Income Tax Appellate Tribunal - Agra
Udai Raj Singh, Agra vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND
SHRI P.K. BANSAL, ACCOUNTANT MEMBER
ITA No.638/Agr/2008
Asst. Year: 2005-06
Income-tax Officer - 1(3), Vs. Shri Udai Raj Singh,
Agra. 18, Nasheman,
Khandari Road, Agra.
(PAN : AIBPS 8238 F).
ITA No.639/Agr/2008
Asst. Year: 2005-06
Income-tax Officer - 1(3), Vs. Smt. Rekha Rani Singh,
Agra. 18, Nasheman,
Khandari Road, Agra.
(PAN : AQQPPS 4663 P).
(Appellant) (Respondents)
Appellant by : Shri A.K. Mishra, Sr. D.R.
Respondent by : Shri Anil Verma, Advocate
ORDER
PER P.K. BANSAL, A.M.:
Since both the appeals filed by the Revenue have the common issue, therefore, both are decided by this common order. Respective appeals have been filed by the Revenue against the order of the CIT(A) dated 05.08.2008 and 05.08.2008 respectively by taking the following effective common grounds in both the appeal :-
2. Grounds of appeal:-
"1(a) That the CIT(Appeals)-I, Agra has erred in law and on facts in deleting the addition of Rs.7,04,698/- made on account of incorrect claim of indexed cost 2 of acquisition and deduction u/s 54 of I.T. Act, 1961, without properly appreciating the facts of the case;
(b) In doing so the CIT(Appeals)-I, Agra has also erred in law and on facts by ignoring the fact that the assessee claimed benefit of indexation of cost of acquisition from the year prior to the first year in which the asset was first held by the assessee (the assessee claimed benefit of indexation of cost of acquisition from 1.1.98 instead of 08.4.1999 i.e. the date on which she inherited the property). Ld. CIT(A) also ignored the fact that the assessee did not construct the house within the stipulated period u/s 54F of I.T. Act, 1961 and therefore, was not eligible for deduction u/s 54F of I.T. Act, 1961.
2. That the CIT(Appeals)-I, Agra has erred in law and on facts in deleting the addition of Rs.4,56,500/- made on account of unexplained investment being ½ share of the assessee of the difference of Rs.9,13,000/- between the investment of Rs.15,00,000/- shown by the assessee in a residential property and the investment assessed by the DVO at Rs.24,13,000/-, without properly appreciating the facts of the case".
3. Brief facts of the case are that the assessee's parents has acquired property on 15.12.1956 which was inherited by both the assesses (brother and sister) on 08.04.1999 on the demise of their parents. The sale deed for the said property was executed by them for Rs.50,00,000/- on 31.12.2004. Each of the assessee has shown one of the shares as Long Term capital gain (LTCG). The capital gain has been computed by taking base as on 19.01.1981 to 1982. Rest of the capital gain was invested in eligible Bond and residential house. Exemption under section 54EC and 54F of the Income-tax Act, 1961 ('the Act' hereinafter) was claimed. The A.O. has taken the consideration at Rs.50,49,220/- in view of section 50C while computing the LTCG instead of Rs..50,00,000/-. The A.O. did not allow the indexation of cost to the assessee on the fair market value as on 01.04.1981. He was of the view that the benefit of indexation is to be allowed from the first year in which the assessee has inherited the property i.e. from financial year 1999-2000 and thus worked out the index cost as under :-
3
"2,75,000/- as on 01.04.1981 x 480/389 = 3,39,825/-"
4. After deducting this amount from Rs.50,49,220/-, LTCG was worked out at Rs.47,09,395/- prior to allowing the exemption under section 54EC amounting to Rs.16,50,000/- in the case of each of the assessees. The A.O. also did not allow deduction under section 54F claimed at Rs.7,49,188/- taking the view that in the sale deed the transfer date is 31.12.2004. The assessee has constructed the property prior to the said date and not after the date of transfer of the property while the residential property has to be constructed within a period of 3 years. Thus, the LTCG at Rs.7,04,698/- was taxed in the case of each of the assessee. Each of the assessee went in appeal before the CIT(A). The CIT(A) deleted the addition of Rs.7,04,698 but confirmed the sale consideration at Rs.50,49,220/-.
5. We have heard the rival submissions and carefully considered the same. We noted that in this case the A.O. has interpreted the explanation (iii) to section 48 and has applied the cost inflation index applicable to the Financial Year 1999-2000 being the year in which each of the assessee inherited the property from their parents. The words "year in which the assessee first has the capital asset" is interpreted by him to be the year in which each of the assessee succeeded to the assets of their parents. We find that section 2(42A) also uses somewhat similar expression. Explanation 1 to section 2(42A) provides that in determining the period for which the asset is held by the assessee in the case of capital asset which became the property of the assessee in any of the circumstances mentioned under section 49(1) the period for which the asset is held by previous owner shall be included if the period for which the previous owner has held the asset is to be included for determining the period of holding of capital asset by an 4 assessee. Different considerations cannot be applied while computing the capital gain under section 48. If sections 2(42A), 47(iii), 49(1)(ii)(iii) and section 55(2)(b)(ii) are read together then it appears that in law no transfer of a capital asset is considered to take place on inheritance and succession. The capital gain arises only when the capital asset is actually sold by the successor in assessing the capital gain in the hands of the successor, the date of acquisition and the period of holding is determined by taking into consideration the cost for which the first owner acquires the capital asset. Section 2(42A) uses the expression "in determining the period for which capital asset is held by the assessee". Section 48 is merely a computation provision and cannot override the charging provision. The scheme of taxation of capital gain to be understood by applying the provisions of section 2(42A), 2(47), 47(ii), 48, 49(1)(ii) & 55(2)(b)(ii) of the Act. Therefore, as per the provisions of these sections, where an assessee sells and inherits capital asset, the capital gain is computed with reference to the period of holding and cost of acquisition incurred by previous owner. If it is so considered, the cost inflation index has also to be considered with reference to the previous owner. Similar view has been taken by Calcutta Bench of the Tribunal in the case of Smt. Mina Deogun vs. ITO, 117 TTJ 121 (Cal) and in the case of Vijaysinh R. Rathore vs. ITO (Ahd.) Special Bench, 106 ITD 153. No contrary decision was brought to our knowledge by the ld. D.R. We are, therefore, of the view that the CIT(A) has rightly held that the cost of indexation has to be applied to the fair market value as on 01.04.1981 while computing the capital gain under section 48 of the Income Tax Act, 1961.
6. Coming to the second issue in ground no.1 we noted that the CIT(A) has given a categorical finding that even though the sale deed was executed on 31.12.2004 but in fact 5 physical possession of impugned land was given to the purchaser by the assessee vendor on 18.06.2001. The relevant para of the sale deed was reproduced under para no. 2.2 of his order. The CIT(A) took the view that as per the provisions of section 2(47) of the Act the transfer took place on 18.06.2001 and since each of the assessee has constructed the property within 3 years from the date of transfer of the original asset they are entitled for the exemption under section 54F. The ld. D.R. before us merely relied on the order of the A.O. but did not object that the transfer has not taken place on 18.06.2001. Even no cogent material in this regard was filed before us. Under these facts and circumstances, if the finding that the transfer has taken place on 18.06.2001 is undisputed, the assessee in our opinion is entitled for the exemption under section 54F as the assessee has constructed the property within 3 years. Thus, the order of the CIT(A) is also confirmed on this part of the ground. Accordingly, ground no.1 taken by the Revenue stands dismissed.
7. The next ground relates to the deletion of the addition of Rs.4,56,500/- in the case of each of the assessee added by the A.O. as unexplained investment. The assessee has shown the investment in the said property at Rs.15,00,000/- while the D.V.O. has valued the property at Rs.24,13,000/- which was objected by the assessee on legality as well as on merit. The CIT(A) after considering the reconciliation of the difference between the investment shown by the assessee and investment as made by the D.V.O. worked out the value of the estimated investment at Rs.20,45,000/- and took the view that these investments were made by the assessee during the three financial year 2002-03, 2003-04 & 2004-05. The investments made during the year were Rs.3,06,750/- against the investment shown at Rs.2,50,000/- by each of the assessee. He noted 6 that the difference was merely 7.6% which is within the tolerance limit and accordingly deleted the addition of Rs.4,56,500/-.
8. Ld. D.R. relied on the order of the A.O. while the ld. A.R. relied on the order of the CIT(A) and vehemently contended that the investments in the construction has been made by both the assessees during the financial years 2002-03, 2003-04 & 2004-05 while the A.O. made the addition only in one A.Y. He referred to the reconciliation in the cost as incurred by the assessee and as has been estimated by the D.V.O. which is available at page no.10 of the order of the CIT(A). Thus, it was contended that the CIT(A) has rightly deleted the addition.
9. We have carefully considered the rival submissions and perused the material on record. We find that the A.O. has made the addition in one year on the basis of the cost as estimated by the D.V.O. and even though the construction took place in 3 years, the total cost shown by the assessee is at Rs.15,00,000/-. The assessee has pointed out the defects in the DVO's report to the extent of Rs.6,05,211/- on the various items pointing out that the cost of marble flooring, crazy flooring, Kota stone flooring, glazed tile etc. were taken at a very high rates. It was also pointed out that the assessee has used old bricks and emerging grits etc. of the old house. It was also pointed out therein that no architecture fees was paid and there is settled law that difference in CPWD and PWD rates are upto 10 to 15%. In our opinion, the CIT(A) has rightly considered all these points and took the view on the basis of the value estimated by the D.V.O. himself in another case of Smt. Kamini Agarwal for the A.Y. 2004-05 at Rs.20,45,000/-. The cost estimated by the CIT(A) in our opinion is fair and reasonable and is based on the judicially accepted valuation norms. We could not see any error which may compel us to reverse the cost 7 as estimated by the CIT(A). Under these fact and circumstances, we are of the view that no interference is called for in the order of the CIT(A). Thus, this ground also stands dismissed.
10. In the result, both the appeals filed by the Revenue stand dismissed.
(Order pronounced in the open Court on 25.06.2010).
Sd/- Sd/-
(R.K. GUPTA) (P.K. BANSAL)
Judicial Member Accountant Member
Place: Agra
Date: 25th June, 2010.
PBN/*
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1. Appellant
2. Respondent By Order
3. CIT concerned
4. CIT (Appeals) concerned
5. DR, ITAT, Agra Bench, Agra
6. Guard File Assistant Registrar
Income-tax Appellate Tribunal, Agra
True Copy