NISHITA VIJAY MEHTA ,MUMBAI V. INCOME TAX OFFICER WARD 19(2)4, MUMBAI

ITA 1787/MUM/2025

AI Insights

The case involves cross appeals by the assessee, Nishita Vijay Mehta, and the revenue against the order of the Commissioner of Income Tax Appeals/National Faceless Appeal Centre (NFAC), Delhi, concerning the assessment year 2017-18. The primary issues revolved around the denial of cost of acquisition and indexation benefit from the year 1981 for shares inherited by the assessee, and the denial of exemptions claimed under sections 54F and 54EC of the Income Tax Act, 1961, for investments made from the sale proceeds of these shares. The CIT(A) had allowed the exemptions and adjusted the cost of acquisition and indexation, which the revenue contested. The Tribunal's decision affirmed the CIT(A)'s rulings, dismissing the revenue's appeals and the assessee's appeal on the indexation issue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785729 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 17-03-2025
• Other Referred Cases: CIT vs. Manjula J. Shah
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: PRAKASH JOTWANI; MRUGAKSHI K
• Keywords: Capital asset; Additional evidence; Cost of acquisition; Gift; Capital Gains; Share purchase agreement; Benefit of exemption
• Section: 143(3); 54F

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & MS PADMAVATHY S, AM I.T.A. No. 1787/Mum/2025 (Assessment Year: 2017-18) Nishita Vijay Mehta 81A Somerset House, Breach Candy, Mumbai 400026 PAN: BUUPM4219A Vs. Income Tax Officer, Ward 19(2)(4), Mumbai Piramal Chamber, Parel, Mumbai 400012 Appellant) : Respondent) I.T.A. No. 2989/Mum/2025 (Assessment Year: 2017-18) Income Tax Officer, Ward 19(2)(4), Mumbai Piramal Chamber, Parel, Mumbai 400012 Vs. Nishita Vijay Mehta 81A Somerset House, Breach Candy, Mumbai 400026 PAN: BUUPM4219A Appellant) : Respondent) Assessee by : Shri Prakash Jotwani, Ms. Mrugakshi K. Joshi, & Priya Gada Revenue by : Shri. Leyaqat Ali Aafaqui, Sr. Ar. Date of Hearing : 15.10.2025 Date of Pronouncement : 27.10.2025 O R D E R Per Padmavathy S, AM: Printed from counselvise.com 2 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta These cross appeals by the assessee and the revenue are against the order of the Commissioner of Income Tax Appeals/National Faceless Appeal Centre (NFAC), Delhi passed u/s. 250 of the Income Tax Act, 1961 (the 'Act') dated 27.02.2025 for AY 2017-18. The grounds raised by the revenue and the assessee are as under – Assessee’s Grounds “GROUND NO.1: DENIAL OF COST OF ACQUISITION AND INDEXATION BENEFIT FROM THE YEAR 1981 1. The learned CIT(A) erred in denying indexation benefit as on 1 April, 1981, since the shares were held by the Donor from 1978 onwards. 2. The learned CIT(A) failed to consider that the Appellant would be deemed to be the owner of the shares from the year in which the shares were held by previous owners, i.e., 1978. Therefore, the base year for the purpose of availing indexation benefit would be 1981. 3. The learned CIT(A) failed to take into consideration that not only is the Appellant entitled to claim cost of the previous owners (i.e. 1\" April, 1981), but is also entitled to claim indexation benefit from (i.e. 1 April, 1981). 4. The learned CIT(A) erred in disregarding the ruling in the case of CIT vs. Manjula J. Shah relied upon by the Appellant.” Revenue’s ground 1. Whether on the facts and circumstances of the case and in law, Ld.CIT(A) has erred in directing to delete the entire disallowance of Rs. 5,25,00,000/- made by the AD claimed as exemption u/s. 54F of the Act, being the amount invested under the Capital Gain Account Scheme (CGAS) and Rs.50,00,000/- in Bonds claimed as exemption u/s. 54EC of the Income-Tax Act ?\" 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in directing to delete the additions, by ignoring the fact that AO has denied the said exemption by holding that investments in Capital Gain Bond made in, was beyond due date and documentary evidences of extension investments in Capital Gain Bond by another one year was not submitted by the assessee ?\" 3. \"Whether on the facts and circumstances of the case and in law, Ld.CIT(A) has erred in directing to delete the additions, without considering the fact that the assessee has not acquired or constructed any property during the stipulated period of three years nor has Printed from counselvise.com 3 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta submitted any evidences of extension of investments for one year, hence the AO has right in denying the exemption of Rs. 50,00,000/- u/s 50EC of the Act ?\" 4. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in directing to delete the additions, without appreciating the fact that 50% of the sale consideration arising from transfer of 87 shares of IMCPL to the assessee, being Rs 2,90,38,712/- as income from other sources instead of Income from Capital Gain ?\" 5. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary.” 2. The assessee is an individual and filed the return of income on 26.07.2017 declaring total income at Rs. 8,96,530/-. The case was selected for scrutiny under CASS and the statutory notices were duly served on the assessee. On perusal of the documents furnished the AO noticed that during the year under consideration, assessee has sold 87 shares of Industrial Minerals & Chemicals Company Pvt. Ltd. (IMCCPL), under a share purchase agreement dated 31.03.2017 between Tata Reality and Infrastructure Ltd. & Standard Chartered Real Estate Investment (Singapore) VII Private Limited & the assessee and others, for a total consideration of Rs.5,80,77,423/-.After indexing the cost of acquisition, the long term capital gains worked out at Rs.5,05,58,665/-. The assessee has invested Rs.5,25,00,000/- in capital gain account and claimed exemption u/s.54F and Rs.50,00,000/- in Bonds for claiming deduction u/s.54EC of the Act. The AO noticed that Mr.Vijay Mehta father of the assessee has gifted 87 shares to assessee vide gift deed dated 6.1.2017. The Assessing Officer noticed that the shares held by the assessee are jointly held by her along with her father Mr.Vijay Mehta. The AO further noticed that though the assessee's father has gifted the shares to her in AY 2016-17, the assessee has claimed the indexed cost as of 01.04.1981. The AO held that since the year in which the assessee acquired the shares and the year of transfer being the same, the benefit of indexation cannot be given to the assessee. The AO further held that since the assessee has not furnished any documentary evidence towards Printed from counselvise.com 4 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta investments towards which the assessee has claimed exemption under section 54F/54EC, the same cannot be allowed. Accordingly the AO considered 50 % of the sales consideration received by the assessee amounting to Rs.2,90,38,712/- for the purpose of computation of long term capital gain and balance 50% amounting to Rs. 2,90,38,711/- is considered as income from other sources. Thus, the AO completed the assessment u/s 143(3) by (i) Denying the exemption claimed under section 54F/54EC (ii) Denying the indexation of cost of acquisition (iii) Treating 50% of the capital gain as income from other sources 3. Aggrieved the assessee filed further appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the claim of exemption under section 54F/54EC by the assessee by holding that – In light of the above facts, it is pertinent to note that the Appellant has purchased Rural Electrification Bonds of Rs. 50,00,000/- on 31st May, 2017 (i.e. within 6 months from the date of transfer). Further, the appellant has invested in capital gain account scheme amounting to Rs. 5,25,00,000/- proceeds arising from the sale of 87 shares of IMCCPL, in Term Deposits/Savings Account of Capital Gain Account Scheme and therefore has complied with the provisions of section 54F. It is evident that the Appellant has not utilized the amounts lying in the Capital Gain Account Scheme and therefore the same has been voluntarily offered for tax by the Appellant in Assessment Year 2020-21. The initial Fixed Deposit under CAGS was for the period 5th May, 2017 to 5th May, 2019. Thereafter, a renewal for another 1 year, i.e., upto May, 2020 for the Capital Gain Fixed Deposits was effected. The renewal receipts were furnished during assessment proceedings vide letter dated 29th November, 2019. However, the AO has failed to take these renewal receipts into consideration and disallowed the exemption u/s 54F. The money was not withdrawn from the CGAS Fixed Deposit Account. The AO failed to take into consideration that section 45 clearly states that unutilized capital gain can only be taxed in the previous year in which 3 years expire from the year in which transfer of capital asset took place. There was no bar to keep the capital gain money in savings or FD form. For the purposes of claiming deduction u/s. 54F at the time of filing the Return of Income, the Appellant is required to either provide the proof that she Printed from counselvise.com 5 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta has purchased a residential house or she may deposit the net proceeds in the capital gains account scheme, which amount will then be utilized to purchase a residential house within the stipulated period of 2 years or 3 years (if constructed), as the case may be. It is evident from the records, that the Appellant had deposited the proceeds arising from the sale of 87 shares of IMCCPL, in Term Deposits/Savings Account of Capital Gain Account Scheme and therefore has complied with the provisions of section 54F. Therefore, in the instant case, the addition is unwarranted in Asst. Year 2017-18. Hence, the ground is noted as allowed. 4. On the issue of indexation the Ld. CIT(A) held that the cost of acquisition of such shares is to be determined as on 23.10.1993 and is eligible for indexation from 1993 only. With regard to treatment of 50% of the gain as income from other sources the Ld. CIT(A) held that – In light of the above facts, it is evident even from the Demat account, that 87 shares belonged to Ms. Nishita Mehta and that the entire consideration was solely received in her Bank account. It is also stated by the appellant that Mr. Vijay Tulsidas Mehta was re-opened merely on this point. During the re- assessment proceedings, the Appellant submitted a letter dated 28-03-2023 in which complete details were given regarding the gift of 87 shares to his daughter (i.e. Assessee herein). All supporting documents were submitted during the scrutiny proceedings and after having perused all the evidences and claims, the AO (for Vijay Mehta), passed the Re-Assessment Order, accepting the Returned Income. In respect of the same, Mr. Vijay Tulsidas Mehta has given the confirmation letter in which 87 shares were gifted solely to the appellant i.e. Nishita Vijay Mehta, and that she is the sole beneficial owner, was duly accepted by the Income Tax Department and therefore a contrary view cannot be taken to say that the shares were jointly held , in which each had 50% shareholding. The AO failed to consider joint Declaration dated 30th January, 2017 made by the Appellant’s father and mother Vijay Mehta and Kavita Mehta, stating that the shares were absolutely and exclusively transferred to the Appellant. Hence, the ground is noted as allowed. 5. Accordingly the Ld. CIT(A) have partial relief to the assessee. Both the assessee and the revenue are in appeal before the Tribunal against the order of the CIT(A). Printed from counselvise.com 6 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta 6. The Ld. AR submitted that the Ld. CIT(A) has considered the evidences submitted with regard to the exemptions claimed by the assessee under section 54F/54EC, and has allowed the claim. The Ld. AR further submitted that these evidences were submitted before the AO by the assessee which have not been considered by the AO and the said fact has been mentioned by the Ld. CIT(A). The Ld. AR also submitted that the Ld. CIT(A) has examined the fact that Mr.Vijay Mehta's name is added in the share certificate only for namesake and the assessee is the sole beneficiary of the shares. The Ld. AR drew our attention to the fact that the entire sale consideration is received by the assessee and this has been acknowledged by the Ld. CIT(A) after considering the documentary evidences. 7. The Ld. DR on the other hand supported the order of the AO. 8. We heard the parties and perused the material on record. The brief facts pertaining to the impugned issue as submitted before the lower authorities – “1. One Mrs. Kamlaben Shamjibhai Mehta, had purchased equity shares of a company called Industrial Minerals and Chemical Company Pvt. Ltd. (IMCC) before 1978. 2. In the year 1962, Mrs. Kamlaben Shamjibhai Mehta settled a family trust, under the name \"Kamlaben Shamjibhai Mehta Family Trust\" (hereinafter referred to as the said Trust), for the benefit of her family members, with a sum of Rs. 1,00.000/-, on the terms and conditions specified therein. 3. Mrs. Kamlaben Shamjibhai Mehta died on 01-09-1992, leaving her Last Will and Testament dated 24-08-1985, which Will was probated by the Hon'ble High Court of Judicature of Bombay (vide Petition No. 609 or 1995) dated 23-06-1997. As per her last Will and testament, her shares of IMCC were to be transferred to \"Kamlaben Shamjibhai Mehta Family Trust\", for the benefit of its beneficiaries. 4. Accordingly Mr. Vijay Tulsidas Mehta (along with his wife Mrs. Kavita Vijay Mehta) were entitled to 249 shares of the IMCC in the following manner :- No. of shares Year Transfer from 217 shares 1993 Kamlaben Shamjibhai Mehta Family Trust 30 shares 23-10-2009 Jayalaxmi Mehta Printed from counselvise.com 7 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta 2 shares Shamji Harjivandas Mehta 249 shares 5. The shares of IMCC were transferred in the names of (i) Mr. Vijay Tulsidas Mehta and (ii) Mrs. Kavita Vijay Mehta. However, it is to be noted that Mrs. Kavita Vijay's name was added only for the sake of convenience and the real beneficial owner of the said shares of IMCC, was solely Vijay Tulsidas Mehta. (Copy of the Share Transfer Forms showing transfer of such shares is enclosed on Pg. 106-117 of PB). 6. Thereafter vide gift dated 06-01-2017, (1) Mr. Vijay Tulsidas Mehta and jiij Mrs. Kavita Vijay Mehta, gifted/transferred 87 shares of IMCC to their daughter, Ms. Nishita Vijay Mehta (the Assessee herein), out of natural love and affection. Copy of Gift letter dated 06-01-2017 along with Share Transf. Form is on Page 118-119 of PB). 7. IMCC issued a new share certificate in favour of Nishita the Assessee and on the back side of the document, endorsed the name of Nishita Vijay Mehta and Mr. Vijay Tulsidas Mehta (copy of such share certificate is on Pg. 118-119 of PB). However, it is to be noted that that Mr. Vijay Tulsidas Mehta's name is added only for the sake of convenience and the real beneficial owner of the said 87 shares of IMCC, is solely Nishita Mehta (the Assessee herein) (Copy of Confirmation Letter from Mr. Vijay Tulsidas Mehta is on Pg. 167 of PB and the same is in the nature of additional evidence and was not submitted before the lower authorities on the presumption that the explanation provided by the Assessee was satisfactory. I therefore humbly request you to kindly admit the same as additional evidence under Rule 46A of the 1.Tax Act, 1961.). 8. The relevant stamp duty on such a gift of 87 shares has been paid (Copy of the same is enclosed on Pg. 170 of PB). 9. Copy of the Declaration of such Gift is on Pg. 172-173 of PB, which clearly established that Vijay Tulsidas Mehta and Kavita Vijay Mehta, gifted their daughter ti e 87 shares of IMCCPL 10. Thus, from the above it is clear that the Assessee has received the 87 shares of IMCC by way of a gift from her father, Mr. Vijay Tulsidas Mehta, who had inherited the same from his Grand Mother, i.e. through Mrs. Kamlaben Shamjibhai Mehta Family Trust and therefore the cost of acquisition of such shares is to be determined as on 1st April 1981 and is eligible for indexation from 1981 also. 11. On 31-03-2017, the Appellant sold 87 shares of IMCCPL to Tata Realty, for a consideration of Rs.5,85,88,236/- which was fully received by the Appellant in her own bank account (copy of which is enclosed on Pg. 197-199 of PB). Income arising from such transfer has been duly offered for tax under the head Long Term Capital Gain' in the following manner :- Sale Consideration: Rs. 5,85,88,236 Less: Legal expenses: Rs. 5,10,815 Printed from counselvise.com 8 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta Net Consideration recd.: Rs. 5,80,77,423 Less: Indexed Cost of Acquisition: (6,68,334 1125/100) as on 01-04 1981) Rs. 75,18,758 Long Term Capital Gain: Rs. 5,05,58,665 Less: Deduction u/s. 54F Rs. 4,57,03,300 Less: Deduction u/s. 54EC (50Lakhs) Rs. 48,55,365 NIL 9. We notice that the AO has denied the benefit of exemption claimed by the assessee for the reason that investment is made beyond the due date and that the assessee has not submitted any documentary evidence. However, we notice that the assessee has submitted the relevant details pertaining to the investments as tabulated below before the AO which has not been considered by the AO (refer the relevant observations of the Ld. CIT(A) as extracted herein above) 10. The Ld. AR during the course hearing submitted that the assessee has offered the unutilized amount as capital gain in AY 2021-22 and this fact has been Printed from counselvise.com 9 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta considered by the Ld. CIT(A) before allowing the exemption to the assessee. Accordingly, we see merit in the argument that denying the exemption in the year under consideration would result in taxing the same amount twice. From the perusal of the findings of the Ld. CIT(A) and considering the submissions made along with documentary evidences before us, we are of the view that there is no infirmity in the decision of the Ld. CIT(A) in allowing the exemption under section 54F/54EC to the assessee. The grounds raised by the revenue in this regard are dismissed. 11. On the issue of 50% of the gain being treated as income from other sources, we notice that the Ld. CIT(A) has examined the merits of the issue in detail based on the documentary evidences submitted. Further, the assessee has submitted the relevant documents as submitted before the lower authorities in the form of a Paper Book before us. On perusal of the evidences, we notice that there is merit in the claim of the assessee that she is the sole beneficiary and that the sale proceeds are entirely received by the assessee. It is also relevant to notice that during the course of Mr.Vijay Mehta's re-assessment the same facts have been examined and that the revenue has accepted that no portion of the gain is taxable in Mr.Vijay Mehta's hands. In our considered view, when the assessee has offered the entire amount as capital gains, treating a portion of the same as income from other sources without examining the facts is not sustainable. Accordingly, we see no reason to interfere with the decision of the Ld. CIT(A) in allowing the treatment of the entire gain as Long Term Capital Gain as claimed by the assessee. The grounds raised by the revenue are thus dismissed. 12. With regard to the grounds raised by the assessee with regard to cost of acquisition as 01.04.1981 is to be considered, the Ld. AR during the course hearing Printed from counselvise.com 10 ITA No. 1787 & 2989/Mum/2025 Nishita Vijay Mehta submitted that the same is not pressed. Accordingly, we dismiss the appeal of the assessee as not pressed. 13. In result the appeal of the revenue and the appeal of the assessee are dismissed. Order pronounced in the open court on 27-10-2025. Sd/- Sd/- (AMIT SHUKLA) (PADMAVATHY S) Judicial Member Accountant Member Divya R. Nandgaonkar Stenographer Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "