ITO 17(2)(3), MUMBAI v. PARAG JASANI, MUMBAI

ITA 1486/MUM/2010 | 2005-2006
Pronouncement Date: 09-03-2011 | Result: Dismissed

Appeal Details

RSA Number 148619914 RSA 2010
Bench Mumbai
Appeal Number ITA 1486/MUM/2010
Duration Of Justice 1 year(s) 14 day(s)
Appellant ITO 17(2)(3), MUMBAI
Respondent PARAG JASANI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-03-2011
Date Of Final Hearing 01-03-2011
Next Hearing Date 01-03-2011
Assessment Year 2005-2006
Appeal Filed On 24-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) ITA NO.1486/MUM/2010(A.Y. 2005-06) THE INCOME TAX OFFICER RANGE 17(2)(3) 2 ND FLOOR PIRAMAL CHAMBERS PAREL MUMBAI 12. (APPELLANT) VS. SHRI PARAG JASANI 550 JAME JAMSHED ROAD RAJANI VILLA MATUNGA(C.R) MUMBAI 19. PAN:AACPJ 4812D (RESPONDENT) APPELLANT BY : SHRI P.N.DEVADASAN RESPONDENT BY : SHRI REEPAL TRASHAWALA ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 6/12/2009 OF CIT(A) 29 MUMBAI RELATING TO ASSESSMENT YEAR 2005- 06. THE GROUND OF APPEAL OF THE ASSESSEE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ADOPT COST OF A CQUISITION IN THE HANDS OF PREVIOUS OWNER AS PER PROVISIONS OF SECTIO N 49(I)(III) THOUGH ON THE ISSUE CONTRADICTORY DECISIONS HAVE BEEN REND ERED BY THE ITAT. 2. THE ASSESSEE IS AN INDIVIDUAL. DURING THE PREV IOUS YEAR THE ASSESSEE ALONGWITH OTHER CO-OWNERS SOLD THREE PLOTS OF LAND AT MADHAPAR GUJARAT. THE ASSESSEE HELD 34.35% SHARE IN THE PLOT OF LAND BEARING R.S.NO.52/53 4.5% SHARE IN THE PLOT OF LAND BEARING R.S. NO.11/1 & 11/2 AND 53.40% SHARE IN THE PLOT OF LAND BEARING R.S.NO.466/3. TH E ASSESSEE HAS DECLARED HIS SHARE OF SALE CONSIDERATION AT RS. 1 54 500/- RS.5 82 750/- AND RS. 30 91 986/- RESPECTIVELY. AGAINST SUCH CONSIDERATI ON THE ASSESSEE HAS CLAIMED INDEXED COST OF ACQUISITION OF RS. 1 65 120 /- RS.6 15 600/- AND RS. ITA NO.1486/MUM/2010(A.Y. 2005-06) 2 28 88 976/- RESPECTIVELY. THE ASSESSEE HAS DECLARE D A TOTAL LONG TERM CAPITAL GAIN OF RS. 1 59 540/-. 3. THE AO CALLED UPON THE ASSESSEE TO FURNISH DETA ILS OF COMPUTATION OF CAPITAL GAINS WITH SUPPORTING EVIDENCE. ON PERUSA L OF THE DETAILS THE AO NOTICED THAT THE ASSESSEE WAS ENTITLED TO 25% OF HI S PRESENT SHARE IN THE PLOTS OF LAND BEARING R.S.NO.52/53 & R.S NO.11/1 & 11/2 AND 10% OF HIS PRESENT SHARE IN PLOT OF LAND BEARING R.S. NO.466/3 AS RESULT OF PARTIAL PARTITION OF THE HUF OF HIS FATHER NAMELY DHANVANT RAI A. JASANI-HUF VIDE PARTITION DEED DT. 29/03/1985. 4. SUBSEQUENTLY THE ASSESSEE INHERITED THE BALANCE 75% OF HIS PRESENT SHARE IN THE PLOTS OF LAND BEARING R.S.NO.52/53 & R .S. NO.11/1 & 11/2 AND 90% OF HIS PRESENT SHARE IN PLOT OF LAND BEARING R. S. NO.466/3 FROM HIS MOTHER MRS. HANSA JASANI WHO EXPIRED ON 03/08/2003 . THE ASSESSEES MOTHER WAS ENTITLED TO 25% OF THE SAID SHARE IN THE SAID PLOTS OF LAND AS RESULT OF PARTIAL PARTITION OF THE HUF OF HIS FATHE R NAMELY DHANVANTRAI A. JASANI-HUF VIDE PARTITION DEED DT. 29/3/1985. THE BALANCE SHARE IN THE SAID PLOTS OF LAND WAS WILLED TO THE ASSESSEES MOT HER BY LT. MR.DHANWANTRAI A. JASANI VIDE WILL EXECUTED IN MAY 2000. 5. BASED ON THE ABOVE THE AO WAS OF THE VIEW THAT THE ASSESSEE FIRST HELD THE 25% OF HIS PRESENT SHARE IN THE PLOTS OF LAND B EARING R.S. NO.52/53 & R.S. 11/1 & 11/2 AND 10% OF HIS PRESENT SHARE IN PL OT OF LAND BEARING R.S. NO.466/3 IN THE YEAR 1985 AND THE BALANCE PERCENTAG E OF HIS PRESENT SHARE IN THE SAID PLOTS OF LAND IN 2003. HOWEVER WHILE COMPUTING THE INDEXED COST OF ACQUISITION THE ASSESSEE HAS TAKEN THE BASE YEA R AS 1981 OF THE ENTIRE PROPERTY. THE AO THEREAFTER REFERRED TO EXPLANATIO N (III) TO SECTION 48 OF THE INCOME TAX ACT 1961 (THE ACT) WHICH READS AS FOL LOWS:- INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHIC H BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INF LATION INDEX FOR THE ITA NO.1486/MUM/2010(A.Y. 2005-06) 3 YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY T HE ASSESSEE OR FOR THE YEAR BEGINNING ON THE 1 ST DAY OF APRIL 1981 WHICHEVER IS LATER; THE AO WAS OF THE VIEW THAT THE BENEFIT OF INDEXATI ON CAN BE ALLOWED FROM THE PERIOD WHEN THE ASSET IS HELD BY THE ASSESSEE AND NOT WHEN HIS PREDECESSORS IN INTEREST HELD THE ASSET. HENCE T HE ASSESSEE WAS ASKED TO FURNISH AN EXPLANATION IN THIS REGARD. IN RESPONSE THE ASSESSEE FURNISHED A REVISED WORKING OF CAPITAL GAINS FROM THE SALE OF T HE SAID PLOTS OF LAND. IN THE REVISED COMPUTATION THE ASSESSEE TOOK THE BASE YEA R AS 1985 FOR 25% OF HIS PRESENT SHARE IN THE PLOTS OF LAND BEARING R.S. NO. 52/53 & R.S. NO.11/1 & 11/2 AND 10% OF HIS PRESENT SHARE IN PLOT OF LAND B EARING R.S. NO.466/3 AND BASE YEAR AS 2003 FOR HIS BALANCE SHARE IN THE SAID PLOTS OF LAND. THE AO THEREAFTER COMPUTED THE INDEXED COST OF THE ACQUISI TION OF THE THREE PLOTS AS FOLLOWS: PLOT OF LAND BEARING R.S.NO.52/53 25% 75% TOTAL YEAR IN WHICH ASSET FIRST HELD BY THE ASSESSEE 1984-85 2003-04 - SALE CONSIDERATION 38 625 1 15 875 1 54 500 COST OF ACQUISITION 8 600 25 800 34 400 INDEXED COST OF ACQUISITION 33 024 26 747 59 771 --------- ---------- ----------- CAPITAL GAINS 5 601 89 128 94 729 ---------- ----------- ---------- PLOT OF LAND BEARING R.S.NO.11/1 & 11/2 25% 75% TOTAL YEAR IN WHICH ASSET FIRST HELD BY THE ASSESSEE 1984-85 2003-04 - SALE CONSIDERATION 1 45 688 4 37 062 5 82 750 COST OF ACQUISITION 32 06 3 96 188 1 28 250 INDEXED COST OF ACQUISITION 1 23 122 99 720 2 22 842 --------- ---------- ----------- CAPITAL GAINS 22 56 6 3 37 342 3 59 908 ---------- ----------- ---------- ITA NO.1486/MUM/2010(A.Y. 2005-06) 4 PLOT OF LAND BEARING R.S.NO.466/3 10% 90% TOTAL YEAR IN WHICH ASSET FIRST HELD BY THE ASSESSEE 1984-85 2003-04 - SALE CONSIDERATION(U/S.50C) 3 13 079 2 8 17 712 31 30 791 COST OF ACQUISITION 60 187 5 41 683 6 01 870 INDEXED COST OF ACQUISITION 2 31 118 5 61 572 7 92 690 --------- ---------- ----------- CAPITAL GAINS 81 961 22 56 621 23 38 635 ---------- ----------- ---------- 6. THE ASSESSEE WAS AGGRIEVED BY THE ORDER OF THE AO IN NOT ALLOWING INDEXATION AS CLAIMED BY THE ASSESSEE. THE CIT(A) ON THIS ISSUE ACCEPTED THE PLEA OF THE ASSESSEE FOLLOWING THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MANJULA J. SHAH 318 ITR 417(AT)(MUM)(S B). AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS FILED THE PRESE NT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN OUR VIE W THE ISSUE IS SQUARELY COVRED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MANJULA J. SHAH (SUPRA). IT HAS BEEN HELD IN THE SAID DECISION AS FOLLOWS: THE ASSESSEE TRANSFERRED A CAPITAL ASSET WHICH WAS RECEIVED BY HER BY WAY OF GIFT ON 1.2.2003. THE PREVIOUS OWNER HAD ACQ UIRED THE CAPITAL ASSET ON 29.1.1993. IN COMPUTING CAPITAL GAINS THE ASSESSEE CLAIMED THAT THE INDEXED COST OF ACQUISITION HAD TO BE WORK ED OUT BY TAKING THE DATE OF ACQUISITION BY THE PREVIOUS OWNER. THE AO R EJECTED THE CLAIM THOUGH THE CIT (A) ACCEPTED IT. ON APPEAL BY THE RE VENUE THE ISSUE WAS REFERRED TO THE SPECIAL BENCH. HELD BY THE SPEC IAL BENCH: (I) EXPLANATION (III) TO S. 48 DEFINES THE TERM IN DEXED COST OF ACQUISITION TO MEAN THE AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS THE . COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE A LITER AL READING OF THE PROVISION SUGGESTS THAT ONE HAS TO GO BY THE YEAR I N WHICH THE ASSET WAS HELD BY THE ASSESSEE. HOWEVER THIS WOULD BE IN CONSISTENT WITH ITA NO.1486/MUM/2010(A.Y. 2005-06) 5 THE SCHEME OF THE ACT AS REFLECTED IN THE DEFINITIO N OF SHORT-TERM CAPITAL ASSET IN EXPL. 1(B) TO S. 2 (42A) WHICH PR OVIDES THAT THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER ALSO HAS TO BE TAKEN INTO ACCOUNT. IT IS NOT LOGICAL THAT THE COST OF ACQUISITION AND THE PERIOD OF HOLDING IS DETERMINED WITH REFERENCE TO T HE PREVIOUS OWNER AND THE INDEXATION FACTOR IS DETERMINED WITH REFERE NCE TO THE DATE OFACQUISITION BY THE ASSESSEE . SUCH AN INTERPRETAT ION WILL LEAD TO ABSURDITY AND UNJUST RESULTS AND DEFEAT THE PURPOSE OF THE CONCEPT OF INDEXED COST OF ACQUISITION. IN ACCORDANCE WITH T HE PRINCIPLES OF PURPOSIVE INTERPRETATION OF STATUTES EXPL. (III) T O S. 48 HAS TO BE READ TO MEAN THAT THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED BY TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER. IN VIEW OF THE AFORESAID DECISION WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE CIT(A). CONSEQUENTLY THE APPEAL BY THE REVENUE IS DISMISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH DAY OF MARCH 2011. SD/- SD/- (RAJENDRA SINGH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 9 TH MARCH.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.1486/MUM/2010(A.Y. 2005-06) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 1/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2/3/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED D RAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER