ACIT, New Delhi v. Sh. Anil Dhawan, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES A: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO. 4240/DEL/2010 ASSESSMENT YEAR: 2005-06 ACIT VS. ANIL DHAWAN CIRCLE 23(1) S-31 PANCHSHEEL PARK C.R. BLDG I.P. ESTATE NEW DELHI. NEW DELHI. AAHPD2876Q (APPELLANT) (RESPONDENT) APPELLANT BY : MS. ANUSHA KHURANA SR. DR RESPONDENT BY : H.K. L AL & J.K. MONGA ADV. ORDER PER I.P. BANSAL J.M. : THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 22.6.10 FOR A.Y. 2 005-06. GROUNDS OF APPEAL READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 94 46 336/-. 2. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OF DURING THE COURSE OF HEARING OF THE APPEAL. 2. THE ASSESSEE HAD HELD 50% SHARE IN THE PROPERTY SITUATED AT PLOT NO. C-21B BHAGWAN DAS ROAD JAIPUR. SUCH SHARE IN THE PROPERTY WAS SOLD FOR A CONSIDERATION OF RS. 3 57 00 000/- ON WH ICH NET LONG TERM CAPITAL ITA NO. 4240/D/10 2 GAIN WAS WORKED OUT BY THE ASSESSEE AT RS. 42 56 37 0/- WHICH WAS SET OFF AGAINST LONG TERM CAPITAL LOSS OF RS. 45 21 052/- O N SALE OF SHARES AND THUS NET LONG TERM CAPITAL LOSS WAS SHOWN AT RS. 2 64 68 2/-. AGAIN AS PER REVISED RETURN THE ASSESSEE DECLARED THE LONG TERM CAPITAL GAIN ON SALE OF PROPERTY AT RS. 68 51 103/-. IT WAS CLAIMED BY THE ASSESSEE THAT 25% SHARE OF THE PROPERTY WAS RECEIVED BY HIM IN SUCCESSION O N DEATH OF HIS FATHER THEREFORE THE COST TO THAT EXTENT SHOULD BE TAKEN AS WAS THE COST IN THE HANDS OF PREVIOUS OWNER (DECEASED FATHER OF THE ASS ESSEE). THUS IT WAS CLAIMED BY THE ASSESSEE THAT TO THAT EXTENT FOR TH E PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN THE FAIR MARKET VALUE SHOUL D BE TAKEN AS ON 1.4.1981 (AS THE PREVIOUS OWNER HAD ACQUIRED THE PROPERTY MU CH BEFORE 1.4.1981) AND INDEXATION BENEFIT SHOULD BE GRANTED ON THAT FA IR MARKET VALUE FROM 1.4.1981. THE FATHER OF THE ASSESSEE NAMELY SH. RAM KISHORE DHAWAN HAD DIED INTESTATE ON 23 RD MAY 1969 AND HAD LEFT THE AFOREMENTIONED PROPERTY . THE LEGAL HEIRS OF THE DECEASED FATHER OF THE ASSES SEE WERE (I) SHEELA DHAWAN (SPOUSE) (II) SH. ANIL DHAWAN (ASSESSEE BEI NG ONLY SON) (III) SMT. USHA AHUJA (DAUGHTER OF THE DECEASED) (IV) ALKA C HATRATH (DAUGHTER OF THE DECEASED). THUS IT WAS THE CLAIM OF THE ASSESSEE THAT THE DATE ON WHICH THE FATHER OF THE ASSESSEE HAD DIED 25% SHARE IN T HE SAID PROPERTY HAD FALLEN TO THE SHARE OF THE ASSESSEE AND THUS THE A SSESSEE HAD BECOME OWNER ON THE SAID DATE AND IS ALSO ENTITLED TO GET THE BENEFIT OF COST OF INDEXATION FROM THAT DATE. THIS CLAIM OF THE ASSES SEE WAS REJECTED BY LD. AO ON THE GROUND THAT ASSESSEE HAD BECOME THE OWNER OF SAID 25% IN THE PROPERTY ONLY ON 12.1.2000 WHEN A MEMORANDUM OF FAM ILY SETTLEMENT WAS ITA NO. 4240/D/10 3 EXECUTED AMONGST THE LEGAL HEIRS OF LATE SH. RAM KI SHORE & TILL THAT DATE THE INHERITED SHARE OF THE ASSESSEE WAS IN FLOATING STAGE THEREFORE THE ASSESSEE CANNOT CLAIM BENEFIT OF COST OF INDEXATION FROM 1.4.81 AND AFTER REJECTING THE CLAIM OF THE ASSESSEE THE AO HAS COM PUTED THE LONG TERM CAPITAL GAIN AT RS. 94 46 336/- WHICH HAS BEEN ADDE D TO THE INCOME OF THE ASSESSEE AS PER FOLLOWING CALCULATION: - 50% SHARE OF SALE PROCEED RS. 3 57 00 000/- LESS: EXPENSES ON SALE RS. 3 83 000/- LESS: INDEX COST OF ACQUISITION RS. 17 95 664/- LONG TERM CAPITAL GAIN RS. 3 35 21 336/- LESS: EXEMPTION U/S 54 RS. 2 40 75 000/- TAXABLE LONG TERM CAPITAL GAIN RS. 94 46 336/- 3. LD. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSE E ON THE BASIS OF SPL. BENCH DECISION IN THE CASE OF DCIT V. MAJULA J . SHAH (2009) 318 ITR (AT) 417 (MUM.) (SB) WHEREIN AFTER CONSIDERING SEC TIONS 2(42A) EXPLANATION 1(B) (29A) 48 EXPLANATION (III) 49( I) AND CBDT CIRCULAR NO. 636 DATED 31 ST AUGUST 1992 IT IS HELD THAT INDEXATION BENEFIT SH OULD BE WITH REFERENCE TO THE YEAR IN WHICH PREVIOUS OWNER HAD A CQUIRED THE ASSET. IN THIS MANNER LD. CIT(A) HAS DELETED THE ADDITION MA DE BY THE AO AGAINST WHICH THE REVENUE IS AGGRIEVED HENCE IN APPEAL. T HEREFORE THE SOLE CONTROVERSY ARISING FOR ADJUDICATION IN THE PRESENT APPEAL IS THAT WHETHER OR NOT CIT(A) IS RIGHT IN HOLDING THAT THE ASSESSEE IS ENTITLED TO HAVE THE BENEFIT OF INDEXATION FALLING TO THE 25% SHARE OF THE PROPE RTY FROM 1.4.81 AS THE SAID 25% SHARE HAD DEVOLVED UPON THE ASSESSEE ONLY ON 23 RD MAY 1969 AFTER THE DEATH OF HIS FATHER. ITA NO. 4240/D/10 4 4. LD. DR AFTER NARRATING THE FACTS RELYING UPON T HE ORDER OF AO PLEADED THAT AO WAS RIGHT IN NOT GRANTING THE BENEFIT OF IN DEXATION TO THE PORTION OF 25% SHARE OF WHICH THE ASSESSEE HAD BECOME OWNER ON LY ON 12.1.2000 WHEN THE SAID SHARE WAS ASCERTAINED BY WAY OF A MEM ORANDUM OF FAMILY SETTLEMENT OF THE PROPERTY AND THUS SHE PLEADED TH AT LD. CIT(A) HAS WRONGLY GRANTED THE RELIEF TO THE ASSESSEE. 5. ON THE OTHER HAND RELYING UPON THE ORDER OF CIT (A) IT WAS PLEADED BY LD. AR THAT THE ISSUE IS DIRECTLY COVERED BY THE AFOREMENTIONED DECISION OF SPL. BENCH. THUS HE PLEADED THAT LD. CIT(A) HA S RIGHTLY HELD THAT THE ASSESSEE IS ENTITLED FOR BENEFIT OF INDEXATION FROM THE DATE WHEN THE ASSET WAS FIRST OWNED BY THE PREVIOUS OWNER. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT IS THE CASE OF THE A SSESSEE THAT 25% SHARE IN THE PROPERTY HAD DEVOLVED UPON HIM UPON THE DEATH O F HIS FATHER WHO HAD DIED INTESTATE. RELYING UPON THE PROVISIONS OF SEC . 49(1) WHICH DEFINE COST WITH REFERENCE TO CERTAIN MODES OF ACQUISITION IT IS THE CASE OF THE ASSESSEE THAT AS THE 25% SHARE IN THE PROPERTY HAS BEEN RECEIVED BY THE ASSESSEE BY WAY OF SUCCESSION INHERITANCE OR DEVOL UTION THEREFORE THE COST OF ACQUISITION OF THE SAID SHARE IS DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY HAD ACQUIRED IT. RE FERENCE IS ALSO MADE TO EXPLANATION (III) WHICH DEFINE INDEXED COST OF ACQU ISITION AS THE COST TO THE ITA NO. 4240/D/10 5 PREVIOUS OWNER OF THE PROPERTY. PREVIOUS OWNER (FA THER OF THE ASSESSEE) HAD BECOME OWNER OF THE SAID PROPERTY EARLIER TO 1. 4.81. HE DIED ON 23.5.1969 AND PRIOR TO THAT HE WAS OWNER OF THE SAI D PROPERTY). THEREFORE THE ASSESSEE IS ENTITLED TO HAVE THE COST OF ACQUIS ITION BEING FAIR MARKET VALUE AS ON 1.4.1981 AND IS REQUIRED TO BE GIVEN BE NEFIT OF INDEXATION OF COST ON THE SAID FAIR MARKET VALUE. THERE IS NO DI SPUTE REGARDING THE FAIR MARKET VALUE OF THE ASSET ADOPTED BY THE ASSESSEE A S ON 1.4.1981. THE ONLY QUESTION INVOLVED IN THE PRESENT APPEAL IS THA T WHETHER THE FAIR MARKET VALUE AS ON 1.4.1981 IS TO BE TAKEN AS A COST IN TH E HAND OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN OR THE FAIR MARKET VALUE AS ON 12.1.2000 IS TO BE TAKEN AS HAS BEEN DONE BY THE AO WHICH RELATES TO DATE OF EXECUTION OF MEMORANDUM OF FAMILY SETTLEMEN T. THE CONTROVERSY IN THIS REGARD IF ANY HAS BEEN RESOLVED BY THE AFOREM ENTIONED DECISION OF SPL. BENCH IN THE CASE OF DCIT VS. MANJULLA J. SHAH (SUP RA) WHEREIN INTERPRETING THE PROVISIONS IN A SIMILAR SITUATION OF GIFTS IT HAS BEEN HELD THAT COST FOR THE PURPOSE OF INDEXATION IS TO BE TAKEN A S COST IN THE HANDS OF THE PREVIOUS OWNER. SECTION 49(1) COVERS BOTH THE EVEN TUALITIES I.E. GIFT AS WELL AS SUCCESSION INHERITANCE OR DEVOLUTION. THEREFOR E THE SITUATION IN THE CASE OF THE ASSESSEE THAT HE HAS GOT THE SAID SHARE OF 25% IN SUCCESSION WILL ALSO BE COVERED BY SEC. 49(1) OF THE ACT. THUS NO ERROR IS COMMITTED BY LD. CIT(A) IN ARRIVING AT A CONCLUSION THAT THE ASS ESSEE IS ENTITLED TO HAVE THE BENEFIT OF INDEXATION BY TAKING THE COST OF 25% SHA RE FALLING TO HIS CREDIT AND SUCH COST OF ACQUISITION RELATES TO THE DATE WHEN T HE PREVIOUS OWNER HAD ITA NO. 4240/D/10 6 ACQUIRED THE SAID PROPERTY. THERE BEING NO INFIRMI TY IN THE ORDER OF CIT(A) THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.2.11 (A.K. GARODIA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT