TMI Blog2013 (4) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... urview of the capital gains tax which is not intended by the legislature. Therefore, the argument of the Revenue which runs counter to the legislative intent cannot be accepted. See DCIT vs. Manjula J.Shah (2011 (10) TMI 406 - BOMBAY HIGH COURT). Against revenue. Whether the CIT(A) was justified in deleting the capital gain relating to "Property No.2" - Held that:- A plain reading of the recitals made in the Gift deed dated 08-06-2005 would show that Shri V.K.Mohan(father of minors) has handed over the possession of the Property No.2 to the assessee herein. Further following recitals made in the irrevocable Power of Attorney dated 13-07-2005 executed by the assessee herein in favour of Shri V.K. Mohan show that the assessee herein accepted the gift and was also in possession of the property As per the provisions of sec. 47(iii) of the Act, the transfer of property by way of settlement deed by Shri V.K.Mohan to the assessee herein is not considered as a "transfer' and hence the same is not assessable to capital gains. On the execution of the Settlement deed, the assessee herein became absolute owner of the Property No.2 as per the Transfer of Property Act. The provisions of Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint of time, Shri Suresh babu executed a trust deed and appointed their parents viz., Shri V.K.Mohan and Smt. Shyamala Kumari as trustees with the condition that the trustees shall hold the property in trust and for the benefit of the beneficiaries viz., Ms. Anjana Mohan and Ms. Archana Mohan. Further they should transfer the trust property in equal shares in favour of the beneficiaries upon their attaining majority. Thus, the assessee herein and her sister got rights over 28.5235 cents each over the property gifted by their maternal uncle Shri Suresh Babu after they became majors. 4. Smt. Shyamala Kumari, the mother of the assessee herein, settled the land admeasuring 55 cents and 371 square links by way of gift in favour of her spouse Shri V.K.Mohan in the year 2005, vide settlement deed no.850/2005. Shri V.K.Mohan, in turn settled the said property in favour Ms. Anjana Mohan, the assessee herein, by way of gift on 08-06-2005, vide settlement deed no.2244/05/I. Accordingly, the assessee herein became the owner of 55 cents and 371 cents, which was originally acquired by her mother Smt. Shyamala Kumari by way of gift from Shri Parameswaran Nair. 5. For the sake of convenience, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessing officer re-computed the Long term capital gain on sale of Property No.1 by making many adjustments. One of such adjustments relate to the cost inflation index relating to the first year in which the asset was held by the assessee. The assessee adopted the cost inflation index of "125" applicable for the financial year 1984-85, since she became the owner of the Property No.1, by virtue of settlement deed dated 09-07-1984. However, the assessing officer did not accept the same. He referred to clause (iii) of Explanation to sec. 48 of the Act, which defines the term "indexed Cost of acquisition" as under:- "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later." The assessing officer placed reliance on the words "for the first year in which the asset was held by the assessee" and accordingly held that the assessee can be considered to have held the property only from the date when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh court in the case cited above:- "17. We see no merit in the above contention. As rightly contended by Mr. Rai, learned counsel for the assessee, the indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was 'held by the assessee'. Since the expression 'held by the assessee' is not defined under s. 48 of the Act, that expression has to be understood as defined under s. 2 of the Act. Explanation 1(i)(b) to s. 2(42A) of the Act provides that in determining the period for which an asset is held by an assessee under a gift, the period for which the said asset was held by the previous owner shall be included. As the previous owner held the capital asset from 29th Jan., 1993, as per Expln. 1(i)(b) to s. 2(42A) of the Act, the assessee is deemed to have held the capital asset from 29th Jan., 1993. By reason of the deemed holding of the asset from 29th Jan., 1993, the assessee is deemed to have held the asset as a long-term capital asset. If the long-term capital gains liability has to be computed under s. 48 of the Act by treating that the assessee held the capital asset from 29th Jan., 1993, then, nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period for which the said asset was held by the assessee, then that object cannot be defeated by excluding the period for which the said asset was held by the previous owner while determining the indexed cost of acquisition of that asset to the assessee. 7 I.T.A. No. 50/Coch/2011 In other words, in the absence of any indication in cl. (iii) of the Explanation to s. 48 of the Act that the words 'asset was held by the assessee' has to be construed differently, the said words should be construed in accordance with the object of the statute, that is, in the manner set out in Expln. 1(i)(b) to s. 2(42A) of the Act. 19. It is true that the words of a statute are to be understood in their natural and ordinary sense unless the object of the statute suggests to the contrary. Thus, in construing the words 'asset was held by the assessee' in cl. (iii) of Expln. to s. 48 of the Act, one has to see the object with which the said words are used in the statute. If one reads Expln. 1(i)(b) to s. 2(42A) together with ss. 48 and 49 of the Act, it becomes absolutely clear that the object of the statute is not merely to tax the capital gains arising on transfer of a capital asset acquired by an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay High Court referred supra. Hence we uphold his order on this issue. 12. The next issue contested by the revenue is whether the Ld CIT(A) was justified in deleting the capital gain relating to "Property No.2". Let us recapitulate the facts relating to the same. The mother of the assessee Smt. Shyamala Kumari obtained the Property No.2 by way of gift from her father and she transferred it by way of a settlement deed in favour of her spouse Shri V.K.Mohan. The said Shri V.K.Mohan, in turn, transferred it by way of a settlement deed in favour of her daughter Ms. Anjana Mohan, the assessee herein on 08-06-2005. Ms. Anjana Mohan executed a Power of Attorney in favour of Shri V.K.Mohan on 13-07-2005, who sold the same to a construction company. The sale proceeds were received by Shri V.K.Mohan and he utilized the same for purchasing another property. 13. Since the assessee became the owner of the Property No.2, by virtue of the gift deed executed by Shri V.K.Mohan in her favour on 08-06-2005, the assessing officer held that the assessee herein is only the owner of the Property No.2 and her father Shri V.K. Mohan has executed the sale deed only as a Power of Attorney holder of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property with a revocable gift deed to his daughter and did not part away with the possession of the same to her. (e) By virtue of the Power of Attorney given by the assessee, Shri V.K.Mohan became absolute owner and hence he has acted as the undisputed owner of the Property No.2. Hence he received the entire sale consideration through his bank account and also made reinvestment in his name in order to claim exemption from capital gain. Hence he was acting as a principal himself and not as an agent of the assessee herein. (f) The gift deed also suffers from one more major lacunae for the reason that it has not been pointed out s to whether the assessee herein, as a donee, accepted the gift or not. Acceptance of gift by the donee is mandatory under the Transfer of Property Act. (g) Since the capital gain has already been assessed in the hands of Shri V.K.Mohan, there is no loss of revenue to the department. No malafide intentions are proved in showing the capital gain in the hands of Shri V.K.Mohan and not in the case of appellant. 16. We have heard the rival contentions on this issue and perused the record. We notice that the Ld CIT(A) has held that there was no transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty having an extent of 55.371 cents (22.40 Ares) of land comprised in Sy. No.217/9-33-1 (22.500 cents) 217/9 (1.200 cents), 206/4 (21.371 cents) 217/9-34 (3 cents) and 209/8-13 (7.250 cents) of Sasthamangalam Village has been acquired by me as per Settlement Deed No. 2244/05 dated 08-06-05 of Sasthamangalam Sub Registrar Office, Thiruvananthapuram. 19. As per the provisions of sec. 47(iii) of the Act, the transfer of property by way of settlement deed by Shri V.K.Mohan to the assessee herein is not considered as a "transfer' and hence the same is not assessable to capital gains. On the execution of the Settlement deed, the assessee herein became absolute owner of the Property No.2 as per the Transfer of Property Act. The provisions of Transfer of Property Act are not overridden by sec. 47(iii) of the Act. Hence, in our view, the ld CIT(A) has misdirected himself in interpreting the scope of provisions of sec. 47(iii) of the Act. 20. Since there was absolute transfer of Property No.2 by way of settlement deed, there is no scope to interpret that there was transfer of income only without transfer of asset so as to attract the provisions of sec. 60 of the Act. 21. The foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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