TMI Blog2014 (10) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... wners first held the shares – Decided against revenue. - ITA No. 3586/Del/2013 - - - Dated:- 31-1-2014 - SHRI R.P. TOLANI AND SHRI S.V. MEHROTRA, JJ. For The Appellant by: Smt. Renuka Jain Gupta, Sr. DR For The Respondent by: Sh. Amit Gupta, CA ORDER PER S.V. MEHROTRA, A.M. This appeal filed by the Revenue is directed against the order of ld. CIT(A)-XXVI, New Delhi, dated 14/03/2013 for A.Y. 2009-10. 2. The assessee had filed her return of income declaring total income of ₹ 92,15,12,886/-. The assessee derived income from salary, capital gain and other sources. The assessee had declared long term capital gain of ₹ 92,33,99,485/- on sale of shares as per following working: A Capital gain during 01.04.08 to 31.03.09 29988 shares of GUVISO Holdings (P) Ltd. Gifted by Mr. Malani dt. 15.6.05 to Ms. Soni Mirchandani cost as per Balance sheet of Mr. Bhagwan Malani as on 31.3.1999 Indexed Cost in 2008-09 29988*100 582 (2998800 582/351 29,98,800.00 49,72,369.23 49,72,369.23 B Gift to Ms. Soni Mir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exed cost in 2008-09 1000*100 582 1,00,000.00 1,36,619.72 (100000x582/351) Sale Consideration 1,00,000.00 Capital loss (36,619.72) (36,619.72) Expenses 16.06.2008 Paid to G.S. Travels P. Ltd. vide B. No.A-200800645 1644 For Mr. C. Tampi (Legal Advisor) 33,964.00 25.06.2008 Paid to Koniva Travels vide B. No. 200801499 Mr. Sonu Mirchandani along with Advocate 34,683.00 26.08.2008 Paid to Jayant Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 48 of the I.T. Act, 1961, it would be relevant to find out the cost of acquisition of shares by the previous owner and also assessee. After considering the assessee s computation, the AO issued show cause notice to explain as to why the cost inflation index for the year in which the shares were first held by assessee (that is the year of acquisition by assessee) may not be applied and indexed cost of acquisition be reworked out accordingly. The assessee s explanation has been reproduced in para 6A of assessment order in which primarily assessee relied on the decision of Spl. Bench of ITAT in the case of Deputy CIT vs. Manjullah J. Shah in ITA No. 735/Mum./2000 dated 16/10/2009. In this case, it was held that the indexed cost of acquisition of capital asset, which had become property of the assessee under gift, has to be computed with reference to the year in which the previous owner first held the assets. The assessee also relied on the decision in the case of Smt. Neena Devgan vs. ITO (2008), 117 TTJ-121, wherein it was, inter-alia, held as under: 8.6 A co-joint reading of the Memorandum explaining the Finance Bill, 1992 and CBDT Circular No. 636 shows that the indexat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n [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. The section 2(42A)(b) only says that while considering the capital gain on transfer of a capital asset which becomes the property of the assessee in the circumstances mentioned in section 49(1), the period for which the asset was held by the previous owner should also be included. Meaning thereby that the determination of long term or short term capital gain depends upon the entire period of holding of asset by assessee and also by the previous owner. This is infact a definition whereby the capital asset should be considered as short term or long term capital asset. There is no issue of indexation in this section. The sub-clause (ii) of clause (b) of sub-section 2 of sectin 55 further says that where the capital asset became the property of the assessee by any of the modes specified in [sub-section (1) of] section 49, and the capital asset became the property of the previous owner before the [1st day of April, 1981],means the cost of the capital asset to the previous owner or the fair market value of the asset on the [1st day of Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain at a lower rate even though the assessee may have become owner of the property in the same year in which the property was sold, is the only intent of statute. There is no scope of providing indexation for the entire period for which the asset was held by the previous owner. Respectfully disagreeing with ld. Counsel, I reject the claim of assessee for claiming indexation for the F.Y. prior to the date on which the property was first held by the assessee. As discussed aforesaid and also mentioned by assessee himself, cost of acquisition of the capital asset shall be deemed to be the cost for which the previous owner of the property acquired. It means that the previous owner of the capital asset who acquired it by the mode of acquisition other than that referred to in clause (iii) of section 49(1) of the I.T. Act, 1961. 7(a) As per explanation, clause (iii) of section 48 of the Income Tax Act, 1961, the indexed cost of acquisition means the amount which bears to the cost of acquisition, the same proportion has cost inflation index for the year in which the assesset is transferred bears to the cost inflation index for the first year in which the asset was held by assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005 2005-06 497 582 18,853/- 7 1000 shares Of ADONIS Electronics 1,00,000/- 13.03.2006 2005-06 497 582 1,17,102/- Indexed cost of acquisition of the above shares sold by assessee during the year 75,75,001/- 5. The AO determined the net taxable gain at ₹ 92,58,05,358/- as against ₹ 92,33,99,486/- determined by assessee. The assessee preferred appeal before ld. CIT(A), who allowed the assessee s claim observing in para 7.3 to 8 as under: 7.3 Thus, a conjoint reading of section 2(42A), section 48 and section 49(1) of the Income-tax Act, 1961 would make it abundantly clear that the benefit of indexation cost of acquisition for the purpose of computing long term capital gains must be made available to the appellant from the date of acquisition by the previous owner and not from the date of inheritance. This is because the Act has allowed the assessee to start the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the year in which the previous owner first held the asset. Accordingly, we answered the question referred to us in favour of the assessee and uphold the impugned order of the ld. CIT(A) on this issue. 7.6 The Hon ble Mumbai High Court in their judgement dt. 11.10.2011 passed in the above case (CIT vs. Manjula J Shah) wherein the Hon ble High Court has confirmed the above said order of the ITAT Special Bench holding that: While computing the capital gains arising on transfer of the capital asset, acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. 7.7 The AR of the appellant has also submitted before me the copy of the judgment of the Hon ble Mumbai High Court dt. 5.7.2012 in the case of CIT vs. Ms. Janhavi S. Desai in support of the appellant case, wherein it has been held that the indexed cost of acquisition of the capital asset has to be computed with reference to the year in which previous owner first held the asset. 7.8 Further, the Hon ble Delhi High Court in the case of Arun Shu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of indexation is to be 01/04/1981. He, therefore, submitted that the issue is to be stand covered by the decision of Hon ble Bombay High Court. 7.1 We have considered the rival submissions and have perused the record of the case. 8. The brief background of the transfer of the shares is like this. The assessee along with her husband Shri Sonu P. Mirchandani and her sons Sh. Varun S. Mirchandani and Sh. Karan S. Mirchandani had controlling stakes in two companies viz. GUVISO Holdings Pvt. Ltd. and IWAI Electronics P. Ltd. The assessee and her above noted family members and also Sh. Gulu L. Mirchandani held shares of various companies of MRIC Electronics Ltd. and other Associate Companies who is owner of the brand name Onida . Both Gulu L. Mirchandani (GLM Group) and Sonu L. Mirchandani (SLM Group) are real brothers. Both the brothers decided that in view of expanded families and in order to avoid dispute, differences and misunderstanding within the family members, it would be in the interest of both the GLM Group and the SLM Group that they separate their businesses. Accordingly, a family settlement agreement/memorandum was entered into on 31st May, 2008. As per this settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady filed) Record their number and the Balance sheet for the AY 01-02 (already filed) record the Number as well as the Investment value of ₹ 29,98,800/- IWAI 4978 Received as gift from Sh. Bhagwan Malani, (Father) in May, 2005 Facts are similar to GUVISO Shares. Investment value Recorded in his Balance sheet As on 31.03.2001 is Rs. 49,78,000/- ADINO Electronics 1661 1500 received as gift In May, 2006 and 161 Shares in March, 2006 Number recorded in the will Dated 27.02.1999, 15.10.99 is 1500 and investment cost accounted For in the return mentioned above Is ₹ 1,50,000/- remaining 161 Shares may have been acquired In FY 2002-03 (copy enclosed). Investment value therein has Increased to ₹ 1,66,100/- ADONIS Electronics 1000 Received as gift from Father Mr. Bhagwan Malani on 13.03.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee CII for the Year in which The shares Were first Held by Assessee CII for The year Of transfer Indexed cost Of acquisition Of the shares 1 2 3 4 5 6 7 8 1 29980 shares Of GUVISO 29,98,000/- March, 2008 2007-08 551 582 31,66,671/- 2 20 shares of GUVISO 2,000/- March, 2008 2007-08 551 582 2,112/- 3 29988 shares Of GUVISO 29,98,800/- May, 2005 2005-06 497 582 35,11,673/- 4 4978 shares Of IWAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Ld. CIT(A) allowed the assessee s appeal relying on following decisions: a) DCIT vs. Manjula J. Shah, which was approved by Hon ble Mumbai High Court vide its judgment dated 11th October, 2011. b) Mrs. Pushpa Safad vs. ITO, 81 ITD (Chd.) (SMC). c) CIT vs. Ms. Janhavi S. Desai (Mum.) dated 05/07/2012. d) Delhi High Court Arun Shungloo Trust vs. CIT (2012) 18 Taxman, ITA No. 116/2011 dated 13/02/2012. 12. Thus, the entire controversy revolves around the meaning of previous owner. 13. Section 49 deals with cost with reference to certain modes of acquisition while computing capital gains chargeable u/s 45. As per this section if assessee acquired any capital asset, inter-alia, by way of gift or will then the cost of acquisition of the asset is to 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 to this section defines the expression previous owner of the property as under: [Explanation In this [sub-section] the expression previous owner of the property in rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property for the purpose of calculating the capital gains to be prior to 01/04/1981. 15.2 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 recomputation was on the basis of 50% of the property having been inherited by the assesseerespondent from his father on 21/08/1988 and the other 50% thereof having been inherited by him from his mother on 21/02/2000 and, accordingly, applied the cost inflation index. 15.3 Ld. CIT(A) allowed the assessee-respondent s appeal holding that the period for determining the long term capital gain included the period for which the original owner held the assets that devolved upon the legal heir. 15.4 The revenue challenged the order of CIT(A) before the ITAT. The ITAT held that the period for holding 50% of the property inherited by the assessee-respondent from his father would start from 01/04/1981, whereas in respect of 50% of the property inherited by the assesseerespondent from his mother, the period for holding would start from 21/08 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
