TMI Blog2015 (1) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... /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: 2.1 The assessee had further claimed deduction of ₹ 50 lakhs u/s 54EC of the I.T. Act, and offered ₹ 92,33,99,486/- as long term capital gain. The AO noticed from the computation of capital gain that all the shares of four companies sold by assessee during the year were neither purchased by her nor allotted to her originally for which she had paid any cost. Instead, she had received all the shares through gift from her two sons namely Sh. Varun and Sh. Karan and also from her father Sh. Bhagwan Malani. Accordingly, the AO concluded that the case of assessee was covered u/s 49(1)(ii) of the I.T. Act which provides that where the capital asset become the property of assessee under the gift, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. He further pointed out that previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f period of holding of the asset and not in relation to individuality of the assessee. The assessee pointed out that the cost adopted is the cost of shares in the hand of previous owner of shares from whom the assessee received shares as gift. The assessee explained the mode of acquisition as under: Given in Annex-18 to the letter dated 23.09.2011. The cost adopted is the cost of shares in the hand of previous owners of shares from whom the assessee received shares as gift. 30000 shares of GUVISO were received by the assessee as gift from her sons Mr. Varun S. Mirchandani and Mr. Karan S. Mirchandani in March, 2008 who in turn inherited 14990 shares each fcrom their grand mother late Mrs. P.L. Mirchandani as per her will on 19.10.2003. Copy of the will as well as statement of affairs of that date has been submitted with the letter dated 27.09.2011 (point no. 7). The remaining shares of GUVISO Holdings and other three companies were received as gift from her father Lt. Shri Bhagwan Malani. Copies of gift deeds have already been filed with the letter dated 27.09.2011. A copy of the will dt. 15.10.1999 has also been filed with letter dated 27.09.2011 in support that he held the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of a long term capital asset, other than capital gain arising to a nonresident 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 had respectively been substituted. Thus, the benefit of indexation is a subject matter of section 48 only to which explanation (iii) is a rider wherein it has been provided that 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 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 intent of law is amply clear that the beneficiary owner should get the benefit of indexation from the date of acquisition of property. Infact this is the reason that acquisition by a different mode has been provided in section 49(1) of the I.T. Act, 1961 and a different mode of calculation for indexed cost of acquisition is mentioned in specific provisions of explanation (iii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift F.Y. in which The shares Were first Held by 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 4,97,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not from the year of inheritance. 7.4 In the case of DCIT vs. Manjula J. Shah a Special Bench was constituted by the Hon ble President for considering and deciding the following question as a result of the divergent views expressed by the division benches. The said question also incorporates the solitary issue arising from the appeal of the revenue which is preferred against the order of CIT(Appeals)-XII, Mumbai dated 26.09.2007 where it was observed as under: While computing the capital gains in the hands of an assessee who had acquired the asset transferred under gift, whether indexed cost of acquisition was to be computed with reference to the year in which the previous owner first held the asset or the year in which the assessee became the owner of the asset . 7.5 The Hon ble ITAT, Mumbai Special Bench B-1, Mumbai, after considering the rival submissions and perusing the relevant material on record in their order dt. 16.10.2009 have held as under: For the reasons given above, we are of the view that for the purpose of computing long term capital gain arising from the transfer of the capital asset which had become the property of the assessee under gift, the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. This ground of appeal is allowed. 6. Ld. DR referred to page 6 of assessment order and pointed out that main issue in the present appeal is in regard to meaning of previous owner. He pointed out that Hon ble Delhi High Court in the case of Arun Shungloo Trust vs. CIT (2012) vide ITA No. 116/2011 dt. 13/02/2012 has merely referred to previous owner and not to other owners from whom the previous owner acquired the property. He submitted that in this case the only point of dispute was regarding the period of holding of the shares by the immediate previous owner and not by other previous owners from whom the shares were acquired by immediate last previous owner. 7. Ld. Counsel for the assessee submitted that Hon ble Bombay High Court in the case of CIT vs. M/s Janvi S. Desai has considered an identical situation. In this case previous owner (respondent)-assessee had acquired the property from his father i.e. the respondent s grand father in the year 1942. The respondent s assessee s father expired in the year 1988, leaving behind a will bequeathing the property to his wife and the respondent in equal shares. The respondentassessee sold the property during the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e received as gift in May, 2005 and remaining 161 shares were further received as gift in May, 2006. The 1000 shares of ADONIS Electronics were received on 13/03/2006 as gift by assessee from her father Sh. Bhagwan Malani. The assessee had submitted following chart in this regard: Name of Shares Number of shares Quantity, year of Acquisition and name Of donors Explanation of Donor s Records regarding No. Of Shares value GUVISO 59988 30000 from Mr. Varun Mr. Karan in March, 2008 i.e. 15000 from Each, as gift 10 shares were received by each Mr. Varun Mr. Karan as gift from their uncle. Copies of Shares certificates already filed. Total Investment recorded in the Statement of affairs of Donors is ₹ 15,00,000/- each aggregating to Rs. 30,00,000/-. 14990 received by each on death of their grand Mother Smt. P.L. Man Chandani on 19.10.03. value of shares shown in their statement of her Affairs prepared on the date of death. A copy of her return for the A.Y. 2001-02 is filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 shares of GUVISO were received by the assessee as gift from her sons Mr. Varun S. Mirchandani Mr. Karan S. Mirchandani in March, 2008 who in turn inherited 14990 shares each from their grand mother late Mrs. P.L. Mirchandani as per her will on 19.10.2003. Copy of the will as well as statement of affairs of that date has been submitted with the letter dated 27.09.2011 (point No. 7). The remaining shares of GUVISO Holdings and other three companies were received as gift from her father Lt. Sh. Bhagwan Malani. Copies of gift deeds have already been filed with the letter dated 27.09.2011. A copy of the will dated 15.10.1999 has also been filed with letter dated 27.09.2011 in support that he held the shares. It may be added that he, who was 81 met with a very serious accident at Bangalore and since then he was lying in Coma and on 03.10.2011 breathed his last. 10. The AO, however, did not accept the assessee s contention for the reasons given in para 7 of his order and computed the indexed cost of the acquisition of the shares sold by the assessee, as under: S.No. Name no. of Shares Cost to the Previous owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Sale consideration of shares of Guviso IWAI as shown ₹ 93,88,81,656/- b) Sale consideration of shares of Adino Electronics as shown ₹ 1,66,100/- c) Sale consideration of shares of Adonis Electronics as shown ₹ 1,00,000/- d) Total sale consideration of above shares ₹ 93,91,47,756/- e) Expenses incurred on transfer as claimed ₹ 7,67,397/- f) Indexed cost of acquisition of shares as per para 8(a) above ₹ 75,75,001/- g) Long term capital gain (d-e-f) ₹ 93,08,05,358/- h) Deduction u/s 54EC as claimed in ITR ₹ 50,00,000/- i) Net taxable long term capital gain (g-h) ₹ 92,58,05,358/- The long term capital gain on sale of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determines the holding period of an asset for the purpose of short term capital gain and has no application to long term capital gain for which the assessee gets the benefit of indexation? The cross-objections are admitted on the following substantial question of law: Whether, on then 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? ) 15. Brief facts of this case are that in or about the year 1942, the assessee-respondent s father acquired the entire immovable property from his father i.e. the assessee-respondent s grand father. The assesseerespondent s father expired in the year 1988, leaving behind a will bequeathing the property to his wife and the assessee-respondent in equal shares. The assessee-respondent s mother expired on 21/02/2000 leaving behind a will bequeathing her 50% share in the property to the assesseerespondent. 15.1 The assessee-respondent sold the property during the assessment year 2005-06 for ₹ 9.50 crores declaring a long term capital gain of ₹ 38,44,247/ ..... 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