TMI Blog2016 (4) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... , is not correct being against the statutory scheme, that if the market value can be ascertained, it has to be taken to be equal thereto and if the value cannot be ascertained, it has to be equal to the market value on a specified date at the option of the assessee. Now, coming back to the facts of the case, we find that the FAA had adopted the fair market value as on 01. 04. 1981 for the property inherited by the assessee from his father which is correct - Decided against revenue - ITA/6917 /Mum/2011, ITA/6602/Mum/2011 - - - Dated:- 13-4-2016 - Sh. Joginder Singh, Judicial Member And Rajendra, Accountant Member For the Petitioner : Shri M. Murli For the Respondent : Shri Ajay Indrajit Thakore ORDER Per Rajendra A. M. Challenging the order dt. 25/7/2011 of the CIT(A)-3 Mumbai the Assessee and the Assessing Officer(AO)have filed the cross appeals for the year under consideration raising various Grounds of appeal. Assessee, an individual filed his return of income on 20/07/2008 declaring total income of ₹ 56. 22 lakhs. The AO completed the assessment u/s. 143(3)of the Act on 21. 12. 2010, determining the income of the assessee at ₹ 2. 40 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare of inherited tenancy right a consideration of ₹ 1. 83 crores, that the consideration received by him fell under the exempted portion of section 55 (a) (2) (ii) of the act, that section 55 (2) was amended with effect from 1/4/1995 to supersede the certain exclusions, that the new provisions provided that for the purpose of section 49 and 48 the cost of acquisition in any other case had to be taken as nil, that as per the provisions of section49(1)(iii)(a)where the capital asset became the property of the assessee by succession, inheritance or devolution, the cost of acquisition of the asset would be deemed to be cost for which the previous owner of the property acquired at has increased by the cost of any improvement of the assessee incurred or borne by the previous owner for the assessee as the case might be, that explanation provided that the expression previous owner of the property in relation to any capital asset owned by an assessee meant the last previous owner of the capital asset who acquired it by order of acquisition other than that referred to in clause (i) or clause (ii) or clause(iv) of the subsection, that the assessee had inherited tenancy rights from his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indexed cost. He referred to the value determined by the valuer as on 01. 04. 48 lacs and indexed it to ₹ 79, 81, 237/-. Accordingly, he held that LTCG would be computed at ₹ 1, 03, 52, 098/-(1, 83, 33, 334/(-)Rs. 79, 81, 235/-)as against ₹ 1. 83, determined by the AO. 4. During the curse of hearing before us, the Departmental Representative(DR)stated that the entire amount received by the assessee i. e. ₹ 1. 83 crores was taxable, that the cost of acquisition of tenancy right was to be taken as nil, that provisions of Sec. 55(2)(b) were not applicable to the facts and circumstances of the case under consideration. The assessee stated that whole consideration recd by the assessee was capital receipt and not liable to tax u/s. 55(2)(a) of the Act. He alternatively stated that FMV as on 01. 4. 81 plus the indexing worked out by using cost inflation index in reverse manner should have been allowed. That provisions of sec. 49(a) were applicable to the facts of the case, that in case of tenancy capital gain was not taxable. He referred to the case of D. P. Sandu Bros. Chembur P. Ltd. (273 ITR 1), Tara Agencies (292 ITR444) and B. Srinivasa Shetty (128 ITR2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case were as under that a residential house situate at premises No. 47, Golf Links, New Delhi, was purchased by Sardar Pratap Singh on 16. 04. 1958, that he died on 29. 06. 1968, that the aforesaid property devolved on her widow, who died on 16. 09. 1999, that, the assessee and her three sisters succeeded to the property in equal shares. During the financial year 2003-04 the property was sold at a sum of ₹ 12 crores. The share of the assessee in the sale proceeds was a sum of ₹ 3 crores. Matter travelled up to the Hon ble Calcutta High Court, wherein following question about valuation of the property was framed (b)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in applying the cost inflation index with effect from April 1, 1981, instead of the 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 April 1, 1981, whichever is later, on the ground that a literal interpretation of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset' is explained in Explanation (iii) to section 48. In terms of such Explanation, indexed cost of acquisi tion would be an amount which bears to the cost of acquisition the same proportion 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. In simple words, there fore, for an asset acquired prior to April 1, 1981, the indexed cost of acquisition would be the cost of acquisition multiplied by the ratio of the cost inflation index in the year in which assessee's asset is trans ferred to the cost of inflation index for the year beginning on April 1, 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 April 1, 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 first year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 13. Mr. Murarka has also relied upon a judgment of CIT v. Manjula J. Shah reported in [2013] 355 ITR 474(Bom)and referred to paragraphs 21 to 24 of the judgment which are as under (page 482) : 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 section 48 of the Act, the expression 'asset held by the assessee' is not defined and, therefore, in the absence of any intention to the con trary the expression 'asset held by the assessee' in clause (iii) of the Explanation to section 48 of the Act has to be construed in conso nance with the meaning given in section 2(42A) of the Act. If the meaning given in section 2(42A) is not adopted in construing the words used in section 48 of the Act, then the gains arising on transfer of a capital asset acquired under a gift or will be outside the purview of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14. For the aforesaid reasons, the second question is answered in the affirmative and against the Revenue. 5. 2. In the case of Raja Malwinder Singh(334ITR48), the Hon ble P H High Court has held that even in a case where the cost of acquisition cannot be ascertained, section 55(3) of the Act statutorily prescribes the cost to be equal to the market value on the date of acquisition, that this being the position, capital gains are not excluded even on the plea that the value of the asset in respect of which capital gains are to be charged was incapable of being ascertained, that the view based on the assumption that where the market value cannot be ascertained, capital gains cannot be applied, is not correct being against the statutory scheme, that if the market value can be ascertained, it has to be taken to be equal thereto and if the value cannot be ascertained, it has to be equal to the market v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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