Shyalaja Narayanan, CHENNAI V. ITO, CHENNAI

ITA 770/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9283 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 28-03-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH J
• Assessee Lawyers: J C PRAKASH
• Keywords: Capital asset; Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.770/MDS./2016 / ASSESSMENT YEAR :2012-13 SMT.SHYALAJA NARAYANAN , BLOCK IV,FLAT I C, RANI MAYYAMAI TOWERS, M R C NAGAR, CHENNAI 600 028. VS. INCOME TAX OFFICER, INTERNATIONAL TAXATION 2(1), CHENNAI-34. [PAN AFVPN 3881 J ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.J.C.PRAKASH, CA /RESPONDENT BY : MR.A.V.SREEKANTH, JCIT,DR / DATE OF HEARING : 30 - 05 - 201 6 / DATE OF PRONOUNCEMENT : 03 - 06 - 2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-16, CHENNAI DA TED 28.12.2015 PERTAINING TO ASSESSMENT YEAR 2012-13. ITA NO770/MDS./16. :- 2 -: 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO HOLDING THAT IN THE CASE OF INHERITANCE OF PROPERTY THE ASSESSEE WA S ENTITLED TO COST OF INFLATION INDEX, ONLY FROM THE YEAR OF INHERITANCE OF PROPERTY AND NOT FROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER. 3. THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE IS A NON-RESIDENT, FILED HER RETURN OF INCOME FOR ASSESSMENT YEAR 2012 13 DECLARING TOTAL INCOME AT ` 37,89,970/-. THE ASSESSEE HAD SOLD HER INHERITED HO USE PROPERTY DURING THE PREVIOUS YEAR 2011-12 (ALONG WI TH THREE CO- OWNERS) AT KASTURI AVENU, MRC NAGAR, R.A.PURAM, CH ENNAI . THE ASSESSEES SHARE WAS ` 1,42,50,000/-. THE ASSESSE HAD DETERMINED HER INCOME UNDER LONG TERM CAPITAL GAIN AT ` 35,19,134/-. THE COST OF INDEXATION OF THE ASSET WAS DETERMINED AT ` 7,30,66/-. THE PROPERTY WAS INHERITED BY THE ASSESSE AFTER THE DEMISE OF HE R FATHER ON 04/08/2010. THE PROPERTY HAD BEEN ACQUIRED BY HER FATHER BEFORE 1981 AND THEREFORE THE ASSESSEE IN DETERMINING THE COST OF INDEXATION OF PROPERTY HAD ADOPTED THE FINANCIAL YEAR 1981-82 AS THE BASE YEAR. THE CASE WAS SELECTED FOR SCRUTINY AND THE INCOME W AS ASSESSED AT ` 43,84,410/-. THE ASSESSING OFFICER HAS DETERMINED T HE COST OF INDEXATION OF THE PROPERTY AS ` 1,36,416/- TREATING THE YEAR OF INHERITANCE OF PROPERTY I.E.2010-11 AS THE YEAR OF ACQUISITION. AGGRIEVED BY THIS, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A). ON ITA NO770/MDS./16. :- 3 -: APPEAL, LD.CIT(A) OBSERVED THAT THE ASSESSEE WAS IN HERITED THE PROPERTY AFTER THE DEMISE OF HER FATHER ON 04/08/20 10. ACCORDING TO HIM, THE ASSESSEE IS ENTITLED FOR BENEFIT FOR COST OF ACQUISITION FROM FINANCIAL YEAR 2010-11. ACCORDINGLY, LD.CIT(A) DISM ISSED THE APPEAL OF ASSESSEE. 4. THE CONTENTION OF THE ASSESSEES COUNSEL IS THAT THE PROPERTY WAS INHERITED BY THE ASSESSE AFTER THE DEM ISE OF HER FATHER ON 04/08/2010. THE PROPERTY HAD BEEN ACQUIRED BY HER FATHER BEFORE 1981. THE LD.A.R SUBMITTED THAT IN THE CASE OF INHE RITANCE OF PROPERTY THE ASSESSEE WAS ENTITLED TO COST OF INFLATION INDE X, ONLY FROM THE YEAR OF INHERITANCE OF PROPERTY AND NOT FROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER. ON THE OTHER HAND, LD.D.R SUPPORTE D THE ORDERS OF LOWER AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS PER SEC.49(1)(III)(A) OF THE ACT, WHEREA S THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BY SUCCESSION, INHERITANCE OR DEVOLUTION, THE COST OF ACQUISITION OF THE ASSET SH ALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPER TY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT INCURRED B Y THE PREVIOUS OWNER OF THE ASSESSEE, AS THE CASE MAY BE. FOR THE PURPOSE OF ITA NO770/MDS./16. :- 4 -: COMPUTATION OF CAPITAL GAINS, THE COST OF ASSET SHO ULD BE REVISED UPWARDS BY APPLYING THE APPROPRIATE COST OF INFLATI ON INDEX. IF THE ASSET WAS ACQUIRED PRIOR TO 1ST APRIL, 1981, THE CO ST OF INFLATION INDEX RELATING TO THE FINANCIAL YEAR 1981-82 IS REQUIRED TO BE APPLIED FOR THE PURPOSE OF ARRIVING AT THE INDEX COST OF ASSET. T HE COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT THE ASSESSEE BEC AME THE OWNER OF THE PROPERTY UNDER CONSIDERATION ONLY ON THE DEA TH OF ASSESSEES FATHER I.E. ON 04.08.2010, AND THE SAID PROPERTY W AS SOLD ALONG WITH THREE CO-OWNERS DURING THE FINANCIAL YEAR 2011-12. ACCORDING TO THE COMMISSIONER OF INCOME-TAX(APPEALS), THE ASSESSEE B ECAME THE OWNER OF THE PROPERTY ONLY ON 04.08.2010 AND THERE IS NO QUESTION OF CONSIDERATION OF COST OF ASSET IN TERMS OF SEC.49(1 )(III)(A) OF THE ACT. 6. IT IS TO BE NOTED THAT THIS TRIBUNAL IN THE CASE OF SMT. MINA DEOGUN V. ITO(19 SOT 183)(KOL.), AFTER CONSIDERING THE MEMORANDUM EXPLAINING THE FINANCE BILL 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 I N RELATION TO THE INDIVIDUALITY OF THE ASSESSEE. ACCORDINGLY, IT WAS HELD THAT FOR THE PURPOSE OF DETERMINING THE PERIOD OF HOLDING, INTER MEDIATE TRANSFERS ON ACCOUNT OF SUCCESSION ARE TO BE IGNORED. SIMILA RLY, IN THE CASE OF SMT. PUSHPA SOFAT V. ITO (81 ITD 1), CHANDIGARH BEN CH OF THIS ITA NO770/MDS./16. :- 5 -: TRIBUNAL HAS EXPRESSED SIMILAR VIEW. WE ALSO NOTIC ED THAT AS PER THE PROVISIONS OF SEC.2(42A), EXPLANATION I(B), IT IS S TIPULATED THAT IN DETERMINING THE PERIOD FOR WHICH ANY CAPITAL ASSET IS HELD BY THE ASSESSEE, IN THE CASE OF A CAPITAL ASSET WHICH BECO MES THE PROPERTY OF THE ASSESSEE BY WAY OF SUCCESSION, INHERITANCE ETC. , THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER SHAL L ALSO BE INCLUDED. 7 . IT IS ALSO TO BE NOTED THAT IN THE CASE OF DCIT V . KISHORE KANUNGO (102 ITD 437), THE MUMBAI BENCH OF THIS TRI BUNAL, HELD THAT INDEXATION IS TO BE ALLOWED ONLY FROM THE YEAR IN W HICH THE ASSESSEE BECAME THE OWNER OF THE PROPERTY. CONTRARY TO THIS , VISHAKHAPATNAM BENCH IN THE CASE OF M. SIVAPARVATHI & OTHERS V. IT O (7 ITR (TRIB) 468) HELD THAT, THE ASSESSEE HAVING INHERITANT PROP ERTY PURCHASED BY THE PREVIOUS OWNER IN THE YEAR 1974, THE COST OF AC QUISITION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS ON THE SALE OF SUCH PROPERTY HAD TO BE COMPUTED BY APPLYING THE COST OF INFLATIO N INDEX BY FINANCIAL YEAR 1981-82 AND NOT BY FINANCIAL YEAR 1989-90 I.E. THE YEAR OF INHERITANCE BY THE ASSESSEE. THUS, IT IS A SETTLED PROPOSITION THAT WHEN TWO VIEWS ARE POSSIBLE, A VIEW WHICH IS IN FAVOUR O F 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 P RODUCTS LTD. (88 ITR 192). ITA NO770/MDS./16. :- 6 -: 8. IN VIEW OF THIS, WE HOLD THAT IN THE PRESENT CAS E, THE ASSESSEE INHERITED THE PROPERTY ON 04.08.2010. THE SAID PRO PERTY WAS PURCHASED BY THE ASSESSEES FATHER BEFORE 1981. AF TER THE DEATH OF THE ASSESSEES FATHER, THE PROPERTY WAS INHERITED T O THE ASSESSEE ALONG WITH OTHER CO-OWNERS. ACCORDINGLY, THE COST OF IND EXATION TO BE APPLIED AS ON 1.4.1981, AFTER FIXING THE VALUE OF T HE ASSET AS ON 1.4.1981 AND IT CANNOT BE SAID THAT THE ASSESSEE AC QUIRED PROPERTY UNDER DISPUTE ONLY ON 04.08.2010 ON THE DEATH OF TH E ASSESSEES FATHER SO AS TO COMPUTE THE CAPITAL GAINS. IN OTHE R WORDS, CAPITAL GAINS HAS TO BE ASSESSED AS LONG TERM CAPITAL GAINS BY FIXING THE COST OF ASSET AS ON 1.4.1981 AND THEREAFTER APPLYING THE COST OF INFLATION INDEX IN TERMS OF SEC.49(1)(III)(A) OF THE ACT. IT NEEDLESS TO SAY THAT SAME VIEW WAS TAKEN IN THE CASE OF CIT VS. MANJULA J.SHAH REPORTED IN 355 ITR 474(BOM.). ACCORDINGLY, THIS APPEAL OF T HE ASSESSEE IS ALLOWED. 9. THE SECOND GROUND IS WITH REGARD TO ALLOWABILIT Y OF DEDUCTION U/S.54EC OF THE ACT IN RESPECT OF AMOUNT WHICH WAS INVESTED AT ` 50 LAKHS WITHIN SIX MONTHS OF DATE OF SALE, BUT IN TWO DIFFERENT FINANCIAL YEARS. 10. IN THIS CASE, THE ASSESSEE MADE INVESTMENTS IN REC BONDS DURING FINANCIAL YEAR 2011-12 & 2012-13 AT ` 50 LAKHS EACH AND CLAIMED ITA NO770/MDS./16. :- 7 -: DEDUCTION U/S.54EC OF THE ACT. THE SAME WAS DENIED BY THE LD.CIT(A) ON THE REASON THAT PROVISIONS OF THE SECTION 54EC O F THE ACT, THE INVESTMENTS MADE ON OR BEFORE FIRST DAY OF APRIL, 2007 IN THE LONG TERM SPECIFIED ASSET BY AN ASSESSEE DURING ANY FIN ANCIAL YEAR DOES NOT EXCEED FIFTY LAKH RUPEES ( ` 50/- LAKHS). 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ISSUE IS SQUARELY COVER ED BY THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. C.JAICHANDER REPORTED IN [2015] 370 ITR 0579(MAD.) WHEREIN IT W AS HELD THAT LEGISLATURE BY FINANCE (NO.2) ACT, 2014, WITH EFFEC T FROM 01.04.2015, INSERTED AFTER EXISTING PROVISO TO SUB-SECTION(1) O F SECTION 54EC SECOND PROVISO, AS PER WHICH INVESTMENT MADE BY AN ASSESSEE IN LONG TERM SPECIFIED ASSET, OUT OF CAPITAL GAINS ARISING FROM TRANSFER OF ONE OR MORE ORIGINAL ASSET, DURING FINANCIAL YEAR IN WHICH ORIGINAL ASSET OR ASSETS ARE TRANSFERRED AND IN SUBSEQUENT FINANCIAL YEAR DOES NOT EXCEED FIFTY LAKHS RUPEES. IN THIS CASE, THE ASSE SSEE INVESTED IN REC CAPITAL GAINS TAX SAVING BONDS ON 31.01.2012 AT ` 50/- LAKHS, AND ON 31.05.2012 AT ` 50/- LAKHS. IN VIEW OF JURISDICTIONAL HIGH COURT CITED ABOVE, WE ARE INCLINED TO HOLD THA T THE CLAIM OF ASSESSEE WHEREIN THE ASSESSEE HAS INVESTED ` 50/- LAKHS WITHIN SIX MONTHS OF DATE OF SALE, BUT IN TWO DIFFERENT FINANC IAL YEARS, IS ENTITLED ITA NO770/MDS./16. :- 8 -: FOR DEDUCTION U/S.54EC OF THE ACT. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A) ON THIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 3 RD JUNE, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 4. - 1 / CIT 2. / RESPONDENT 5. /23- 4 / DR 3. - 1-!' / CIT(A) 6. 3&-5 / GF