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2015 (5) TMI 10 - CALCUTTA HIGH COURT

2015 (5) TMI 10 - CALCUTTA HIGH COURT - [2015] 375 ITR 586 (Cal) - Valuation of share of the assessee in the property - report of the Registered Valuer or the mean value between the valuations made by the Registered Approved Valuer and by the District Valuation Officer, as determined by the Commissioner of Income Tax (Appeals) - Held that:- Revenue/appellant has not disputed the fact that under Clause (a) of section 55A as it stood at the relevant point of time, the assessing officer could have .....

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positive and against the revenue.

Tribunal applying the cost inflation index with effect from 1.4.1981 - Held that:- The object of giving relief to an assessee by allowing indexation is with a view to offset the effect of inflation. As per CBDT Circular No.636, dated August 31, 1992, a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular further provides that the cost of acquisition and the cost of improvement have to .....

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first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee.Since the assessee, in the present case, is held liable for long-term capital gains tax by treating the period for which the capital asset in question was held by the previous owner as the period for which the said asset was held by the assessee, the indexed cost of acquisition has also to be determined on the very same basis. - Decided against the revenue. .....

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of title is not required. In the case before us the land admittedly belonged to the husband. He has raised the building with the joint funds belonging to himself and his wife. Therefore, one inference which can be drawn is that the land belonging to the husband has been thrown into the common stock of joint property between the husband and the wife. Both of them thus became the joint owners by operation of the doctrine of blending. They admittedly have borne the cost of construction in the ratio .....

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appeal is a judgment and order dated 3rd August, 2007 passed by the learned Income Tax Appellate Tribunal pertaining to the assessment year 2004-2005. The revenue has come up in appeal. The following questions were formulated at the time of admission of appeal:- (a) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in adopting the value of share of the assessee in the property at 47, Archbishop Makarios Marg (Golf Links), New Delhi as on 1.4 .....

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he year 1999-2000, in which the assessee inherited the property, contrary to the provisions of Explanation (iii) to section-48 of the Income Tax Act, 1961, to the effect that it would be applied with effect from the first year in which the assessee held the property, or 1.4.1981, whichever is later, on the ground that a literal interpretation of the provisions was to be discarded ? c ) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in hol .....

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property devolved on her widow Bhajan Pratap Singh. She died on 16th September, 1999. The assessee and her three sisters being the daughters of the deceased Bhajan Pratap Singh succeeded to the property in equal shares. During the financial year 2003-2004 the property was sold at a sum of ₹ 12 crores. Share of the assessee in the sale proceeds was a sum of ₹ 3 crores. The question numbers 1 and 2 indicated above are with regard to computation of the capital gains payable by the asse .....

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as the first question is concerned the property was valued by the registered valuer as at 1st April, 1981 at a sum of ₹ 73,60,975/-. Therefore, the share of the assessee worked out to a sum of ₹ 18,40,244/-. The assessing officer, however, in exercise of power under section 55A referred the matter to the departmental valuer who valued the property at a sum of ₹ 46,62,280/- and thus, the share of the assessee was worked out a sum of ₹ 11,65,570/-. The competence of the ass .....

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appellant has not disputed the fact that under Clause (a) of section 55A as it stood at the relevant point of time, the assessing officer could have made a reference provided he was of the opinion that the valuation made by the registered valuer was less than the fair market value of the property. When the valuation made by the registered valuer was on the higher side, there was no occasion for the assessing officer to refer the matter to the valuation officer under section 55A. therefore, the v .....

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rtion as the 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 Mr. Agarwal is correct when he submitted that the benefit of cost inflation index going by clause (iii) of the Explanation quoted above should be available to the assessee from the year 1999 when she inherited the property which was in fact the f .....

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for which the asset was held by the previous owner referred to in the said section. Section 49 referred to in the aforesaid clause (b) of Explanation (1) provides for various circumstances including acquisition by succession, inheritance or devolution. Therefore, the period for which the asset was held by the previous owner, namely, the mother of the assessee can also be included to the period of holding of the property by the assessee. The mother held the property since 1968 as indicated above. .....

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cost of the capital asset to the previous owner or the fair market value of the asset on the [1st day of April, [1981]], at the option of the assesse. Based on the aforesaid provision the cost of acquisition of capital asset at the option of the assessee is the fair market value of the asset on 1st April, 1981. When that is permissible in law, indexation on the fair market value as on 1st April, 1981 until the date of transfer has to be allowed. Any other interpretation will not only lead to abs .....

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on 48 of the Act, thus capital gain is computed by deducting from the full value of the consideration received or accruing as a result of the transfer, the amounts of expenditure incurred wholly and exclusively in connection with such transfer, the cost of acquisition of the asset and the cost of any improvement thereto. Term cost of acquisition of the asset is explained in Explanation (iii) to section 48. In terms of such explanation, indexed cost of acquisition would be an amount which bears t .....

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ssessee s asset is transferred to the Cost of Inflation Index for the year beginning on 1.4.1981. It was therefore, that the Tribunal in our opinion correctly held that the indexed cost of acquisition shall have to be worked out with reference to 1.4.1981, since in the present case the asset was acquired by the previous owner of the property. Learned counsel for the Revenue however, submitted that such interpretation would fail to take into account the expression Cost Inflation Index for the fir .....

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need to fall back on computation provision of section 48. When we do so, we work out the cost of acquisition of the asset in the hands of previous owner. While doing so, we cannot transpose the assessee in Explanation (iii) of section 48. Doing so, would amount to falling short of giving full effect to the deeming fiction contained in sub-section (1) of section 49. To our opinion such deeming fiction must be allowed to have its full play. As is often stated, a deeming fiction must be allowed it .....

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cost of improvement borne by the assessee would not have been necessary since section 48 itself would take care of any improvement on the capital asset to be included for the cost of acquisition. It is precisely because such improvement referred to in section 48 would have reference only to that made by the previous owner that the additional provision had to be made in the deeming fiction provided in sub-section (1) of section 49. Further the interpretation sought to be given by the Revenue wou .....

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and referred to paragraphs 21 to 24 of the judgement which are as under:- 21) To accept the contention of the Revenue that the words used in clause (iii) of the Explanation to section 48 of the Act has to be read by ignoring the provisions contained in section 2 of the Act runs counter to the entire scheme of the Act. Section 2 of the Act expressly provides that unless the context otherwise requires, the provisions of the Act have to be construed as provided under section 2 of the Act. In secti .....

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under a gift or will be outside the purview 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. 22. Apart from the above, section 55(1)(b)(2)(ii) of the Act provides that where the capital asset became the property of the assessee by any of the modes specified under section 49(1) of the Act, not only the cost of improvement incurred by the assessee but also the cost of improveme .....

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easonable to hold that in the case of an assessee covered under section 49(1) of the Act, the capital gains liability has to be computed by considering that the assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. 23. The object of giving relief to an assessee by allowing indexation is with a view to offset the effect of inflation. As per CBDT Circular No.636, dated August 31, 1992 .....

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n assessee covered under section 49(1) of the Act, the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee. 24. Since the assessee, in the present case, is held liable for long-term capital gains tax by treating the period for which .....

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