Padmanabhan Venkatramanan, CHENNAI V. ITO, CHENNAI

ITA 712/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8860 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 07-06-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 23-03-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: S KRISHNAN
• Keywords: Capital asset; Gift; Cost of acquisition
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 712/MDS/2016 / ASSESSMENT YEAR : 2012-13 PADMANABHAN VENKATRAMANAN, C/O S.KRISHNAN, NO.2, C.V.RAMAN ROAD, ALWARPET, CHENNAI 600 018. PAN AABPV6049H ( /APPELLANT) V. THE INCOME-TAX OFFICER, INTERNATIONAL TAXATION-2(2), CHENNAI 34. RESPONDENT) / APPELLANT BY : SHRI S. KRISHNAN, FCA / RESPONDENT BY : SHRI P. RADHAKRISHNAN, JCIT ! / DATE OF HEARING : 07.06.2016 '# ! / DATE OF PRONOUNCEMENT : 15.07.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 21 .12.2015 FOR THE ASSESSMENT YEAR 2012-13. - - ITA 712/16 2 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O APPLYING THE DATE OF INDEXED COST OF ACQUISITION OF THE PROP ERTY DEVOLVED ON THE ASSESSEE ON THE DATE OF DEATH OF THE ASSESSE ES FATHER OR THE DATE ON WHICH THE ASSESSEES FATHER HAD BECOME OWNER OF THE PROPERTY. 3. IN THIS CASE, THE INCOME-TAX OFFICER, INTERNATIO NAL TAXATION -2(2), CHENNAI WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DATED 27.2.2015, COMPUTED THE TO TAL INCOME AT 64,20,600/-. THE AO COMPLETED THE ASSESSMENT BY TA KING INDEXED COST OF ACQUISITION ONLY FROM THE YEAR IN W HICH THE PROPERTY DEVOLVED ON THE ASSESSEE. IN OTHER WORDS, INDEXATION POINT 632 PERTAINING TO THE YEAR 2009-10 [YEAR OF D EATH OF FATHER/HUSBAND SHRI PADMANABHAN 25.1.2010] AND THE PROPERTY DEVOLVED IN EQUAL SHARE ALONG WITH HIS MOTHER SMT. VASANTHA PADMANABHAN AND BROTHER SRI SURESH PADMANABHAN) WAS ONLY ADOPTED AS AGAINST INDEX POINT PERTAINING TO RESPEC TIVE YEARS OF ACQUISITION AND CONSTRUCTION BY THE ASSESSEES FATH ER. THE DISPUTED AMOUNT WORKS OUT TO 120,17,739/-. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS), WH O - - ITA 712/16 3 CONFIRMED THE FINDING OF THE A.O. AGAINST THIS, TH E ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BE FORE THE TRIBUNAL IN THE CASE OF (LATE) MYTHRI GRANDHI V. IT O IN ITA NOS. 407 & 408/MDS/2015 AND 582/MDS/2016 AND VIDE ORDER DATED 6.6.2016, IT WAS HELD AS UNDER : 11. AS PER SEC.49(1)(III)(A) OF THE ACT, WHEREAS THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE B Y SUCCESSION, INHERITANCE OR DEVOLUTION, THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIR ED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT INCURRE D BY THE PREVIOUS OWNER OF THE ASSESSEE, AS THE CASE MAY BE. FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS, TH E COST OF ASSET SHOULD BE REVISED UPWARDS BY APPLYING THE APPROPRIATE COST OF INFLATION INDEX. IF THE ASSET WAS ACQUIRED PRIOR TO 1 ST APRIL, 1981, THE COST OF INFLATION INDEX RELATING TO THE FINANCIAL YEAR 1981-82 IS REQUIRED TO BE APPLIED FOR THE PURPOSE OF ARRIVING AT THE INDEX CO ST OF ASSET. THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT THE ASSESSEE BECAME THE OWNER OF THE PROPERTY UNDER CONSIDERATION ONLY ON 20.11.2005, W HICH WAS SOLD ON 2.2.2006 WITHIN A GAP OF 2 MONTHS AND IT IS RESULTED IN SHORT TERM CAPITAL GAINS. ACCORDING TO THE COMMISSIONER OF INCOME-TAX(APPEALS), THE ASSESSEE BECAME THE OWNER OF THE PROPERTY ONLY ON 20.11.2005 AND THERE IS NO QUESTION OF CONSIDERATION OF COST O F ASSET IN TERMS OF SEC.49(1)(III)(A) OF THE ACT. 12. IT IS TO BE NOTED THAT THIS TRIBUNAL IN THE CAS E OF SMT. MINA DEOGUN V. ITO(19 SOT 183)(KOL.), AFTER CONSIDERING THE MEMORANDUM EXPLAINING THE FINANCE B ILL - - ITA 712/16 4 1992 AND CBDT CIRCULAR NO.636 DATED 13.8.1992 (107 CTR(ST.), HELD THAT INDEXATION IS TO BE ALLOWED IN RESPECT OF PERIOD OF HOLDING OF THE ASSET AND NOT IN RELATI ON TO THE INDIVIDUALITY OF THE ASSESSEE. ACCORDINGLY, IT WAS HELD THAT FOR THE PURPOSE OF DETERMINING THE PERIOD OF H OLDING, INTERMEDIATE TRANSFERS ON ACCOUNT OF SUCCESSION ARE TO BE IGNORED. SIMILARLY, IN THE CASE OF SMT. PUSHPA SOFAT V. ITO (81 ITD 1), CHANDIGARH BENCH OF THIS TRIBUNA L HAS EXPRESSED SIMILAR VIEW. WE ALSO NOTICED THAT AS P ER THE PROVISIONS OF SEC.2(42A), EXPLANATION I(B), IT IS S TIPULATED THAT IN DETERMINING THE PERIOD FOR WHICH ANY CAPITA L ASSET IS HELD BY THE ASSESSEE, IN THE CASE OF A CAPITAL A SSET WHICH BECOMES THE PROPERTY OF THE ASSESSEE BY WAY O F SUCCESSION, INHERITANCE ETC., THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER SHALL ALSO BE INCLUDED. 13. IT IS ALSO TO BE NOTED THAT IN THE CASE OF DCIT V. KISHORE KANUNGO (102 ITD 437), THE MUMBAI BENCH OF THIS TRIBUNAL, HELD THAT INDEXATION IS TO BE ALLOWE D ONLY FROM THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNE R OF THE PROPERTY. CONTRARY TO THIS, VISHAKHAPATNAM BENCH IN THE CASE OF M. SIVAPARVATHI & OTHERS V. ITO (7 I TR (TRIB) 468) HELD THAT, THE ASSESSEE HAVING INHERITA NT PROPERTY PURCHASED BY THE PREVIOUS OWNER IN THE YEA R 1974, THE COST OF ACQUISITION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS ON THE SALE OF SUCH PR OPERTY HAD TO BE COMPUTED BY APPLYING THE COST OF INFLATIO N INDEX BY FINANCIAL YEAR 1981-82 AND NOT BY FINANCIA L YEAR 1989-90 I.E. THE YEAR OF INHERITANCE BY THE ASSESSE E. THUS, IT IS A SETTLED PROPOSITION THAT WHEN TWO VIE WS ARE POSSIBLE, A VIEW WHICH IS IN FAVOUR OF THE ASSESSEE , HAS TO BE ADOPTED. IN THIS REGARD, WE MAKE REFERENCE T O THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. (88 ITR 192). 14. IN VIEW OF THIS, WE HOLD THAT IN THE PRESENT CA SE, THE ASSESSEE INHERITED THE PROPERTY ON 21.5.2002. THE SAID PROPERTY WAS PURCHASED BY THE ASSESSEES MOTHE R ON 12.4.1960. AFTER THE DEATH OF THE ASSESSEES MO THER, - - ITA 712/16 5 THE PROPERTY WAS INHERITED TO THE ASSESSEE ALONG WI TH OTHER CO-OWNERS. ACCORDINGLY, THE COST OF INDEXATI ON TO BE APPLIED AS ON 1.4.1981, AFTER FIXING THE VALUE O F THE ASSET AS ON 1.4.1981 AND IT CANNOT BE SAID THAT THE ASSESSEE ACQUIRED PROPERTY UNDER DISPUTE ON 21.5.20 02 ON THE DEATH OF THE ASSESSEES MOTHER SO AS TO COMP UTE THE CAPITAL GAINS. IN OTHER WORDS, CAPITAL GAINS H AS TO BE ASSESSED AS LONG TERM CAPITAL GAINS BY FIXING THE C OST OF ASSET AS ON 1.4.1981 AND THEREAFTER APPLYING THE CO ST OF INFLATION INDEX IN TERMS OF SEC.49(1)(III)(A) OF TH E ACT. SAME VIEW WAS TAKEN IN THE CASE OF CIT VS. MANJULA J. SHAH (355 ITR 474)(BOMBAY). CONSEQUENTLY, THE ASSESSEE IS ENTITLED TO EXEMPTION U/S.54 OF THE ACT . ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS ALLOWED . 5. IN THE CASE OF MANJULA J. SHAH (SUPRA) HELD THAT WHEN COMPUTING THE CAPITAL GAIN ARISING ON TRANSFER OF CAPITAL ASSET ACQUIRED BY THE ASSESSEE UNDER A GIFT , THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER F IRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BE COMES THE OWNER OF THE CAPITAL ASSET. IN VIEW OF THE ABO VE, WE ARE OF THE OPINION THAT THE COST OF INDEXATION TO BE CO MPUTED FROM THE YEAR IN WHICH THE ASSESSEES FATHER HAD BE COME OWNER OF THE PROPERTY. ACCORDINGLY, CAPITAL GAIN I S TO BE COMPUTED. THIS GROUND IS ALLOWED. 6. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO ADDITION OF 50 LAKHS MADE IN RESPECT OF INVESTMENT MADE IN CAP ITAL - - ITA 712/16 6 GAIN BONDS UNDER SEC.54EC OF THE ACT BY IGNORING TH E DECISIONS OF THE JURISDICTIONAL HIGH COURT BE DELET ED. 7. IN THIS CASE, THE ASSESSEE SOLD THE HOUSE PROPER TY ON 14.11.2011 AND MADE THE FOLLOWING INVESTMENT: IN THE FY 2011-12 ON 01.12.2011 10,00,000 DRAWN ON ICICI BANK, CHEQUE DATED 19.11.2011 ON 14.02.2012 40,00,000 DRAWN ON ICICI BANK, CHEQUE DATED 23.01.2012 IN THE FY 2012-13 ON 20.04.2012 25,00,000 DRAWN ON ICICI BANK, CHEQUE DATED 09.04.2012 ON 14.02.2012 25,00,000 DRAWN ON ICICI BANK, CHEQUE DATED 24.04.2012 ACCORDINGLY, THE ASSESSEE CLAIMED DEDUCTION U/S.54E C OF THE ACT, OF ONE CRORE AS INVESTMENT IN THE FINANCIAL YEAR. HO WEVER, THE CIT(APPEALS) CONSIDERED THE FACTS AND CIRCUMSTA NCES OF THE CASE AND GIVEN EXEMPTION OF 50 LAKHS. AGAINST THIS, THE ASSESSEE IS IN APPEAL. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MADRAS HIGH COURT IN THE CASE OF CI T V. JAICHANDER (370 ITR 579), HELD AS UNDER : - - ITA 712/16 7 10. THE LEGISLATURE HAS CHOSEN TO REMOVE THE AMBIG UITY IN THE PROVISO TO SECTION 54EC(1) OF THE ACT BY INS ERTING A SECOND PROVISO WITH EFFECT FROM APRIL 1, 2015. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO. 2) BILL, 2014, ALSO STATES THAT THE SAME WILL BE APPLICABLE FROM APRIL 1, 2015, IN RELATION TO ASSES SMENT YEAR 2015-16 AND SUBSEQUENT YEARS. THE INTENTION OF THE LEGISLATURE PROBABLY APPEARS TO BE THAT THIS AMENDM ENT SHOULD BE FOR THE ASSESSMENT YEAR 2015-16 TO AVOID UNWANTED LITIGATIONS OF THE PREVIOUS YEARS. EVEN OTHERWISE, WE DO NOT WISH TO READ ANYTHING MORE INT O THE FIRST PROVISO TO SECTION 54EC(1) OF THE ACT, AS IT STOOD IN RELATION TO THE ASSESSEES. 11. IN ANY EVENT, FROM A READING OF SECTION 54EC(1) AND THE FIRST PROVISO, IT IS CLEAR THAT THE TIME LIMIT FOR INVESTMENT IS SIX MONTHS FROM THE DATE OF TRANSFER AND EVEN IF SUCH INVESTMENT FALLS UNDER TWO FINANCIAL Y EARS, THE BENEFIT CLAIMED BY THE ASSESSEE CANNOT BE DENIE D. IT WOULD HAVE MADE A DIFFERENCE, IF THE RESTRICTION ON THE INVESTMENT IN BONDS TO RS. 50,00,000 IS INCORPORATE D IN SECTION 54EC(1) OF THE ACT ITSELF. HOWEVER, THE AMB IGUITY HAS BEEN REMOVED BY THE LEGISLATURE WITH EFFECT FRO M APRIL 1, 2015 IN RELATION TO THE ASSESSMENT YEAR 20 15-16 AND SUBSEQUENT YEARS. - - ITA 712/16 8 IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL IS ALLO WED, THOUGH INVESTMENT U/S.54EC WAS MADE IN TWO DIFFEREN T FINANCIAL YEARS. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON FRIDAY, THE 15 TH OF JULY, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 15 TH JULY, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.