Income Tax Appellate Tribunal - Chandigarh
Mrs. Pushpa Sofat vs Income-Tax Officer on 4 July, 2001
Equivalent citations: [2002]81ITD1(CHD)
ORDER
Vimal Gandhi, Vice-President
1. This appeal by the assessee for the assessment year 1993-94 is directed against the order of CIT(A) refusing to grant any relief to the assessee on account of the capital gain charged in the hands of the assessee.
2. The undisputed facts of the case are that the assessee and her sister Smt. Shashi Jain were owner of one kanal single storey residential Kothi No. 2356, sector 23C, Chandigarh and the same was sold by them in the accounting year 1992-93 for a sum of Rs. 7,40,000. The said house was inherited by the above mentioned ladies from their father, who died on 17-2-1991 in Nairobi. Their father had built the house long back i.e. much earlier to 1-4-1981 and had bequeathed the same to her daughters i.e. the assessee and her sister.
3. The assessee in her return of income for the assessment year 1993-94 duly disclosed the sale of the house, but claimed that no capital gain accrued on above sale as the cost of property by applying cost inflation index in terms of Section 48(1)(a) of Income-tax Act was more than the sale consideration. Accordingly, no capital gain was shown in return.
4. The Assessing Officer did not agree with the above proposition. In his view, the indexed cost of acquisition was to be worked out with reference to the date on which the father of the assessee expired i.e. 17-2-1991 falling in accounting year 1991-92. As per the notification, the relevant index for that year was 199 which was substituted by figure 223 in the year in which the property was sold and that way estimated cost as on 1-4-1981 was to be multiplied by above figure and that way the Assessing Officer worked out the cost of the property at Rs. 4,55,126 as per the following calculation tion :-
Rs. 4,06,144 x 223
------------------- = Rs. 4,55,126 199
5. Taking sale price at Rs. 7,40,000, the capital gain was worked out at Rs. 2,84,874 and assessee's Vi share at Rs. 1,42,437.
6. In the above working, the Assessing Officer took into account the definition of "short-term capital asset" as given in Section 2(42A), provisions of Section 49 and as "also Section 47 of Indian Registration Act. He held that long-term capital gain was to be assessed in the case of the assessee which was worked out to Rs. 1,21,180 and added to income of the assessee.
7. The assessee impugned above addition in appeal before the ld. CIT(A) but remained unsuccessful. She held that the assessee became the owner of the property on 14-8-1992, the date on which the Estate Officer transferred the house in question in her name. While operating the assessment in the hands of the assessee, she took into account Explanation-Ill to proviso 2 of Section 48 of Income-tax Act. The assessee has come up in appeal before the Appellate Tribunal.
8.1 have heard both the parties at length. There is no dispute about the sale consideration or estimated value of the property as on 1-4-1981. The only dispute which requires to be determined is as to how the capital gain is to be worked out in terms of Sections 48 and 49 of the Income-tax Act. The relevant provisions are to the following effect:-
Section 48 :
'The income chargeable under the head "Capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :-
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto.
(1st proviso is not relevant and therefore not reproduced):
Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of Clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted :
Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government. Section 49 :
(1) Where the capital asset became the property of the assessee-
(i)...
(ii) under a gift or will;
(iii) (a) by succession, inheritance or devolution, or
(b)...
(c) ...
(d) ...
(e) ...
the cost of acquisition of the 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 the previous owner or the assessee, as the case may be In this (sub-section) the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in Clause (i) or Clause (iii) or Clause (iv) of this (sub-section) (underlined here and on page 5 by me to emphasise)
9. In the impugned order, the Revenue Authorities did take note of provisions of Section 49(1) of the Income-tax Act but failed to correctly apply the statutory provision or indexed cost of acquisition. There is no dispute that the assessee and her sister acquired the property in question on the death of their father on 17-2-1991 and they became the owner of the property by operating of Will. A Will like several other documents does not require compulsorily registration under the Indian Registration Act and even unregistered Will written on a plain piece of paper legally operates. The validity of a Will is to be seen under Section 59 of Indian Succession Act. Under the aforesaid provision, every person of sound mind, not being a minor, may dispose of his property by Will. Oral Wills are not permissible, but a Will written even on an ordinary piece of paper and properly attested can be enforced under the law. The provision requires that the testator or of Will should sign in presence of two witnesses who should sign in presence of each other and that of the testator. Therefore, it is not clear as to why the Assessing Officer made reference to Section 47 of Indian Registration Act and I. CIT(A) referred to the date 14-8-1992 when the Estate Officer transferred the house in the name of the assessee and her sister in the record maintained in the Estate Office. Above observations are irrelevant. Having regard to the fact that the assessee inherited the property through a valid Will of her father who was the original owner of the property, the cost of acquisition of asset was to be determined in the hands of the previous owner i.e. the father of the assessee. I say valid Will because a probate of the Will of the assessee's father has already been granted by the High Court of Kenea at Nairobi in succession case No. PIC 314 of 1991 vide order dated 27-5-1991. The above decision is a judgment in remp and has to be respected universally without any doubt. There is ample evidence on record to show that the father of the assessee had acquired the property much before 1981. In the report of the Valuation Officer, dated 11-2-1994, the year of construction of property was shown to be 1969-1972. The Assessing Officer, in the impugned order, has made the following observations :-
The facts of the case in brief are that Mrs. Pushpa Sofat along with her sister received through Will a kothi at Chandigarh. Both have 1/2 share in it. The Will was originally made by Late Sh. Naurata Ram Vij, who is the original owner of this property. As it was old property belonging to Sh. Naurata Ram Vij, father of the assessee who constructed it during 1969 to 1972. But what the assessee is forgetting is that since, it is an old property built during the years 1969 to 1972, value as on 1-4-1981 has to be arrived at. The value so arrived has to be given weightage by the cost inflation index in the year in which it is sold. Application of cost inflation index of 1981-92 for working out the van e of old proportion is the Sine Qua Non and cannot be altered or waived. As this has not been done, this ground also stands rejected
10. There is thus, sufficient evidence to show the property by the original owner was acquired in 1972 or near about. The cost of the acquisition of asset to the assessee shall be deemed to be the cost for which the previous owner had acquired the asset. As the asset was acquired prior to 1972, the indexed cost of acquisition in the hands of the previous owner as on 1-4-1981 (100) was to be considered as also the indexed cost in the accounting year 1992-93 (223) when the property was sold. There is no dispute that the value of property as on 1-4-1981 was Rs. 4,06,144. This is accepted both by the Assessing Officer and on appeal by the ld. CIT(A).
Therefore, the deemed cost of acquisition having regard to the indexed price in the year of sale (223) is worked out under :-
Rs. 4,06,144 X 223/100 = Rs. 9,05,701.
The above figure being more than the sale consideration, no taxable capital gain accrued to the assessee. Therefore, the Revenue Authorities were in error in assessing Rs. 1,21,180 in the hands of the assessee as capital gain. The addition made is hereby deleted.
11. In the result, assessee's appeal is allowed.