCTI ON U/S 54 ON THE PURCHASE 2 ITA NO. 6701/MUM/2014 ASSESSMENT YEAR: 2011-12 OF NEW RESIDENTIAL HOUSE. THE LD. CIT(A) ALLOWED TH E APPEAL OF THE ASSESSEE FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURIS DICTIONAL HIGH COURT IN CIT VS. MANJULAJ SHAH, ITA NO 3378 OF 2010 DATED 13.02. 2012 AND HONBLE DELHI HIGH COURT IN ARUN SHUNGLOO TRUST VS. CIT, ITA NO 1 16 OF 2011 AND ISSUED DIRECTION TO THE AO TO WORK OUT THE COST OF INDEXAT ION FROM 1.4.1981, WHILE DETERMINING THE TOTAL INCOME ON TRANSFER OF THE FLA T IN QUESTION AND TO ALLOW THE BENEFIT UNDER SECTION 54 OF THE INCOME TAX ACT,1961 (IN SHORT THE ACT). 3. AGAINST THE SAID ORDER, THE REVENUE IS IN APPEA L ON FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1..ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH, THEREBY CONSI DERING THE DATE OF ACQUISITION OF PROPERTY BY THE PREVIOUS OWNER FO R THE PURPOSE OF APPLYING THE COST OF INDEXATION, WHILE COMPUTING LT CG WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS FILED SLP AGAINST EH SAID CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE EXEMPTION U/S 54 O F THE I.T.ACT TO THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE DID NOT CLAIM THE SAME IN THE RETURN OF INCOME FILED FOR TH E INSTANT AY I.E. 2011-12. 4. BEFORE US THE LD. AUTHORISED REPRESENTATIVE (AR ) SUBMITTED THAT THE ASSESSEE HAS ACQUIRED RESIDENTIAL FLAT AT 2-B GARDE N ROSE, ANDHERI (W) MUMBAI BY WAY OF GIFT FROM HIS MOTHER IN THE YEAR 2010. T HE SAID FLAT HAD BEEN INHERITED BY THE MOTHER OF THE ASSESSEE AFTER THE D EATH OF HER HUSBAND IN 2000. HER HUSBAND HAD PURCHASED THE SAID PROPERTY IN THE YEAR 1971.THE APPELLANT/ASSESSEE SOLD THE SAID FLAT ON 29/01/2011 FOR A CONSIDERATION OF RS. 3 ITA NO. 6701/MUM/2014 ASSESSMENT YEAR: 2011-12 2,30,00,000/- AND WHILE COMPUTING THE LONG TERM CA PITAL GAIN, HE TOOK THE COST OF INDEXATION FORM THE YEAR 1981, BEING THE CO ST TO THE PREVIOUS OWNER I.E. TO HIS MOTHER IN THE YEAR 1971. THE APPELLANT PURCH ASED A NEW RESIDENTIAL HOUSE FOR RS. 3,36,40,000/- ON 02/12/2010 THUS THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 54 OF THE ACT. THE LD. AR FURTHER SUB MITTED THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE DEPARTMENT H AS FILED SLP AGAINST THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN MANJULA S SHAH RELIED UPON BY THE LD. CIT(A). SECONDLY, THE LD. CIT(A) HAS ALLOWED TH E EXEMPTION UNDER SECTION 54 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAS NOT CLAIMED THE SAME IN ITS RETURN. THEREFORE, THE IMPUGNED ORD ER IS LIABLE TO BE SET ASIDE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PAR TIES AND ALSO PERUSED THE MATERIAL PLACED BEFORE US IN SUPPORT OF THEIR RESPE CTIVE CONTENTIONS. THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE HOLDI NG AS UNDER:- 6. I HAVE CONSIDERED THE A.OS ORDER AS WELL AS THE APPELLANT ARS SUBMISSIONS. HAVING CONSIDERED BOTH, I FIND THAT TH E ISSUE INVOLVED IN THIS APPEAL, WHICH HAS BEEN CONTESTED BY THE APPELL ANT THROUGH BOTH THE GROUNDS OF APPEAL IS COVERED IN FAVOUR OF THE A PPELLANT BY THE DECISION OF JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH REPORTED IN ITA NO. 3378 OF 2010 DA TED 13/02/2012 AND ALSO BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN ITA NO. 116/20100 IN THE CASE OF ARUN SHUGLOO TR UST VS. CIT. ACCORDINGLY, KEEPING RELIANCE ON BOTH THE DECISIONS , THE APPELLANTS APPEAL IS ALLOWED. ACCORDINGLY, THE A.O IS ALSO DIR ECTED TO WORK OUT THE COST OF INDEXATION FROM THE YEAR 01.04.1981, WH ILE DETERMINING THE TOTAL INCOME ON TRANSFER OF THE FLAT AS DETAILE D ABOVE. FURTHER TO 4 ITA NO. 6701/MUM/2014 ASSESSMENT YEAR: 2011-12 THAT, THE A.O IS ALSO DIRECTED TO ALLOW THE APPELLA NT THE BENEFIT AVAILABLE TO THE APPELLANT ON ACCOUNT OF SUBSEQUENT RESPECTIVE INVESTMENT MADE IN RESIDENTIAL HOUSE U/S.54 OF THE ACT AS CLAIMED UNDER THE PROVISIONS OF LAW OF THE I.T.ACT. ACCORDI NGLY, THE APPELLANTS APPEAL IS ALLOWED. 6. THE LD. CIT (A) HAS PASSED THE IMPUGNED ORDER AS PER THE PRINCIPAL OF LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT OF IN MANJULA J. SHAH (SUPRA) FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ARUN SHUGLOO TRUST (SUPRA). IN MANJULA S SHAH CASE (SUPRA), THE QUESTION BEFORE THE HONBLE BOMBAY HIGH COURT WAS THAT WHILE COMPUTING THE CAPI TAL GAINS ARISING OF TRANSFER OF CAPITAL ACQUIRED UNDER A GIFT, WHETHER THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO TH E YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET OR THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET? THE HONBLE COURT DECIDED THE ISSUE I N QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE HOLDING AS UNDER:- IN THE RESULT, WE HOLD THAT THE ITAT WAS JUSTIFIED IN HOLDING THAT WHILE COMPUTING THE CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSEE UNDER A GIFT, THE INDEXED COST OF A CQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PR EVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESS EE BECAME THE OWNER OF THE ASSET. 7. SO FAR AS THE SECOND GROUND OF APPEAL IS CONCE RNED, THE SAME IS CONSEQUENTIAL IN NATURE. SINCE, IT HAS BEEN ESTABLI SHED THAT THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAIN FROM TRANSFER OF A LO NG TERM CAPITAL ASSET AND PURCHASED A RESIDENTIAL HOUSE WITHIN A PERIOD OF ON E YEAR BEFORE THE DATE OF TRANSFER OF LONG TERM CAPITAL ASSET, THE ASSESSEE I S ENTITLED FOR EXEMPTION UNDER 5 ITA NO. 6701/MUM/2014 ASSESSMENT YEAR: 2011-12 SECTION 54 OF THE ACT. WE FIND NO MERIT IN THE CON TENTION OF THE LD. DR. IN OUR CONSIDERED VIEW, THERE IS NO SCOPE TO INTERFERE WIT H THE ORDER OF THE LD. CIT(A). WE THEREFORE, UPHOLD THE ORDER PASSED BY THE LD. CI T (A) AND DISMISS BOTH THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT APPEAL FILED BY THE REVENUE FOR TH E A.Y. 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 2 ND JUNE, 2016. SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED:02/06/2016 / 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 PRAMILA