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2015 (6) TMI 31 - ITAT MUMBAI

2015 (6) TMI 31 - ITAT MUMBAI - TMI - Computation of capital gain - property in question was acquired by way of gift/will - the indexed cost of acquisition has to be taken from the date on which it was held by the previous owner and not from the date from which the asset was first held by the assesse as held by AO - CIT(A) deleted the addition - Held that:- The benefit of indexed cost of inflation is given to ensure the taxpayer pays capital gains tax on ‘real or actual gain’ and not on increase .....

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e 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 first day of April, 1981. The property in question was gifted on 01/02/2003 and the assessee sold the flat on 30/06/2003 for ₹ 1.10 crores. Applying the decision of the Hon’ble jurisdictional High Court pronounced in the case of Manjula J. Shah (2011 (10) TMI 406 - BOMBAY HIGH COURT), the capital gains liability has to b .....

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Appeals). - Decided in favour of assesse. - ITA NO.6564/Mum/2013 - Dated:- 8-4-2015 - Shri Joginder Singh And Shri N.K. Billaiya JJ. For the Appellant : Shri Pawan Kumar Beerla-DR For the Respondent : Shri None ORDER Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 06/08/2013, of the ld. First Appellate Authority, Mumbai, on the ground that the ld. Commissioner of Income Tax (Appeals) erred in deleting the addition made as computation of the indexed cost .....

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ice, consequently, we have no option but to proceed ex-party, qua the assessee, and tend to dispose of this appeal on the basis of material available on record. 2.1. Before coming to any conclusion, we are reproducing hereunder the relevant uncontroverted finding recorded in the order of the ld. Commissioner of Income Tax (Appeals) for ready reference and perusal/analysis:- 3.3 I have considered the facts of the case and the submissions made by the assessee. In the case of the Commissioner of In .....

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rchased a flat on 29/01/1993 at a cost of ₹ 50.48 lakhs. She gifted the flat to the assessee on 01/02/2003. The assessee sold the flat on 30/06/2003 for ₹ 1.10 crores. In computing the LTCG, the assessee took the indexed cost of acquisition under Explanation (iii) to See. 48 on the basis that she "held" the flat since 29/01/1993. The A.O. held that as the assesses had held the flat from 61/02/2003, the cost inflation index for 2002- 03 would be applicable. The Ld. CIT(A) an .....

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year in which the assessee became the owner of the asset ?" 3.3.1 The Hon'ble High Court examined the various provisions relating to the taxability of the capital gains and held that where the assessee acquired any capital asset under a gift or will without incurring any cost of acquisition, there would be no capital gains liability. However, sec. 49(1 )(ii) of the Act provided that in the case of an assessee acquiring an asset under. a "gift" or "will", the cost of .....

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ermined by deducting from the total consideration received by the assessee, inter-alia, the deemed cost of acquisition. In Para 17 of their judgment, the Hon'ble High Court held as follows :- "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 ex .....

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of the Act, the assessee is deemed to have held the capital asset from 29/1/1993. By reason of the deemed holding of the asset from 29/1/1993, 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 Section 48 of the Act by treating that the assessee held the capital asset from 29/1/1993, then, naturally in determining the indexed cost of acquisition under Section 48 of the Act, the assessee must be treated to .....

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ed in Explanation 1 (i)(b) to Section 2(42A) and Section 49(1)(ii) of the Act, the assessee is deemed to have held the asset from 291111993 and deemed to have incurred the cost of acquisition and accordingly made liable for the long term capital gains tax. Therefore, when the legislature by introducing the deeming fiction seeks to tax the gains arising on transfer of a capital asset acquired under a gift or will and the deemed fiction, it is not possible to accept the contention of revenue that .....

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the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. " 3.3.3 In Para 22 of their judgment, the' Hon'ble High Shri Naraindas L. Sakraney 6 Court held as follows :- "If indexation is linked to the period of holding the asset and in the case of an 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 own .....

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which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. 3.3.5 In the present case also the case of the assessee is covered u/s 49(1) of the I.T. Act, 1961. Hence, applying the judgement of the Hon'ble Bombay High Court in the case of Manjula J. Shah (supra), the capital gain 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 .....

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way of gift and will, while computing the capital gains arising on the transfer of the capital assets in question, the indexed cost of acquisition has to be computed with reference to the year in ;which the previous owner first held the assets. The assessee has claimed that the previous owner of the assets in question first held the assets prior to 1981 -82. However, the assessee has submitted in the course of the appellate proceedings that Nisha Sakraney have gifted her 50% share in the proper .....

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the year 1995-96 and not with reference to the year 1981-82 as done by the assessee. As regards the part of the assets which are claimed to have been gifted to the assessee by Subhash Sakraney on 30/08/2004 as claimed by the assessee (and which was held by the donor from 02/09/1968, the indexed cost of acquisition will be computed with reference to the year 1981-82 as done by the assessee. Subject to the above, this ground of appeal filed by the assessee is partly allowed. 4. In the result, the .....

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noted by the Assessing Officer that long term capital gains was calculated by the assessee on the basis of indexed valued having the base year 1981-82. As per the ld. DR/AO, indexation has to be taken from the date when the assessee became the owner of the properties and not as on the date of valuation taken as 01/04/1981. The stand of the assessee is that for computing capital gains, the fair market value was adopted as on 01/04/1981 as the asset was purchased by the earlier owner prior to 01/ .....

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s 2004-05, when the assessee became the owner. The ld. Assessing Officer, therefore, worked out the long term capital gains by taking the indexed cost for the financial year 2004-05 as against the indexation for financial year 1981-82 resulting into capital gains at ₹ 2,34,92,236/- against the long term capital gains of ₹ 1,51,58,752/-, declared by the assessee. We find that identically the Tribunal in the case of Mrs. Pushpa Sofar vs ITO and DCIT vs Manjula J. Shah (Special Bench) d .....

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014) 220 TAXMAN 165 (Bom.) while interpreting section 48 of the Act and computation of capital gains (cost inflation index), wherein the assessee inherited property from his mother in AY 2007-08, which was originally acquired by his father in 1979, held that the cost of acquisition, as on 01/04/1981 has to be taken into consideration. We are of the view, the benefit of indexed cost of inflation is given to ensure the taxpayer pays capital gains tax on real or actual gain and not on increase in c .....

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