ACIT 19(1), MUMBAI V. VASANT R. GORE, MUMBAI

ITA 7300/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4282 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

ITA NO. 7300/MUM/2011 VASANT R. GORE PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND DR. STM PAVALAN JUDICIAL MEMBER ITA NO. 7300/MUM/2011 ASSESSMENT YEAR 2007-08 DATE OF HEARING: 10/7/2013 DATE OF PRONOUNCEMENT: 10/7/2013 O R D E R PER RAJENDRA SINGH, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 6.9.2011 OF THE CIT (A) FOR THE ASSESSMENT YEAR 200 7-08. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING COMPUTAT ION OF INDEXED COST OF ACQUISITION OF THE PROPERTY SOLD BY THE ASS ESSEE WHILE COMPUTING LONG TERM CAPITAL GAIN. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS A C O-OWNER OF LAND AND BUNGALOW ON S.V. ROAD, KHAR MUMBAI. THE BUILDIN G WAS CONSTRUCTED IN PHASES PRIOR TO FINANCIAL YEAR 1960- 61. THE SAID PROPERTY WAS SOLD VIDE DEED DATED 29.3.2007 FOR A S UM OF RS. 7.40 CRORE IN WHICH THE SHARE OF THE ASSESSEE WAS 4,00,0 0,000/-. THE ASSESSEE HAD 40% SHARE IN THE PROPERTY, 6.6% OF WHI CH HAD BEEN ACIT 19 (1) ROOM NO. 322, PIRAMAL CHAMBERS, PAREL, MUMBAI 400012 VASANT R. GORE 602 SURAJ BAUG, J.N. RD. SANTACRUZ (W) MUMBAI - 400054 PAN:- AEJPN4770P APPELLANT RESPONDENT DEPARTMENT BY. NONE ASSESSEE BY: SHRI CVK NAIR ITA NO. 7300/MUM/2011 VASANT R. GORE PAGE 2 OF 4 RECEIVED BY THE ASSESSEE ON 24.11.1986 AFTER THE DE ATH OF HIS FATHER AND 33.33% HAD BEEN RECEIVED BY THE ASSESSEE ON 17. 12.1996 AS PER WILL OF HIS MOTHER. THE PROPERTY INHERITED BY THE A SSESSEE OR RECEIVED ON WILL HAD BEEN ACQUIRED PRIOR TO 1.4.1981. THE AS SESSEE HAD COMPUTED THE INDEXED COST OF ACQUISITION OF THE PRO PERTY BY USING THE COST INDEX OF 1.4.1981 AND THE COST INDEX OF TH E YEAR OF SALE. THE ASSESSEE THUS OFFERED LONG TERM CAPITAL GAIN OF RS. 1,27,85,050/-. THE AO HOWEVER DID NOT ACCEPT THE COMPUTATION. IT W AS OBSERVED BY HIM THAT SINCE THE ASSESSEE HAD TAKEN POSSESSION OF THE PROPERTY ON 24.11.1986 AND ON 17.12.1996, THE COST INDEX RELEVA NT TO THE ABOVE DATES HAVE TO BE TAKEN INTO ACCOUNT AND NOT THE COS T INDEX AS ON 1.4.1981 WHICH WAS 100. THE AO PLACED RELIANCE ON T HE DECISION OF TRIBUNAL IN CASE OF DCIT VS. KISHORE KANUNGO (102 I TD 437) IN WHICH IT WAS HELD THAT THE PERIOD OF HOLDING BY THE PREVIOUS OWNER HAS TO BE CONSIDERED ONLY FOR THE PURPOSE OF DECIDI NG AS TO WHETHER ASSET IS A SHORT-TERM CAPITAL ASSET OR LONG-TERM CA PITAL ASSET; BUT THE SAME CANNOT BE CONSIDERED FOR THE PURPOSE OF INDEXI NG. THE AO, THEREFORE, MODIFIED THE COMPUTATION MADE BY AO AND ASSESSED THE CAPITAL GAIN AT RS. 1,60,04,767/-. 3. IN APPEAL CIT (A) HELD THAT THE PERIOD OF HOLDIN G BY THE PREVIOUS OWNER HAS ALSO TO BE CONSIDERED FOR THE PU RPOSE OF INDEXING AS HELD BY SPECIAL BENCH OF TRIBUNAL IN CASE OF DCI T VS. MANJULA J. SHAH (35 SOT 105). HE ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE TRIBUNAL. 4. WE HAVE THE LD. DR, PERUSED THE RECORDS AND CONS IDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING COMPUTAT ION OF INDEXED COST OF PROPERTY SOLD BY THE ASSESSEE DURING THE YE AR FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN. THE ASSES SEE HAD ACQUIRED ITA NO. 7300/MUM/2011 VASANT R. GORE PAGE 3 OF 4 6.67% THE PROPERTY AFTER THE DEATH OF HIS FATHER ON 24.11.1986 AND 33.33% ON 17.12.1996 AS PER WILL OF HIS MOTHER. THE RE IS NO DISPUTE THAT THE PARENTS OF THE ASSESSEE HAD ACQUIRED THE P ROPERTY PRIOR TO 1.4.1981. THE DISPUTE IS WHETHER FOR THE PURPOSE OF COMPUTING THE INDEXED COST OF THE ACQUISITION, THE PERIOD OF HOLD ING OF THE PREVIOUS OWNER HAS TO BE TAKEN INTO ACCOUNT OR NOT. THE ASSE SSEE HAD TAKEN THE PERIOD OF HOLDING OF THE PREVIOUS OWNER ALSO AN D THUS APPLIED THE COST OF INFLATION INDEX OF 1.4.1981 AND THE IND EX OF YEAR OF SALE FOR THE PURPOSE OF COMPUTATION OF INDEXED COST OF A CQUISITION. THE AO HAD APPLIED THE COST OF INFLATION INDEX OF THE Y EAR IN WHICH THE PROPERTY HAD COME INTO THE POSSESSION OF THE ASSESS EE. UNDER THE PROVISION OF SECTION 49 (1) IN CASE, THE ASSESSEE H AD ACQUIRED THE PROPERTY BY WAY OF INHERITANCE, GIFT, WILL ETC. THE COST OF ACQUISITION OF THE PROPERTY IS DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER HAD ACQUIRED THE PROPERTY. FURTHER, UNDER THE PROVISIONS OF EXPLANATION-1(B) OF SECTION 42A WHILE COMPUTING HOL DING PERIOD OF CAPITAL ASSET, THE PERIOD FOR WHICH THE ASSET WAS H ELD BY PREVIOUS OWNER HAD TO BE INCLUDED IN CASE THE ASSET BECAME P ROPERTY OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 49(1). THE REFORE, WHILE COMPUTING THE INDEXED COST OF ACQUISITION, THE ASSE T IS DEEMED TO BE HELD BY THE ASSESSEE FROM THE TIME THE ASSET WAS AC QUIRED BY THE PREVIOUS OWNER. THEREFORE, THE INDEXED COST OF ACQU ISITION IS REQUIRED TO BE COMPUTED WITH RESPECT TO COST INFLAT ION INDEX OF THE YEAR IN WHICH THE ASSET WAS ACQUIRED BY THE PREVIOU S OWNER. IN THIS CASE THE PREVIOUS OWNERS WHO WERE THE PARENTS OF TH E ASSESSEE HAD ACQUIRED THE PROPERTY IN THE FINANCIAL YEAR 1960-61 AND THEREFORE, COST INFLATION INDEX AS ON 1.4.1981 HAS TO BE USED FOR COMPUTATION OF INDEXED COST OF ACQUISITION. THIS VIEW IS SUPPOR TED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MANJU LA SHAH (318 ITR (AT) 417 ) WHICH HAS BEEN RECENTLY UPHELD BY TH E HON'BLE HIGH ITA NO. 7300/MUM/2011 VASANT R. GORE PAGE 4 OF 4 COURT OF BOMBAY VIDE ORDER DATED 11.10.2011 AS REPO RTED IN 16 TAXMANN.COM42. WE, THEREFORE, SEE NO INFIRMITY IN T HE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE BASED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MA NJULA (SUPRA). ACCORDINGLY THE ORDER OF CIT (A) IS UPHELD. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED . ORDER PRONOUNCED IN THE OPEN COURT ON 10 -7-2013. SD/- SD/- (DR. STM PAVALAN ) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 10.7.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI