Narinder Kumar Sharma, Zirakpur V. ACIT, Patiala

ITA 962/CHANDI/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8456 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-10-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NOS.962, 963 & 964/CHD/2012 (ASSESSMENT YEARS : 2004-05,2005-06 & 2006-07) NARINDER KUMAR SHARMA, VS. THE A.C.I.T., VILLAGE LOHAGARH, WARD-6, CENTRAL CIRCLE, NAC, ZIRAKPUR. PATIALA. PAN: AQPPS6208M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANOJ MISHRA, CIT DR DATE OF HEARING : 11.01.2016 DATE OF PRONOUNCEMENT : 15.02.2016 O R D E R PER RANO JAIN, A.M . : THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA, A LL DATED 17.7.2012 FOR ASSESSMENT YEARS 2004-05, 2005- 06 AND 2006-07. 2. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICA L IN ALL THE APPEALS, THE SAME WERE HEARD TOGETHER AN D ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. THE DECISION GIVEN IN ITA 2 NO.962/CHD/2012 SHALL APPLY TO OTHER APPEALS IN ITA NOS.963 & 964/CHD/2012 WITH EQUAL FORCE. ITA NO.962/CHD/2012 : 3. IN TOTAL SEVEN GROUNDS OF APPEAL ARE RAISED. T HE LEARNED COUNSEL FOR THE ASSESSEE PREFERRED NOT TO P RESS GROUND NOS.1, 5 AND 6. THEREFORE THE SAME ARE DISM ISSED AS NOT PRESSED. 4. THE GROUND NO.7 IS GENERAL AND NEEDS NO ADJUDICATION. 5. THE GROUND NOS.2, 3 AND 4 ALL RELATE TO THE ACTION OF THE LEARNED CIT (APPEALS) IN UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDITION ON ACCOUNT OF CAPITAL GAINS ON SALE OF PLOT. 6. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE YEAR, THE ASSESSEE HAD SOLD A PLOT OF LAND ON11.6.2 013 MEASURING 3419 SQ.YDS AT VILLAGE LOHAGARH (1/3 RD SHARE) TO M/S N.K. SHARMA ENTERPRISES ON WHICH LONG TERM CAPITAL GAIN WAS WORKED OUT AS UNDER : SALES CONSIDERATION OF PLOT RS.28,50,000/- MEASURING 3419 SQ.YD AT VILLAGE LOHAGARH TRFD TO N.K. SHARMA ENTERPRISES (P) LTD. LESS: COST OF ACQUISITION COST ON 9/5/1996 @ RS.191464/- RS.56 PER SQ YD INDEXED COST (463/281X191464) 3 LONG TERM CAPITAL GAIN RS.25,34,527 SHARE OF MR.N.K.SHARMA (1/3 RD ) RS.8,44,842 MR.YADWINDER KUMAR SHARMA RS.8,44,842 (1/3 RD ) MR.PARMINDER KUMAR SHARMA RS.8,44,842 (1/3 RD ) 7. THE ASSESSING OFFICER PROCEEDED TO ADOPT THE COST OF ACQUISITION ON THE BASIS OF VALUE OF THE PL OT SHOWN IN THE GIFT DEED DATED 25.3.2003 AS THE PLOT WAS RE CEIVED BY THE ASSESSEE FROM HIS GRANDMOTHER. THE ASSESSIN G OFFICER FURTHER PROCEEDED TO TREAT THE SALE CONSIDE RATION AT RS.51,11,405/-BY TAKING SQ.YD. PRICE OF RS.1495 INS TEAD OF RS.833 PER SQ.YD. THIS WAY, THE ADDITION WAS MADE. ON APPEAL BEFORE THE LEARNED CIT (APPEALS), THE ADDITI ON GOT CONFIRMED TO THE EXTENT OF TAKING THE COST OF ACQUI SITION AS ON THE DATE OF GIFT. AS REGARDS THE ENHANCEMENT IN SALE PRICE BY THE ASSESSING OFFICER, THE CIT (APPEALS) D ELETED THE ADDITION TO THAT EXTENT. SIMILAR ADDITION WAS MADE ON ACCOUNT OF SALE OF PLOT MEASURING 4011 SQ.YD. DATED VILLAGE LOHAGARH (1/3 RD SHARE) TAKING THE COST OF ACQUISITION AS ON THE DATE OF GIFT, WHICH GOT CONFI RMED. 8. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED AT THE OUTSET THAT THE ISSUE IS COVERED B Y THE ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF SHRI VISHWANATH SHARMA VS. ACIT, ITA NO.1057/CHD/2012, DATED 18.10.2013. 4 9. THE LEARNED D.R. RELIED ON THE ORDER OF THE LOW ER AUTHORITIES. 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE ONLY ISSUE TO BE ADJUDICATED BY US WITH REGARD TO BOTH THE SALES IN WHETHER THE COST OF ACQUISITION, FOR T HE PURPOSES OF COMPUTING CAPITAL GAIN IS TO BE TAKEN A S COST TO THE PREVIOUS OWNER OR THE COST AS ON THE DATE OF GIFT. ON PERUSAL OF THE ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF SHRI VISHWANATH SHARMA (SUPRA), WE OBSERVE THAT THE FINDING ARE GIVEN AT PARAS 9 AND 1 0, WHICH READ AS UNDER : 9 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE WAS CONSIDERED BY THE SPECIAL BENCH IN CASE OF CIT V. MANJULA J. SHAH, 68 DTR 269 (BOM) WHEREIN IT WAS HELD THAT INDEXATION HAS TO BE APPLI ED FROM THE DATE WHEN THE PREVIOUS OWNER ACQUIRED THE ASSET. THIS POSITION HAS BEEN CONFIRMED BY HON'BLE BOMBAY HIGH COURT IN CASE OF CIT V. MANJULA J. SHAH , 204 TAXMAN 691. HEAD NOTE OF THIS DECISION READS A S UNDER: CAPITAL GAINS COST OF ACQUISITION RELEVANT YEA R FOR INDEXATION VIS--VIS PROPERTY ACQUIRED UNDER GIFT- PROPERTY PU RCHASED BY ASSESSEES DAUGHTER ON 29 TH JAN., 1993, GIFTED TO ASSESSEE ON 30 TH JUNE, 2003 AS THE PREVIOUS OWNER HELD THE CAPITAL ASSET FROM 29 TH JAN., 1993, AS PER EXPLN. 1(I)(B) TO S. 2(42A) THE ASSESSEE IS DEEMED TO HAVE HELD THE CAPITAL ASSET AS LONG-TERM CAPITA L ASSET FROM 29 TH JAN., 1993 THEREFORE, IN DETERMINING THE INDEXED COST OF ACQUISITION UNDER S. 48, THE ASSESSEE MUST BE TREAT ED TO HAVE HELD THE ASSET FROM 29 TH JAN, 1993 AND ACCORDINGLY THE COST INFLATION INDEX FOR 1992-93 WOULD BE APPLICABLE IN DETERMINING THE INDEXED COST OF ACQUISITION- CONTENTION OF REVENUE THAT AS THE ASSE SSEE HELD THE ASSET W.E.F 1 ST FEB., 2003, THE FIRST YEAR OF HOLDING THE ASSET WO ULD BE FINANCIAL YEAR 2002-03 AND ACCORDINGLY, THE COST IN FLATION INDEX FOR 2002-03 WOULD BE APPLICABLE IS DEVOID OF MERIT, BEC AUSE IN THAT 5 CASE, THE ASSESSEE WOULD NOT BE LIABLE FOR LONG-TER M CAPITAL GAINS TAX BY APPLYING THE DEEMED FICTION CONTAINED IN EXP LN. 1(I)(B) TO S. 2(42A) AND S.49(1)(II)- IN CONSTRUING THE WORDS AS SET WAS HELD BY THE ASSESSEE IN CL.(III) OF S. 48, ONE HAS TO SEE THE OBJECT WITH WHICH THE SAID WORDS ARE USED IN THE STATUTE- IN THE ABSE NCE OF ANY INDICATION IN CL. (III) OF THE EXPLANATION TO S.48 THAT THE WORDS ASSET WAS HELD BY THE ASSESSEE HAVE TO BE CONSTRUED DIFF ERENTLY, THE SAID WORDS SHOULD BE CONSTRUED IN ACCORDANCE WITH THE OB JECT OF THE STATUTE, THAT IS, IN THE MANNER SET OUT IN EXPLN. 1 (I)(B) TO S. 2(42A)- IF THE MEANING GIVEN IN S.2(42A) IS NOT ADOPTED IN CON STRUING THE WORDS USED IN S.48, THEN THE GAINS ARISING ON TRANS FER OF A CAPITAL ASSET ACQUIRED UNDER A GIFT WILL BE OUTSIDE THE PUR VIEW OF THE CAPITAL GAINS TAX AND THE PROVISION OF S.55(1)(B)(2)(II) WI LL BECOME UNWORKABLE. A SIMILAR VIEW WAS TAKEN BY THE HON'BLE DELHI HIGH COURT IN CASE OF ARUN SHUNGLOO TRUST, 68 DTR 279 (D EL). HEAD NOTE OF THIS DECISION READS AS UNDER: CAPITAL GAINS- COST OF ACQUISITION RELEVANT YEAR FOR INDEXATION OF COST VIS--VIS PROPERTY ACQUIRED UNDER GIFT, TRU ST, ETC.- THERE IS NO REASON TO HOLD THAT CL.(III) OF THE EXPLANATION BEL OW S.48 INTENTS TO REDUCE OR RESTRICT THE INDEXED COST OF ACQUISITION TO THE PERIOD DURING WHICH THE ASSESSEE HAS HELD THE PROPERTY AND NOT THE PERIOD DURING WHICH THE PROPERTY WAS HELD BY THE PREVIOUS OWNER- HELD BY THE ASSESSEE USED IN EXPLN. (III) TO S.48 HAS TO B E UNDERSTOOD IN THE CONTEXT AND HARMONIOUSLY WITH OTHER SECTIONS- COST OF ACQUISITION STIPULATED IN S.49 MEANS THE COST FOR WHICH THE PRE VIOUS OWNER HAD ACQUIRED THE PROPERTY TERM HELD BY THE ASSESSEE SHOULD BE INTERPRETED TO INCLUDE THE PERIOD DURING WHICH THE PROPERTY IN TRUST ON 5 TH JAN., 1996, WHICH PROPERTY WAS ACQUIRED BY THE PRE VIOUS OWNER SOMETIME BEFORE 1 ST APRIL, 1981, ON SALE OF PROPERTY BY THE ASSESSEE IN ASST.YR.2001-02, IT WAS ENTITLED TO THE BENEFIT OF INDEXED COST OF ACQUISITION FROM 1 ST APRIL, 1981, AND NOT FOR THE PERIOD ON OR AFTER 5 TH JAN., 1996. HELD AS PER S.49, THE COST OF ACQUISITION IN THE HANDS O F AN ASSESSEE IS TREATED AS THE COST OF ACQUISITION BY THE PREVIOUS OWNER. SIMILAR BENEFIT / ADVANTAGE IS GIVEN IN RESPECT OF COST OF IMPROVEMENT. SECS. 48 AND 49 HAVE TO BE READ HARMONIOUSLY TO GIVE FULL EFFECT TO THE LEGISLATIVE INTENT. ON READING OF CL. (IV) OF EXPLA NATION TO S.48, IT IS APPARENT THAT THE TERM COST OF IMPROVEMENT WOULD INCLUDE THE COST OF IMPROVEMENT(S) MADE BY THE PREVIOUS OWNER. THE BENEFIT OF INDEXED COST OF IMPROVEMENT WOULD BE AVAILABLE EVEN IF THE CAPITAL ASSET IS ACQUIRED BY THE ASSESSEE UNDER ANY GIFT, W ILL OR SUCCESSION, TRUST ETC. AND IMPROVEMENT WAS MADE BY THE PREVIOUS OWNER. IF THE CONTENTION OF THE REVENUE IS ACCEPTED, THEN BENEFIT OF INDEXED COST OF ACQUISITION WILL NOT BE AVAILABLE TO AN ASSESSEE IN A CASE COVERED BY S.49 FROM THE DATE ON WHICH THE ASSET WAS HELD BY T HE PREVIOUS OWNER BUT ONLY FROM THE DATE THE CAPITAL ASSET WAS TRANSFER TO THE ASSESSEE. THIS WILL LEAD TO A DISCONNECT AND CONTRA DICTION BETWEEN INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT IN THE CASE OF CAPITAL ASSETS WHERE S.49 APPLIES. THIS CANNOT BE THE 6 INTENTION BEHIND THE ENACTMENT OF S.49 AND EXPLANAT ION TO S.48. THERE IS, NO REASON OR GROUND WHY THE LEGISLATIVE W OULD WANT TO DENY OR DEPRIVE AN ASSESSEE BENEFIT / ADVANTAGE OF THE PREVIOUS HOLDING FOR COMPUTING INDEXED COST OF ACQUISITION WHILE ALLOWING THE SAID BENEFIT FOR COMPUTING INDEXED COST OF IMP ROVEMENT. (PARAS 10,13 & 14) THE CONSTRUCTION PLACED BY THE REVENUE WILL LEAD TO INCONSISTENCY AND INCONGRUITIES, WHEN ONE REFERS TO S.49 AND CL. (IV) OF EXPLN. (1) TO S. 48. THIS WILL RESULT IN ABSURDITIES BECAUSE T HE HOLDING OF PREDECESSOR HAS TO BE ACCOUNTED FOR THE PURPOSE OF COMPUTING THE COST OF ACQUISITION , COST OF IMPROVEMENT AND INDEX ED COST OF IMPROVEMENT BUT AS PER THE REVENUE NOT FOR THE PURP OSE OF INDEXED COST OF ACQUISITION. EVEN FOR THE PURPOSE OF DECIDI NG WHETHER THE TRANSACTION IS A SHORT-TERM CAPITAL GAIN OR LONG-TE RM CAPITAL GAIN, THE HOLDING BY THE PREDECESSOR IS TO BE TAKEN INTO CONSIDERATION. BENEFIT OF INDEXED COST OF INFLATION IS GIVEN TO EN SURE THAT THE TAXPAYER PAYS CAPITAL GAIN TAX ON THE REAL OR ACT UAL GAIN AND NOT ON THE INCREASE IN THE CAPITAL VALUE OF THE PRO PERTY DUE TO INFLATION. THIS IS THE OBJECT OR PURPOSE IN ALLOWIN G BENEFIT OF INDEXED COST OF IMPROVEMENT, EVEN IF THE IMPROVEMENT WAS BY THE PREVIOUS OWNER IN CASES COVERED BY S.49. ACCORDINGLY THERE I S NO JUSTIFICATION OR REASON TO NOT ALLOW THE BENEFIT OF INDEXATION TO THE COST OF ACQUISITION IN CASES COVERED BY S.49. THIS IS NOT T HE LEGISLATIVE INTENT BEHIND CL.(III) OF EXPLANATION TO S.48. THERE IS NO REASON AND JUSTIFICATION TO HOLD THAT CL.(III) OF THE EXPLANAT ION BELOW S.48 INTENTS TO REDUCE OR RESTRICT THE INDEXED COST OF ACQUISIT ION TO THE PERIOD DURING WHICH THE ASSESSEE HAS HELD THE PROPERTY AND NOT THE PERIOD DURING WHICH THE PROPERTY WAS HELD BY THE PREVIOUS OWNER. THE INTERPRETATION RELIED BY THE ASSESSEE IS REASONABLE AND IN CONSONANCE WITH THE OBJECT AND PURPOSE BEHIND SS. 4 8 AND 49. THE EXPRESSION HELD BY THE ASSESSEE USED IN EXPLN. (I II) TO S. 48 HAS TO BE UNDERSTOOD IN THE CONTEXT AND HARMONIOUSLY WITH OTHER SECTIONS. THE COST OF ACQUISITION STIPULATED IN S.49 MEANS TH E COST FOR WHICH THE PREVIOUS OWNER HAD ACQUIRED THE PROPERTY. THE T ERM HELD BY THE ASSESSEE SHOULD BE INTERPRETED TO INCLUDE THE PERIOD DURING WHICH THE PROPERTY WAS HELD BY THE PREVIOUS OWNER. CIT VS. MANJULA J, SHAH (2012) 68 DTR (BOM,) 269 CONCURRE D WITH. 10. SIMILAR VIEW WAS TAKEN IN THE CASE OF PARWINDE R KUMAR SHARMA V ACIT (SUPRA). FOLLOWING THE ABOVE DECISION, WE ARE OF THE OPINION THAT IN CASE CAPIT AL ASSET HAS BEEN RECEIVED BY THE ASSESSEE BY WAY OF G IFT OR INHERITANCE THEN COST OF INFLATION INDEX HAS TO BE APPLIED FROM THE DATE WHEN SUCH ASSET WAS ACQUIRED BY THE PREVIOUS OWNER. ACCORDINGLY, WE SET ASIDE THE ORDE R OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO APPLY INFLATION INDEX AS PER OUR OBSERVATIONS. RESULTANTLY, ASSESSEES APPEAL IS PARTLY ALLOWED. 7 11. SINCE NO DISTINGUISHING FACTS WERE BROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE ABOVE FINDIN GS OF THE I.T.A.T., WE ALLOW THESE GROUNDS OF APPEAL RAISED B Y THE ASSESSEE. ITA NO.963/CHD/2012 : 12. THE GROUND NOS.4,5 AND 6 ARE NOT PRESSED, HENCE THE SAME ARE DISMISSED AS NOT PRESSED. 13. THE GROUND NO.7 IS GENERAL AND NEEDS NO ADJUDICATION. 14. THE GROUND NOS.1, 2 AND 3 ALL RELATE TO THE ACTION OF THE LEARNED CIT (APPEALS) IN UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDITION ON ACCOUNT OF CAPITAL GAINS ON SALE OF PLOT. 15. IT IS RELEVANT TO OBSERVE HERE THAT THE ISSUE IN THESE GROUNDS IS SIMILAR TO THE ISSUE IN GROUND NOS . 2, 3 AND 4 RAISED BY THE ASSESSEE IN ITA NO.962/CHD/2012 AND THE FINDINGS GIVEN IN ITA NO.962/CHD/2012 SHALL APP LY TO THIS CASE ALSO WITH EQUAL FORCE. ITA NO.964/CHD/2012 : 16. THE GROUND NOS.4,5 AND 6 ARE NOT PRESSED, HENCE THE SAME ARE DISMISSED AS NOT PRESSED. 17. THE GROUND NO.7 IS GENERAL AND NEEDS NO ADJUDICATION. 8 18. THE GROUND NOS.1, 2 AND 3 ALL RELATE TO THE ACTION OF THE LEARNED CIT (APPEALS) IN UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDITION ON ACCOUNT OF CAPITAL GAINS ON SALE OF PLOT. 19. IT IS RELEVANT TO OBSERVE HERE THAT THE ISSUE IN THESE GROUNDS IS SIMILAR TO THE ISSUE IN GROUND NOS . 2, 3 AND 4 RAISED BY THE ASSESSEE IN ITA NO.962/CHD/2012 AND THE FINDINGS GIVEN IN ITA NO.962/CHD/2012 SHALL APP LY TO THIS CASE ALSO WITH EQUAL FORCE. 20. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9