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2016 (2) TMI 570 - ITAT MUMBAI

2016 (2) TMI 570 - ITAT MUMBAI - TMI - Non-granting of exemption available u/s. 54 - the investment in the new residential house property was not situated in India - Held that:- Following the decision of the Coordinate Bench of this Tribunal in the case of Ms. Dhun Jehan Contractor (2015 (8) TMI 316 - ITAT MUMBA) we hold that the assessee is entitled to be allowed exemption under section 54 of the Act in respect of the investment made in the purchase of the new residential property abroad in 151 .....

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ndexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset (i.e. the assessee's late mother first held her 50% share in the said property by inheritance on the expiry of her husband on 11.11.1963) and not in the year in which the assessee became the owner of the asset, viz. in 2006. We, accordingly, hold and direct the AO to allow indexation of the cost of acquisition of the said property entirely w.e.f. 01.04.1981. - Decided in favo .....

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ing total income of ₹ 63,62,578/-. The case was taken up for scrutiny. In the course of assessment proceedings, it was seen that in the year under consideration, the assessee sold Flat No. 21-22, A, Mehezin, Woodhouse Road, Colaba, Mumbai-400005 to Shri Naran J. Shah and others for a sale consideration of ₹ 2,30,00,000/- on 05.03.2009. The assessee inherited the said property from his parents. Taking the cost of acquisition of this property as on 01.04.1981 at ₹ 6,75,000/- the .....

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ax. The Assessing Officer (AO) did not agree with the assessee's computation of LTCG. In respect of the assessee's claim for computing the indexed cost of acquisition w.e.f. 01.04.1981, the AO was of the view that since the assessee inherited 50% share on his father's expiry on 11.11.1963, and 50% share on his mother's expiry on 18.10.2006, the indexed cost of acquisition was to be computed in two stages, i.e. financial year 1981-82 for 50% and financial year 2006-07 for 50% of t .....

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0 1,65,450 1,02,250 5,21,390 2,24,78,610 Less: Cost of acquisition (As per valuation Report) ₹ 6,75,000/- Indexed cost of acquisition for ₹ 7,75,000/- For ½ share (F.Y. 1981-82) Indexed Cost of acquisition for ₹ 6,75,000/- For ½ share (F.Y. 2006-07) 6,75,000 * 582/100 = 19,64,250 6,75,000 * 582/519 = 3,78,468 23,42,718 Gross LTCG 2,01,35,891 Less Exemption U/s. 54 Investment amount in the new house property - Taxable LTCG 2,01,35,891 In view of the re-computation .....

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held the AO's action in denying the assessee's claim for exemption under section 54 of the Act, and (ii) following the decision of the Hon'ble Bombay High Court in the case of CIT vs. Manjula J. Shah (2013) 355 ITR 474 (Bom) directed the AO to allow indexation of the cost of acquisition w.e.f. 01.04.1981 in respect of the said property. 3. Both Revenue and the assessee are aggrieved by the impugned order of the learned CIT(A)-10, Mumbai dated 26.03.2013 for A.Y. 2009-10 in respect of .....

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e Appellant submits that considering the facts and circumstances of his case and the law prevailing on the subject the deduction available u/s. 54 of the Income-tax Act, 1961 ought to have been granted to him and the stand taken by the Assessing Officer in this regard is erroneous, incorrect, illegal and unwarranted to say the least and the Commissioner of Income-tax(Appeals) ought to have held as such. 1:3 The Appellant submits that the Assessing Officer be directed to grant the deduction avail .....

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assessee exemption of ₹ 1,22,53,878/- claimed under section 54 of the Act on the ground that the investment in the new residential house property was not situated in India. The learned A.R. for the assessee submitted that the issue in question, of exemption under section 54/54F of the Act, is covered in favour of the assessee by the following decisions of the Coordinate Bench of the Mumbai Tribunal and other Tribunals in the following cases:- i) Dr. Girish M. Shah (ITA No. 3582/Mum/2009) .....

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on record, including the judicial pronouncements cited and placed reliance upon. We find that a similar issue has already been decided in the case of Ms. Dhun Jehan Contractor in ITA No. 7058/Mum/2013 dated 13.05.2015. In that case the Coordinate Bench, after considering the facts of that case at para 2 thereof, allowed the assessee's claim for exemption under section 54 of the Act on account of investment in the acquisition of a new property outside India. In doing so the Coordinate Bench f .....

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e of Mr. Girdhar Mohanani & Mrs. Varsha Girdhar in ITA Nos.4591 & 4592/Mum/2013 decided on 06.05.15 and the relevant finding in paras 4 to 9 is as under: "4. We have considered rival contentions and found that during the year assessee has claimed exemption u/s.54. Out of the sale consideration of ₹ 87,37,291/-, assessee has deposited ₹ 50 lakhs in capital gains in scheme account. Subsequently deposit was withdrawn during the assessment year 2010-2011 under consideration .....

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ld. AR relied on the decision of Bangalore bench of the Tribunal in the case of Vinay Mishra, 141 ITD 301, wherein it was held that provisions of Section 54F does not suggest that new residential house acquired should be situated only in India. Accordingly exemption was granted in respect of residential house acquired outside India. It was observed that on a plain reading of provisions of Section 54F one does not find anything therein to suggest that the new residential house acquired should be .....

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ia is eligible for exemption u/s.54. However, no contrary decision of Tribunal or Hon'ble High Court was brought to our notice suggesting that exemption will not be available in case residential house is acquired outside India. 7. The Finance (No.2) Bill, 2014 brought an amendment in Section 54, wherein sub-section (1), for the words "constructed, a residential house", the words "constructed, one residential house in India" has to be substituted w.e.f. 1st day of April, 2 .....

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re its amendment by the Act, inter alia, provided that where capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house, then, the amount of capital gains to the extent invested in the new residential house is not cha .....

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the file of the AO for verifying other conditions to be fulfilled for grant of exemption u/s.54 in both the appeals of the ITA No.7058/M/2013 Ms. Dhun Jehan Contractor 5 assessees. The AO is also at a liberty to verify actual acquisition of house property outside India, in terms of transfer deeds so executed in favour of assessee. We direct accordingly." 7. Accordingly, following the order of the co-ordinate bench of the Tribunal in the case of "Mr. Girdhar Mohanani & Mrs. Varsha G .....

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erty abroad in 151, Whispering Lane, Winona, Winona County, Minnwsota 55987, USA. The AO is accordingly directed. Consequently ground No. 1 (1.1 to 1.3) of the assessee's appeal is allowed. 5. Ground No. 2 of assessee's appeal being general in nature, no adjudication is called for thereon. 6. In the result, assessee's appeal for A.Y. 2009-10 is allowed. Revenues appeal for A.Y. 2009-10 in ITA No. 4650/Mum/2013 7. In this appeal, Revenue has raised the following grounds:- "1. On .....

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law, whether the ld. CIT(A) was justified in holding that the AO's action of not allowing indexation benefit on part of the property received on inheritance cannot be upheld even though the 2nd proviso to section 48 of the I.T. Act, which deals with indexed cost of acquisition and as defined in clause (iii) to Explanation to sec. 48 provides that indexation is to be allowed to the assessee from the 1st year of acquisition in which the asset was held by him. 3. The appellant prays that the or .....

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learned CIT(A) in allowing the assessee's claim for indexation of the cost of acquisition w.e.f. 01.04.1981 by following the decision in the case of Manjula J. Shah (2013) 355 ITR 474 (Bom) since this decision has not been accepted by the Department. The learned D.R. was heard in this matter and he placed strong reliance on the AO's order on the issue. 9.2 Per contra, the learned A.R. for the assessee submitted that there was no error in the impugned order of the learned CIT(A) in allow .....

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y the assessee, 50% on the expiry of his father on 11.11.1963 and the remaining 50% on the expiry of his mother on 18.10.2006. In respect of the assessee's claim that the indexed cost of acquisition, on inheritance of 50% of the said property on expiry of his father on 11.11.1963 is to be computed from 01.04.1981, there is no dispute. The dispute before us is in respect of the date to be adopted for computing the indexed cost of acquisition of the remaining 50% of the said property inherited .....

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