ITO 19(3)(4), MUMBAI V. NOVELLA P. PERRY, MUMBAI

ITA 8655/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1733 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAVIK SHAH
• Keywords: Capital asset; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI D. MANMOHAN, V. P. AND SHRI SANJAY ARO RA, A. M. ITA NO. : 8655/MUM/2010 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER 19(3)(3), ROOM NO. 303, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 VS. MS. NOELLA P. PERRY 74, ANNE VILLE, 30 TH ROAD, TPS-III, BANDRA (W), MUMBAI-400 050 [ PAN NO. : ALTPP 8435 C ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN RESPONDENT BY : SHRI BHAVIK SHAH DATE OF HEARING : 31.01.2013 DATE OF PRONOUNCEMENT : 15.02.2013 ORDER PER SANJAY ARORA, A.M. : THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI, DATED 30.09.201 0, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 VIDE ORDER U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT H EREINAFTER) DATED 12.12.2008. 2. THE FIRST ISSUE INVOLVED IN THE PRESENT APPEAL, PROJECTED PER THE REVENUES GROUND NO. 1, AGITATES THE DIRECTION BY THE LD. CIT(A) IN TAKING THE FAIR MARKET VALUE OF THE CAPITAL ASSET AS ON 01.04.1981, BEING A HOUSE PROPERTY, THE ACQUISITION OF WHICH BY THE PREVIOUS OWNER BEING PRIOR TO THAT DATE, AS ITS COST OF ACQU ISITION, AS AGAINST 1/4 TH OF THE SAID VALUE BY THE ASSESSING OFFICER (A.O.). THE SAID ISSUE IS THE DATE FROM WHICH THE COST INFLATION INDEX WOULD APPLY IN COMPUTING THE LONG TERM CAPITAL GAIN S UNDER REFERENCE. 2 ITA NO. 8655/MUM/2010 (A.Y.: 2006-07) ITO VS. MS. NOELLA P. PERRY 3.1 WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. THE PRIMARY FACTS OF THE CASE, I.E., THE MANNER IN WHICH THE ASSESSEE BECAME THE OWNER OF 50% OF THE HOUSE PROPERTY UNDER REFERENCE, WHICH STANDS SOLD DURING THE YEAR, IS NOT IN DOUBT OR DISPUTE, AND STANDS STATED AT PARA 4, PGS. 1 AND 2 OF THE ASSESS MENT ORDER. THE PROPERTY STOOD BEQUEATHED TO THE ASSESSEE ALONG WITH HER SISTER, B Y THEIR GRAND FATHER, SHRI LEWIS PERRY, THROUGH HIS WILL, WHICH WAS PROBATED IN THE BOMBAY HIGH COURT ON 20.05.1998. SHRI LEWIS PERRY, IN TURN, HAD ACQUIRED THE SAID SHARE, TO THE EXTENT OF 25% ON THE DEATH OF HIS WIFE, MRS. LEWIS PERRY IN THE FINANCIAL YEAR (F.Y.) 1985-86, AND TO THE EXTENT OF 50% ON THE DEATH OF HIS SISTER MRS. ROSE G. PEREIRA IN THE F.Y . 1983-84. ROSE G. PEREIRA WAS THE ORIGINAL OWNER OF THE PROPERTY, WHICH IS STATED TO HAVE BEEN CONSTRUCTED IN THE YEAR 1954. DURING THE F.Y. 1960-61, SHE TRANSFERRED 25% SHARE THEREIN EACH TO SHRI LEWIS PERRY AND HIS WIFE MRS. LOUISA PERRY. THE CONVEYANCE OF PROP ERTY THROUGH INHERITANCE OR BY WILL IS NOT REGARDED AS A TRANSFER U/S. 47 OF THE ACT. THE COST OF ACQUISITION TO THE PREVIOUS OWNER, I.E., TO THE OWNER WHO COMES TO OWN THE PROPERTY IN A MANNER OTHER THAN THOSE SPECIFIED IN SECTION 49, AS UNDER WILL (SECTION 49(1)(II)) OR SU CCESSION OR INHERITANCE OR DEVOLUTION (PER SECTION 49(1)(III)(A)), IS TO BE DEEMED AS THE COST OF ACQUISITION IN THE HANDS OF THE ASSESSEE, IN WHOSE HANDS THE ENTIRE CAPITAL GAINS ON THE TRAN SFER OF THE PROPERTY IS TO BE COMPUTED. THE FICTION EXTENDS TO THE HOLDING PERIOD OF THE AS SET AS WELL, SO THAT THE LIVES OF THE TESTATOR AND THE LEGATEE/S ARE COMBINED FOR RECKONI NG THE HOLDING PERIOD ( EXPLANATION 1(B) TO SECTION 2(42A)). FURTHER, WHERE THE DATE OF ACQ UISITION IS PRIOR TO 01.04.1981, I.E., THE CUT OFF DATE, THE ASSESSEE MAY, AT ITS OPTION, SUBS TITUTE THE FAIR MARKET VALUE OF THE CAPITAL ASSET AS ON THAT DATE FOR ITS COST OF ACQUISITION. AS WOULD BE APPARENT FROM THE AFORE-STATED INCIDENTS, WHICH FACTS ARE NOT IN DISPUTE, EACH OF THE THREE OWNERS THROUGH WHOM THE ASSESSEE AND HER SISTER HAVE DERIVED THEIR TITLE, I .E., DIRECTLY OR INDIRECTLY, ACQUIRED THE PROPERTY PRIOR TO 01.04.1981. WE, THEREFORE, FIND NO INFIRMITY IN THE TREATMENT OF THE FAIR MARKET VALUE OF THE ASSET AS ON 01.04.1981 AS THE C OST OF ACQUISITION. THE ASSESSEE HAVING 50% SHARE THEREIN CAN, CONSEQUENTLY, CLAIM ONLY 50% OF THE SAID VALUE (WHICH HAS BEEN WORKED BY THE REGISTERED VALUER AT RS.16,84,125/-), I.E., AT RS.8,42,063/-, IN THE 3 ITA NO. 8655/MUM/2010 (A.Y.: 2006-07) ITO VS. MS. NOELLA P. PERRY COMPUTATION OF THE LONG TERM CAPITAL GAINS IN HER H ANDS. IN FACT, EVEN AS POINTED OUT BY THE ASSESSEES COUNSEL, WITH REFERENCE TO THE WORKING R EPRODUCED AT PG. 6 OF THE IMPUGNED ORDER, A BETTER WAY WOULD BE TO COMPUTE THE ENTIRE LONG TERM CAPITAL GAINS ON THE SALE OF HOUSE PROPERTY, AND ALLOCATE THE CAPITAL GAINS SO C OMPUTED TO THE EXTENT OF 50% EACH IN THE HANDS OF THE ASSESSEE AND HER SISTER, MS. CRYSTAL P ERRY. WE DIRECT LIKE-WISE, AS HAS IN FACT, THE LD. CIT(A). WE DECIDE ACCORDINGLY. 3.2 THE SECOND ISSUE ARISING IN THE INSTANT APPEAL IS IN RESPECT OF THE DATE FROM WHICH THE COST INFLATION INDEX (CFI) IS TO BE APPLIED. TH E HOLDING PERIOD BY THE ASSESSEE IS TO BE RECKONED WITH REFERENCE TO THE DATE OF ACQUISITION BY THE PREVIOUS OWNER, I.E., THE OWNER WHO CAME TO OWN THE PROPERTY IN ANY OF THE MODES OT HER THAN THOSE SPECIFIED IN SECTION 49. THE CFI, WHICH IS TO BE APPLIED FOR THE PERIOD OF H OLDING SINCE 01.04.1981 (TO THE YEAR OF THE TRANSFER) IN VIEW OF SEC. 48 OF THE ACT, HAS BE EN RESTRICTED BY THE REVENUE TO THE PERIOD FOR WHICH THE ASSESSEE OWNED AND HELD THE RELEVANT ASSET IN OTHER WORDS, THOUGH THE COST OF ACQUISITION WAS, AT THE ASSESSEES OPTION, TAKEN AS THE FAIR MARKET VALUE AS ON 01.04.1981 (U/S.55(2)(B)(II)), THE BENEFIT OF INDEXATION FOR W ORKING OUT THE INDEXED COST OF ACQUISITION STANDS TAKEN FROM THE DATE THE PROPERTY DEVOLVED ON THE ASSESSEE, I.E., 20.05.1998, WHILE THE ASSESSEE CLAIMS IT W.E.F 01.04.1981. THE LD. C IT(A) HAS, HOWEVER, AGREED WITH THE ASSESSEE, ALLOWING IT THE INDEXATION BENEFIT SINCE 01.04.1981 ONWARDS, FOLLOWING THE DECISIONS BY THE TRIBUNAL. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DY.CIT VS . MANJULA J. SHAH [2009] 318 ITR (AT) 417 (MUM) HAS CONFIRMED THE SA ID TREATMENT. IN FACT, EVEN AS CONCEDED TO BY THE PARTIES, THE SAID DECISION BY THE TRIBUNAL HAS BEEN SINCE UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH (IN ITA NO.3378/MUM/2010, DATED 11.10.2011/COPY ON RECO RD). WHEN THE COST OF ACQUISITION, IT WAS CLARIFIED PER THE SAID DECISION S, IS DEEMED BY THE FICTION OF LAW TO BE THE COST TO THE PREVIOUS OWNER, AS WELL AS THE HOLDING PERIOD OF THE ASSESSEE IN RESPECT OF THE SAID ASSET, AGAIN, TO BE RECKONED WITH REFERENCE TO THE HOLDING BY THE PREVIOUS OWNER, THE INDEXATION BENEFIT, WHICH IS TO BE APPLIED TO A LON G-TERM CAPITAL ASSET AND, FURTHER, IS ONLY 4 ITA NO. 8655/MUM/2010 (A.Y.: 2006-07) ITO VS. MS. NOELLA P. PERRY FOR PROVIDING THE BENEFIT OF INFLATION IN THE WORKI NG OF THE CAPITAL GAINS FOR THE PERIOD OF HOLDING SINCE 01.04.1981, COULD NOT BE DENIED TO TH E ASSESSEE. THE LAW HAVING BEEN SETTLED BY THE HON'BLE JURISDICTIONAL HIGH COURT THUS, WE D O NOT FIND ANY MERIT IN THE REVENUES CASE. THE SAID ISSUE, AGITATED BY IT PER ITS GROUN D NOS. 2 AND 3 OF THE INSTANT APPEAL, ALSO, THUS, FAILS. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON THIS 15 TH DAY OF FEBRUARY, 2013 SD/- - SD/- ( D. MANMOHAN ) ( SANJAY ARORA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 15.02.2013 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI