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Smt. Seetha S. Shetty Versus Dy. Commissioner of Income Tax, Cir. 17 (2) , Mumbai

Capital gains tax - whether the amount received by the assessee from the sale of property, the title of which was acquired by way of adverse possession and which did not involve any acquisition costs, can be subjected to the capital gains tax or not ? - Held that:- The issue is now squarely covered by the direct decision of in the case of CIT vs. Star Chemicals (Bombay) Pvt. Ltd. (2009 (8) TMI 1143 - BOMBAY HIGH COURT) wherein while answering the question of chargeability of capital gains in rel .....

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ed by way of adverse possession. - Decided in favour of assessee. - I.T.A. No. 807/Mum/2013 - Dated:- 11-9-2015 - SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Appellant : Shri Nandgaonkar For The Respondent : Shri Neil Philip (DR) ORDER PER SANJAY GARG, JUDICIAL MEMBER: This appeal filed by the assessee arise out of the order of the Commissioner of Income-tax (Appeals)-17, [CIT(A)] Mumbai dated 19-12-2012 for the assessment year 2006-07. 2. The short issue ra .....

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income declared by the assessee included an amount of ₹ 34,23,165 being capital gains. 3. Subsequently the assessee filed a revised return of income on 31-03- 2008 wherein the capital gain declared in the original return of income was omitted on the ground that there was a mistake in treating the transaction of sale of 1/3 share of interest in land at Goregaon at ₹ 50,00,000/- as the same was not liable to tax since the cost of acquisition was nil. It was explained that 62 acres of l .....

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as passed by Bombay City Civil Court whereby the said three persons got absolute rights over 2000 sq. meters of land out of the 62 acres of land allotted to the trust Nagari Nivara Parishad . On the application made by the Shettys, the City Survey Officer also transferred the property in their names. Subsequently, the Shettys entered into a Development Agreement dated 24.8.2005 with M/s Hekunt Real Estates P Ltd and received consideration of ₹ 1.20 crores and a flat of 2000 sq. ft. (carpet .....

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ion of section 50C were applicable in view of the stamp duty authorities determining the value of transaction at ₹ 2,28.45,000/- . 4. Accordingly, the assessee was asked to file her submissions on the above issues. The assessee reiterated the statement made in the return of income as revised and contended that since the cost of acquisition of the assessee was nil, no capital gain tax was leviable. The assessee in this respect relied upon the following case laws: i) CIT vs. B.C. Srinivas Sh .....

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5(2) of the Act which defines Cost of Acquisition". Before A.Y. 1995-96, the Courts had held that capital gain tax was not chargeable where the cost of acquisition was nil or not ascertainable. The facts of these case laws were completely different from the facts of the assessee, where the cost of acquisition was although nil but it was fully ascertainable. He relied in this respect upon the decision of the Ahmedabad Special Bench in the case of Vijay Singh R. Rathod & Others Vs. ITO, 1 .....

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nd records. The occupancy rights in these lands, therefore, amount to capital assets within the meaning of section 2(14), the sale whereof was liable to be taxed as capital gain under section 45. 6. After coming to the -conclusion that sale of land by the assessee at Goregaon was liable for Long Term Capital Gain tax, the AO considered the application of section 50C of the Act. He observed that the stamp duty value of the property was ₹ 2,28,45,000/- whereas the deed was registered for  .....

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potential of the said plot and also to bring in FD-FSI from outside. He further held that there was no justification in sending the matter for valuation to DVO because the rate adopted by the Stamp Duty Officer was actually on the lower side considering the prime location of the property and no adjustment was required to be done in the value of the property adopted by the Stamp Duty Officer. The AO therefore held that though cost of acquisition of the ownership right was nil, yet, the assessee .....

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ions of the Hon ble Supreme Court as well of various High Courts of the country. The base decision is in the case of CIT v. B.C. Srinivasa Shetty (1981) 128 ITR 294; (1981) 2 SCC 460 wherein the Hon ble Supreme Court has held that all transactions encompassed by section 45 must fall within the computation provisions of section 48. If the computation as provided under section 48 could not be applied to a particular transaction, it must be regarded as "never intended by section 45 to be the s .....

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of being determined. The principle propounded in B.C. Srinivas Shetty (1981) 128 ITR 294 (SC) has been followed by several High Courts with reference to the consideration received on surrender of inter alia tenancy rights sale of Good Will etc. It was to meet the situation created by the decision in B.C. Srinivas Shetty (1981) 128 ITR 294 (SC) and the subsequent decisions of the High Courts that vide Finance Act, 1994, Section 55 (2) was amended to provide that the cost of acquisition of, inter .....

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btained by way of adverse possession have not been included in the provision neither in the charging section 45 nor in the section 48 which provides mode of computation. There is no any provision regarding the charging of capital gains tax on an asset title to which has been acquired in recognition of rights of adverse possession. Even u/s 49, the cost of the asset with regard to certain mode of acquisition, such as by way of gift or will, by succession, inheritance or devolution or on any distr .....

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