Income Tax Appellate Tribunal - Delhi
Amarjit Singh Puri, New Delhi vs Assessee on 29 September, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : A : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI I.P. BANSAL, JUDICIAL MEMBER
ITA No.4834/Del/2010
Assessment Year : 2007-08
Amarjit Singh Puri, Vs. ACIT,
A-251, New Friends Colony, Circle 22 (1),
New Delhi. New Delhi.
PAN : AAKPP9998A
(Appellant) (Respondent)
Assessee by : S/Shri S.D. Kapila & Sidharth Kapila,
Advocates
Revenue by : Mrs. Geetmala Mohanany, CIT, DR
ORDER
PER I.P. BANSAL, JM:
This is an appeal filed by the assessee. It is directed against the order passed by the CIT (A) dated 29th September, 2010 for Assessment Year 2007-08. The grounds appeal read as under:-
1. That the order of the learned CIT (A) is bad, both in law and on facts of the case.
2. That the CIT (A) has erred in upholding the assessment at Rs.3,28,73,820/- as against the returned income of Rs.96,03,820/- which was later revised to a lower figure.
3. That the computation of capital gains as made by the A.o. is wrong and legitimate deduction as claims have been denied by him.2 ITA No.4834/Del/2010
4. That the A.O. erred in wrongly computing the capital gain on income and inter-alia in denying the benefit of indexation to the assessee while computing capital gains & determining the indexed cost of Rs.80,50,000/- as against the assessee's claim of Rs.4,48,88,615/-. The learned CIT (A) erred in upholding such action of the A.O.
5. That the learned A.O. wrongly interpreted explanations (iii) to section 48 and erred in holding that for the purpose of indexation the property was held by the assessee in the financial year 2006-07 and was not held on 1.04.1981 or alternatively on 14.01.1993 on the day of death of his father and the learned CIT (A) erred in upholding such action of the A.O.
6. That the order of the A.O. is based on irrelevant considerations and wrong legal principles and is perverse.
7. That the above grounds are without prejudice to one another and the assessee appellant craves leave to add/amend/delete any grounds taken above.
8. That the appeal is within time, the order of the CIT (A) having been received only on 4.10.10.
2. The Assessee had sold a property of 600 sq. yard bearing No.22, Friends Colony (West), Mathura Road, New Delhi. The said property was acquired by the assessee pursuant to a memorandum of oral family agreement which was reduced to writing on June, 2, 2006. The assessee calculated the long-term capital gain on this property at ` 95,71,500/- as per the following calculations:-
"Calculation of long term capital gain Sale consideration of 1400 sq. yds (Approx) forming part of property admeasuring 4262.55 sq. yds. At 22, Friends Colony (West), Mathura Road, New Delhi, inherited from father Late Shivcharan Singh as per receipt dated 14.11.2006. Rs.10,92,00,000 Less : indexed cost of acquisition Valuation as on 1.4.1981 (As per Valuation Report) Rs.4,00,08,500 8050000*519/100 Long Term Capital Gain Rs.6,91,91,500 3 ITA No.4834/Del/2010 Share of the assessee on 600 sq. yards Rs.2,96,53,500 Less Exemption u/s 54 of Income Tax Act:
Purchase of GF and Basement of A-251, New Friends Colony, New Delhi - 65 Annexure VII of Letter dt. 26.11.2009 filed. Rs.1,20,60,000 Purchase of 10% share in FF, SF and Roof of A-251, New Friends Colony, New Delhi - 65 Rs.16,20,000 Expenditure on improvement as per statement 14,00,000 Sub Total Rs.1,50,80,000 Balance Capital Gain Rs.1,45,73,500 Investment in Bonds (Annexure IX letter dtd. Rs.50,000 25.11.2009 Net Capital Gain Rs.95,71,500/-
Rs.95,71,500
3. Vide letter dated 15th December, 2009 a revised working of capital gain was filed and net long-term capital gain was computed as under:-
A.S. Puri share of long term capital gain (600/1400) 27562022 Allowable deductions Purchase of A-251, New Friends 12600000 colony 1620000 (Improvement part considered) 1400000 15620000 Investment in Bonds 5000000 20620000 Long Term Capital Gain 6,942,022
4. The facts which led to execution of memorandum of family settlement are given by the learned AR in the form of sequence of dates which, for the sake of convenience are reproduced below:-
4 ITA No.4834/Del/2010"1) Late Bakshi Shivcharan Singh Puri purchases as 1955 absolute owner of plot of land at 22-23 Friends Colony, New Delhi (8225 sq. yds.)
2) Bakshi Shivcharan Singh Puri dies 14.1.1993 Seven legal heirs comprising his two wives and their children (Aggregating five) from them (see Pg 4/IT (A) order)
3) Col. Ravinder Singh, S/o Shivcharan Singh files 7.2.2005 Application u/s 276 of the Indian Succession Act in the court of Dist. Judge.
4) Legal heirs settle disputes in respect of the will of 2.6.2006 Bakshi Shivcharan Singh - Memo of oral agreement is signed by all members of the family on
5) Court disposes of the application u/s 276 of the 3.7.2008 Indian Succession Act (pgs.1-8/Paper Book)
6) Assessee sells his share of inheritance in the plot of 14.11.2006 land for Rs.10.92 Crore and claims indexed cost of acquisition of market value as on 1.4.1981 u/s 48.
7) A.O. assess the gain as Long Term Capital gain in P.2/A.O. terms of Sec. 2(42A) Expla. 1 (i)(b)/Section 48 P.5/CIT (A) Explanation (iii) & (iv) read with section 49(1) of the Act and section 55 (1) (b) (ii) of the Act.
8) A.O./CIT (A) follow Bombay Tribunal in Kishore 9) Kanungo and treats the gain as long term capital gain in terms of S.2(42A) read with section 48, but does not grant indexation as the assessee first held the property only after the court passed this order in the relevant previous.
9) Relevant Provisions of the Act
a) Section 2 (42A)/Explanation (1)(i)(b)
b) Section 45
c) C) Section 48 read with Explanation (iii) * (iv)
d) Section 49(1)(ii) & (iii) read with Section 276 of the
Indian Succession Act (Text Annexed at Pg.1)
e) Section 55 (1) (b) (2)(ii)
10) Case law relied on:
i) Manjula J Shah 318 ITR (AT) 417 (Mum) (SB) (Annexed at Pg.2-
16)
ii) Manjula J Shah (Bom) ITA No.3378 of 2010 Annexed at Pg. 17-23."5 ITA No.4834/Del/2010
5. As it can be seen from the above chart, the property in question was acquired by the father of the assessee in 1955 on which residential house was constructed . The father of the assessee died in January, 1993 leaving seven legal heirs comprising his two wives and their children. Shri Ravinder Singh being son of deceased filed application u/s 276 of the Indian Succession Act in the court of District Judge on 7th February, 2005 pursuant thereof legal heirs had settled the dispute amongst them and arrived at a memorandum of family settlement on 2nd June, 2006 and the court disposed of the application filed u/s 276 as per the order dated 3rd July, 2008. On 14th November, 2006, the assessee had sold share of the said plot of land on which indexed cost of acquisition of market value as on 1.4.1981 was claimed. The Assessing Officer after referring to the provisions of the Income-tax Act, has computed the long-term capital gain in the hands of the assessee as follows:-
"A Sale consideration (as returned by the assessee) 10,92,00,000 B Expenses on Transfer (as returned by the assessee) NIL C CII of the year of Transfer (FY 2006-07). 519 D CII of the Year in which the asset was first held by 519 the assessee (FY 2006-07) E Fair Market Value of land as on 1.4.1981 (as 80,50,000 returned by the assessee) F Indexed Cost of Acquisition [E*(C/D)] 80,50,000 G Total Long Term Capital Gain (A-B-F) 10,11,50,000 H Assessee's share out of (G) (G*600/1400) 4,33,50,000 I Exemption u/s 54 (as returned by the assessee) 1,50,80,000 J Exemption u/s 54 EC (as returned by the assessee) 50,00,000 K Taxable Long Term Capital Gain [G-(H+I)] 2,32,70,000"6 ITA No.4834/Del/2010
6. On these facts, it is the case of the learned AR that the case of the assessee falls u/s 49 and, therefore, the cost indexation benefit has to be given to the assessee on the value as on 1.4.81 which has been denied by the Assessing Officer following the decision of the Tribunal in the case of DCIT vs. Kishore Kanungo 290 ITR (AT) 298 (Mum) which decision later on has been disapproved by the Special Bench in the case of DCIT vs. Manjula J. Shah 318 ITR (AT) 417 (Mum) (SB) in which it has been held that u/s 49(1) the indexation should be with reference to year in which the previous owner acquired the assets. It is also the case of the learned AR that recently Hon'ble Bombay High Court vide their order dated 11th October, 2011 has upheld the aforementioned decision of Special Bench and departmental appeal in the case of CIT vs. Manjula J. Shah was dismissed in Income-tax Appeal No.3378 of 2010. He submitted that the copy of the said decision is filed by the assessee at pages 17 - 23 of the paper book. Thus, it is the case of the learned AR that the benefit of indexation from 1.4.1981 has wrongly been denied to the assessee and in accordance with the aforementioned case law the same should be given to the assessee and the appeal of the assessee should be allowed.
7. On the other hand, ld. CIT ,DR vehemently contested the submission of the assessee. She submitted that the facts of the case of the assessee are different. She submitted that in the case of DCIT vs. Manjula J. Shah, the facts were different as the said case was relating to gift. She submitted that in the case of the assessee the dispute was going on and the matter was settled by the court of law. Therefore, she submitted that before the dispute was settled by the court of law the assessee could not be said to be the owner of the said property and the assessee would become the owner only on the date when he entered into the memorandum of oral agreement dated 2nd June, 2006. Therefore, she submitted that the assessee is not entitled 7 ITA No.4834/Del/2010 to get the benefit of indexation from 1.4.1981 and, therefore, learned CIT (A) is right in upholding the action of the Assessing Officer. She submitted that the assessee's appeal should be dismissed.
8. In a rejoinder, it was submitted by the learned AR that the only objection of the Assessing Officer is regarding grant of indexation benefit. He has taken the cost of the property as on 1.4.81. He submitted that if the case of the learned DR is to be accepted, then the assessee had sold his share on 14th November, 2006 and it will be a case of short-term capital gain which is not even the case of Assessing Officer. He pleaded that Section 49 is wide enough to cover the cases falling under distribution of assets on total or partial partition of Hindu Undivided Family; gift; will; succession; inheritance or devolution and it has been mandated in Section 49 that the cost of acquisition of asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by previous owner or the assessee, as the case may be. He submitted that interpreting Explanation (iii) to Section 48 read with Section 49, it has been held by the Bombay High Court in aforementioned case that the indexation benefit has to be given to the person who has become owner of the property in certain specified circumstances which include gift, will, succession, inheritance or devolution. Therefore, he submitted that the case of the assessee will fall under the provisions of Section 49 read with Explanation (iii). He submitted that Section 276 of Indian Succession Act, 1925 is a provision for a probate of the will and what was filed before Hon'ble Court was to obtain the probate of the will and, thus, the case of the assessee will clearly fall within the purview of Section 49 of the Act.
9. We have carefully considered the rival submissions in the light of the material placed before us. No doubt the aforementioned property has been obtained by the assessee being legal heir of his father. The 8 ITA No.4834/Del/2010 learned DR has invited our attention towards the will, the copy of which is filed by the assessee in the paper book. A suite u/s 276 of the Indian Succession Act was filed by the legal heirs of the deceased. It is pursuant to that suite only a family settlement agreement was arrived at. The net result is that the share has devolved upon the assessee being the legal heir of the previous owner of the property. Section 49 of the Income-tax Act is wide enough to cover all such cases and Section 49 read with Explanation (iii) to Section 48 has been interpreted by the Special Bench in the case of DCIT vs. Manjula J. Shah and it has been opined that indexation benefit has to be given to the legal heir or the recipient of the property through modes described in Section 49 from the date when previous owner of the property acquired the property. The case of the Assessing Officer and CIT (A) is based on the earlier decision of the Tribunal in the case of DCIT vs. Kishore Kanungo (supra) which is no more a good law in view of the aforementioned Special Bench decision of the ITAT which has been approved by Hon'ble Bombay High Court vide their decision dated 11th October, 2011. Therefore, we are of the opinion that the cost indexation benefit has to be granted to the assessee by taking the cost as on 1.4.81 and date of execution of memorandum of family settlement cannot be basis for computing the indexation benefit. Therefore, we direct the Assessing Officer to compute capital gain on the sale of property after giving the indexation benefit to the assessee on the cost determined as on 1.4.81 from 1.4.81 and not from financial year 2006-07.
9 ITA No.4834/Del/201010. In the result, the appeal filed by the assessee is allowed in the manner aforesaid.
The order pronounced in the open court on 29.12.2011.
Sd/- Sd/-
[G.D. AGRAWAL] [I.P. BANSAL]
VICE PRESIDENT JUDICIAL MEMBER
Dated, 29.12.2011.
dk
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches