Income Tax Appellate Tribunal - Mumbai
Nitul B Shah, Mumbai vs Income Tax Officer 19(1)(1), Mumbai on 2 February, 2018
आयकर अपील य अ धकरण, मुंबई यायपीठ,' बी',मुंबई।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "B", MUMBAI ी जो ग दर संह, या यक सद य एवं ी राजेश कुमार, लेखा सद य, के सम Before Shri JOGINDER SINGH, Judicial Member, and Shri RAJESH KUMAR, Accountant Member MA No. 213/Mum2017 (Arising out of ITA NO.5756/Mum/2012 Assessment Year: 2009 - 2010 Nitul B Shah Income Tax Officer Ward 101, Kusumkunj, 1st Floor, बनाम/ 19(1)(1) 9th & 10th Road Khar (West) Mumbai Mumbai 400 052 Vs. ( नधा!"रती /Assessee) (राज व /Revenue) P.A. No. ATAPS0054P नधा!"रती क ओर से / Assessee by Shri Paresh Shaparia राज व क ओर से / Revenue by Shri Ram Tiwari Sr.DR ु वाई क& तार'ख / Date of Hearing :
सन 02/02/2018
घोषणा क& तार'ख/Date of Pronouncement 02/02/2018
आदे श / O R D E R
Per Joginder Singh (Judicial Member)
This Miscellaneous Application is by the assessee seeking rectification/ recalling of the order of the Tribunal 2 dated 5th November 2015. During hearing the learned counsel for the assessee Shri Paresh Shaparia explained that the assessee earned Long term capital gains on 29th July 2008 on the sale of flat received as per intent of his grandmother, Mrs. Kantaben K Shah, who expired on 10th December 1999. Since she died interstate (without will) and in order to transfer the said residential premises, as per last wish known to the family members, they approached the society for transfer of the flat. The assessee was asked to file an affidavit of all the legal heirs of Late Kantaben Shah. The remaining family members gave NOC for transfer of the flat in the name of the assessee. The crux of the argument before us is that while adjudicating the appeal of the assessee the Tribunal inadvertently, could not consider the case of Manjula Shah 16 taxman.com 42, order dated 11.10.2011 from Hon'ble Bombay High Court thus, considering the principle of natural justice the order may be recalled. Reliance was placed upon the decision in Income Tax Officer vs. Nandlal R Mishra (2015) 62 taxman.com 134 and the decision from Hon'ble Jurisdiction High Court in CIT vs. Ms. Jhanvi S Desai (2012) 24 taxman.com 314 (Bom).
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2. On the other hand, the learned DR Shri Ram Tiwari, contended that though there is a decision from Hon'ble Bombay High Court, in favour of the assessee still the Tribunal cannot recall its order as there is no apparent mistake from record which can be rectified u/s. 254(2) of the Act. Reliance was placed upon the decision in CIT vs. Gujarat Institute of Housing Estate Developers (2017) 84 taxman.com 148 (Guj).
3. We have considered the rival submissions and perused the material available on record. Before adverting further, we are reproducing hereunder the relevant portion from the order dated 5th July 2012 from Hon'ble Bombay High Court in the case of CIT vs. Ms. Jhanvi S Desai (supra), for ready reference and analysis:
"1. With the consent of the parties, we proceed to hear the appeal filed under section 260A of the Income Tax Act, 1961 and the cross-objections finally.
2. The appeal is admitted on the following substantial question of law :
"Whether on the facts and circumstances of the case the ITAT was right in directing the A.O. to calculate the long term capital gain without appreciating that section 2(42A) of the Act explanation 1 only determines the holding period of an asset for the purpose of short term capital gains and has no application to long term capital gain for which the assessee gets the benefit of indexation ?"4
The cross-objections are admitted on the following substantial question of law :
"Whether, on the facts and in the circumstances of the case the Tribunal erred in holding that in respect of the 50% of the property inherited by the respondent from his mother the period of holding will start from 21.08.1988 and not from 01.04.1981 ?
3. In or about the year 1942, the respondent's father acquired the entire immovable property from his father i.e. the respondent's grand-father. The respondent's father expired in the year 1988, leaving behind a will bequeathing the property to his wife and the respondent in equal shares.
The respondent's mother expired on 21.02.2000 leaving behind a will bequeathing her 50% share in the property to the respondent.
4. The respondent sold the property during the assessment year 2005-2006 for Rs.9.50 corers and declared a long term capital gain of Rs.38,44,247/-. The respondent considered the date of acquisition of the property for the purpose of calculating the capital gains to be prior to 1.4.1981.
The AO however, held that the actual date of acquisition must be considered for calculating the capital gains. He held the date on which the respondent inherited the property to be the relevant date and accordingly recomputed the capital gains. The re- computation was on the basis of 50% of the property having been inherited by the respondent from his father on 21.8.1988 and the other 50% thereof having been inherited by him from his mother on 21.2.2000 and accordingly applied the cost inflation index.
5. The CIT (A) allowed the respondent's appeal by an order dated 23.6.2008. It was held in the respondent's favour that the period of holding for determining the long term capital gain included the period for which the original owner held the assets that devolved upon the legal heir.
6. The appellant challenged the order of the CIT (A) before the Income Tax Appellate Tribunal (ITAT). The ITAT held that the period for holding 50% of the property inherited by the respondent from his father would start from 1.4.1981, whereas in respect of 50% of the property inherited by the respondent from his mother, the period for holding would start from 21.8.1988, as she became the 5 owner of her 50% share in the property only from that date. The Tribunal ordered accordingly.
7. The respondent's grievance is only with regard to the finding of the Tribunal that the period of holding in respect of 50% of the property inherited by him from his mother would start from 21.8.1988 and not from 1.4.1981.
8. Section 2(42A) of the Income Tax Act, 1961 reads as under :
"2. Definitions ' In this Act, unless the context otherwise requires,' (42-A) "short-term capital asset" means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer:
Provided that in the case of a share held in a company [or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 or a unit of a Mutual Fund specified under clause (23-D) of Section 10] [or a zero coupon bond], the provisions of this clause shall have effect as if for the words "thirty-six months", the words "twelve months" had been substituted.
(Explanation 1.) (i) In determining the period for which any capital asset is held by the assessee
(a) '''''''''''''''''..
(b) in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in [sub-section (1)] of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section ."
Section 49(1) of the said Act in so far as it is relevant reads as under :
"49. Cost with reference to certain modes of acquisition.'(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
(iv)'''''''''''''''''.6
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.
Explanation.'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 (ii) or clause (iii) or clause (iv) of this sub-section. " (emphasis supplied)
9. Two issues arise. Firstly the determination of the cost of acquisition. Secondly a computation of the period for which the asset is held by the assessee.
10. Section 49 deals with the determination of the cost of acquisition. Where a capital asset becomes the property of the assessee under a will or by inheritance, the cost of acquisition thereof is deemed to be the cost for which the previous owner of the property acquired it. The previous owner of the property is not necessarily the immediate previous owner from whom it is acquired by the assessee irrespective of the manner in which such person acquired the property.
The Explanation to section 49(1) defines the expression "previous owner of the property" to be the last previous owner thereof who acquired it by a mode of acquisition "other than that referred to in clauses (i) to (iv) of sub section (1)". Thus the ambit of the words "previous owner of the property" does not include a person who acquired the property by a mode of acquisition referred to in sub- clauses (i) to (iv) of section 49(1). If therefore, the person from whom the assessee had acquired the property had himself acquired it by a mode referred to in clauses (i) to
(iv) of section 49(1), he would not be the "previous owner of the property" for the purpose of sections 2(42A) and 49.
11. The last previous owner of the property, who acquired the property by a mode of acquisition other than those referred to in clauses (i) to (iv), was the respondent's grand-father. The respondent's father admittedly acquired the property in 1942 from his father i.e. the respondent's grand-father. It would in this case make no difference even whether or not the respondent's father had acquired the property in a mode referred to in clauses (i) to (iv) of section 49(1) for he admittedly acquired it prior to 7 1.4.1981 and indexation is granted at the earliest only from 1.4.1981. The respondent admittedly acquired the property under his father's will and therefore by a mode of acquisition referred to in clause (ii) of section 49(1).
12. Thus as far as the 50% portion of the property acquired by the respondent from his father is concerned, the cost of acquisition must be determined to be the cost at which the respondent's grandfather or in any event the respondent's father acquired the property and not the date on which the respondent acquired it. The Tribunal does not hold otherwise either.
13. The Tribunal however held that in respect of 50% of the property inherited by the respondent from his mother, the period for holding would start from 21.8.1988, as she became the owner of her 50% share in the property only from that date under the will made by her husband who died on 21.8.1988.
14. This requires a consideration of the second issue viz. a computation of the period for which the respondent held that 50% portion of the property he acquires from his mother.
15. The respondent's mother also acquired the property under her husband's will. She therefore, acquired the property by a mode of acquisition referred to in section 49(1)(ii). In other words, the respondent's mother did not become the owner of the asset by a mode of acquisition other than than that referred to in section 49(1). Thus the date of the acquisition of her share in the property is not relevant. The last previous owner of her share was therefore her husband's father and at the highest her husband.
16. Section 2(42A) defines "short term capital asset" to mean a capital asset held by an assessee for the stipulated period immediately preceding the date of its transfer. Explanation (1)(b) sets out the factors to be taken into consideration while determining the period for which the capital asset is held. In respect of a capital asset, which became the property of the assessee in the circumstances mentioned in section 49(1), it is provided that there shall be included the period for which the asset was held by the "previous owner referred to in the said section". The said section is section 49(1). Thus the definition of "previous owner" in the Explanation to section 49(1) is incorporated in Explanation (1)(i)(b) to section 2(42A). If therefore a capital asset becomes the property of the assessee in the 8 circumstances mentioned in section 49(1) and the period for which it is held as determined by section 49(1) read with section 2(42A) is more than the period stipulated in section 2(42A), the case would not fall within the ambit of a short term capital asset.
17. The last previous owner of the respondent's mother's 50% share in the property was therefore her husband's father and at the highest her husband. Thus the respondent must be deemed to have held this 50% share in the property also from 1.4.1981.
18. In the circumstances, the questions are answered in favour of the respondent. The period of holding shall be from 1.4.1981 in respect of the entire property.
19. In the result, the appeal is dismissed and the cross- objections are disposed of accordingly." We note that in the aforesaid order the assessee's father acquired property from his grandfather prior to 1981 and father expired in 1988 leaving behind a will bequeathing property to his wife in assessee in equal shares. Assessee's mother expired on 21st Feb 2000 leaving behind a will bequeathing with her 50% share in the property to the assessee. Assessee sold said property and while computing Long term capital gain considered the date of acquisition to be prior to 1.4.1988. The learned Assessing Officer computed capital gain on the basis of date on which assessee inherited share in the property from his father and mother respectively. The question was whether for the purpose of section 2(42A) and 49 it was held that the word "previous owner of property", does not include a person who 9 acquired property by a mode of acquisition referred to in sub section (i) to (iv) of section 49(1) it was decided in favour of the assessee on a question in both case of father and mother the cost of acquisition must be determined to be cost at which assessee's grandmother acquired property and not cost on which assessee acquired it from father or mother. It was held that in both cases period of holding would be from 1.4.1981. Considering the totality of facts, we are of the view that though rectification u/s. 254(2) is limited to apparent mistake from record and a long drawn process of merit cannot be gone into. We are aware that there are various decisions from Hon'ble' High Courts that the powers of the Tribunal are confined to rectify mistakes which are apparent from record and the Tribunal should not undertake elaborate consideration of very same issue on same facts to come to a contrary conclusion. Our view finds support from various decisions including the case from Hon'ble Gujarat High Court in Gujarat Institute of Housing Estate Developers (relied upon by learned DR). Now question arises whether the assessee can be put to hardship due to non consideration of an order form Hon'ble Jurisdictional High Court. Even as per Article 265 of 10 Constitution of India only due taxes have to be levied and collected. It is also noted that in the case of Nandlal R Mishra (2015) 62 taxman.com 134 (Mumbai Tribunal) the gains arising on transfer of a capital asset was acquired under a gift or will in that situation, it was held that the asset from date it was held by previous owner has to be considered and not in the year when the assessee became the owner. Likewise, in the case of M/s. Jhanvi S Desai there was a will bequeathing 50% shares in the property to the assessee whereas, there was no will in the present case. However, considering the principle of natural justice and fair play and further there is no heroism in perpetuating the mistake, if any, we deem it appropriate to recall the order of the Tribunal dated 5th November 2015. It is also worth mentioning that this appeal may not be put up for hearing at least before this combination and should be adjudicated by a different combination so that no grievance is caused to either side and an independent view may be taken by another combination.
Finally the Miscellaneous Application of the assessee is allowed.
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This Order was pronounced in the open court in the presence of learned representatives from both sides at the conclusion of the hearing on 2nd February, 2018.
Sd/- Sd/-
(Rajesh Kumar) (Joginder Singh)
लेखा सद#य / ACCOUNTANT MEMBER या$यक सद#य / JUDICIAL MEMBER
मब
ंु ई Mumbai; +दनांक Dated : 02/02/2018
SA
आदे श क %$त'ल(प अ)े(षत/Copy of the Order forwarded to :
1. अपीलाथ/ / The Appellant
2. 01यथ/ / The Respondent.
3. आयकर आय3 ु त,(अपील) / The CIT, Mumbai.
4. आयकर आय3 ु त / CIT(A)- , Mumbai
5. 5वभागीय 0 त न ध, आयकर अपील'य अ धकरण, मब ुं ई / DR, ITAT, Mumbai
6. गाड! फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ंु ई / ITAT, Mumbai