I.T.O.-19(1)(4), MUMBAI V. PINOO KARAMCHAND SONEJA, MUMBAI

ITA 7296/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8709 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.7296/M/2011 ASSESSMENT YEAR: 2007-2008 INCOME-TAX OFFICER-19(1)(4), ROOM NO.308, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, LALBAUG, MUMBAI 400 012. VS. SHRI PINOO KARAMCHAND SONEJA, FLAT NO.202, 2 ND FLOOR, D-WING, NEAR MAGNET, BAFNA SOCIETY, PLOT NO.276, MOGUL LANE, MATUNGA (W), MUMBAI 400 016. PAN: BIWPS0917D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI OM PRAKASH, DR RESPONDENT BY : NONE DATE OF HEARING: 9.10.2012 DATE OF ORDE R: 12.10.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 1.11.2011 IS DI RECTED AGAINST THE ORDER OF CIT (A)-22, MUMBAI DATED 27.09.2011 IN RELATION TO ASSESSMENT YEAR 2007-2008. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) HAS ERRED IN DIRECTING TO DETERMINE THE LON G TERM CAPITAL GAIN BY TAKING INDEXED COST OF ACQUISITION AS ON 1.4.1981 I N WHICH THE PREVIOUS OWNERS FIRST HELD THE ASSET WITHOUT APPRECIATING TH E FACT THAT THE ASSESSEE BECAME THE OWNER OF PROPERTY AFTER THE DEATH OF HIS FATHER AND SUBSEQUENTLY ON DEATH OF HIS MOTHER ON 20.07.2005. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT THE EXPLANATION (III) TO SECTION 48 CLEARLY STATES THAT THE COST INFLATION INDEX SHA LL BE ADOPTED FROM THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF MANJULA J. SHAH (3 18 ITR (AT) 417 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. 2 3. BRIEFLY STATED THE RELEVANT FACTS OF THE CASE AR E THAT THE ASSESSEE IS AN INDIVIDUAL AND OWNER OF A FLAT INHERITED FROM THE P ARENTS. THE SAID FLAT WAS SOLD DURING THE YEAR AND THE ASSESSEE OFFERED CAPITAL GA INS TO TAX. HOWEVER, THE ASSESSEE INDEXED THE COST OF ACQUISITION WHICH IS F AIR MARKET VALUE AS ON 1.4.1981, AS THE IMPUGNED FLAT WAS INHERITED GIFT FROM THE PA RENTS. THE AO DID NOT ACCEPT THE APPLICABILITY OF THE FAIR MARKET VALUE AS ON 1.4.19 81 AND HE PROCEEDED TO APPLY THE INDEXATION TO THE FAIR MARKET VALUE AS ON DATE OF S ALE OF THE FLAT I.E. 20.7.2005, THE YEAR OF RECEIVING OF THE GIFT FROM HIS MOTHER. 4. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE RELIED ON ITAT, MUMBAI SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. MANJ ULA J. SHAH REPORTED IN 318 ITR (AT) 417 FOR THE PROPOSITION THAT THE INDEXED COST OF ACQUISITION OF CAPITAL ASSET HAD TO BE COMPUTED IN RESPECT OF THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. IN THE INSTANT CASE, THE PREVIOUS OWNER WAS SHRI KARACHAND SONEJA, THE FATHER OF THE ASSESSEE, WHO BECAME THE OWNER IN 197 1. IN THAT CASE, INDEXED COST OF ACQUISITION AS ON 1.4.1981 IS TO BE APPLIED. AG GRIEVED WITH THE SAME, THE REVENUE FILED APPEAL BEFORE US STATING THAT THE SPE CIAL BENCH DECISION IN THE CASE OF MANJULA J. SHAH (SUPRA) WAS NOT ACCEPTED BY THE DEP ARTMENT. 5. DURING THE PROCEEDINGS BEFORE US, LD AR MENTIONE D THAT THE SPECIAL BENCH DECISION WAS APPROVED BY THE JURISDICTIONAL HIGH CO URT IN THE CASE OF IT APPEAL NO 3378 OF 2010. HOWEVER, HE RELIED ON THE ORDER OF TH E AO. 6. THERE IS NONE APPEARED FOR THE ASSESSEE AT THE T IME OF HEARING BEFORE US. CONSIDERING THE FACT THAT THE ISSUE IS COVERED BY T HE JURISDICTIONAL HIGH COURT IN THE CASE OF MANJULA J. SHAH (SUPRA), COVERED IN FAVOUR OF THE ASSESSEE, WE HAVE TAKEN UP THE CASE FOR ADJUDICATION. IT IS A FACT THAT TH E SAID PROPERTY WAS ORIGINALLY OWNED BY SHRI KARACHAND SONEJA WAY BACK IN 1971 AND HE PA SSED AWAY IN 1985. IN SUCCESSION, HIS WIFE I.E. MOTHER OF THE ASSESSEE, H AS BECOME THE OWNER AND THE ASSESSEE BECAME THE OWNER OF THE PROPERTY ON 20.7.2 005 AND SOLD THE PROPERTY ON 1.12.2006. SO, THE PREVIOUS OWNER FIRST HELD THE A SSET WAS LATE KARACHAND SONEJA AND THEREFORE, 1.4.1981 BECOMES A RELEVANT DATE, WH ICH IS RIGHTLY ADOPTED BY THE 3 ASSESSEE. THEREFORE, ASSESSEES CLAIM FOR INDEXING THE COST OF ACQUISITION AS PER THE FAIR MARKET VALUE AS ON 1.4.1981 IS PROPER. THE RE LEVANT PART OF THE SPECIAL BENCH DECISION AS EXTRACTED BY THE CIT (A) IN HIS ORDER I N PARA 2.4 IS AS UNDER: FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPER TY OF THE ASSESSEE UNDER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASSESSEE HAD TO BE DETERMINED TO WORK OUT THE INDEXED COST OF ACQUI SITION, AS ENVISAGED IN THE EXPLANATION (III) TO SECTION 48 AFTER TAKING IN TO ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIO US OWNER. IN THAT VIEW OF THE MATTER, IT WAS TO BE HELD THAT THE INDEXED COST OF ACQUISITION OF SUCH CAPITAL ASSET HAD TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET. 7. CONSIDERING THE ABOVE COVERED NATURE OF THE ISSU E, THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, G ROUNDS RAISED BY THE REVENUE ARE DISMISSED . 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12TH DA Y OF OCTOBER, 2012. SD/- SD/- (D.K. AGARWAL) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 12.10.2012 AT :MUMBAI OKK COPY TO : 1. SHRI PINOO KARAMCHAND SONEJA, MUMBAI. 2. ITO 19(1)(4), MUMBAI. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY/ BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI