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Income-Tax Officer Versus P.M. Rungta (HUF)

2016 (5) TMI 67 - ITAT MUMBAI

LTCG - Benefit of indexation - cost incurred by the previous owner - beneficial owner - CIT(A) directing to allow the cost of acquisition of the property as a market value as on April 1, 1981, and indexation allowed on that cost - rights in the impugned land in pursuance of a family arrangement - Held that:- In the given facts of this case, the assessee was the beneficial owner of the impugned asset, and in any case, on the event of family partition, there was at the best improvement in "title" .....

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nvisaged in section 49(1). Therefore, in our view, in any case, the cost incurred by the previous owner shall be adopted while computing capital gains in the hands of the assessee, and also, the period of holding of the assets in the hands of the assessee should also be reckoned from 1963, and, accordingly, for the purpose of taking cost of acquisition, the value as on April 1, 1981, should be adopted in the hands of the assessee for the purpose of computing the taxable amount of capital gain. T .....

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Ashwani Taneja (Accountant Member) 1. This appeal has been filed by the Revenue against the order of the learned Commissioner of Income- tax (Appeals)-9, Mumbai (in short Ld. CIT (A)) dated September 15, 2010, for the assessment year 2007-08, decided against the assessment order passed by the Assessing Officer (in short "the AO") under section 143(3) of the Act. The assessee has raised the following grounds of appeal : "1. Whether the Commissioner of Income-tax (Appeals) erred in .....

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t aside and the order of the Assessing Officer be restored." 2. During the course of hearing, arguments were made by Shri Somnath Ukkal, Departmental representative (DR) on behalf of the Revenue and Shri Nitesh Joshi (learned counsel) on behalf of the respondent-assessee. 3. It is noted that the only issue involved here is that whether the impugned property sold by the assessee during the year was acquired, as per law and facts, by the assessee actually before April 1, 1981, or after that. .....

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should be granted from the said date only. 4. Being aggrieved, the assessee contested the matter in the first appeal before the Commissioner of Income-tax (Appeals), wherein it was, inter alia, submitted by the assessee that the assessee was in the ownership of the property through his family partnership firm since 1963 and, therefore, the period of holding should be counted since 1963, and, therefore, the value as on April 1, 1981, should be taken as the cost of acquisition of the property, and .....

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judgment of the Special Bench of the Income-tax Appellate Tribunal, Mumbai, in the case of Deputy CIT v. Manjula J. Shah (ITA No. 7315/ Mum/2007 [2009] 318 ITR (AT) 417 (Mum) [SB]) that indexation should be provided with effect from April 1, 1981, i.e., the year in which the previous owner held the assets. 5. Before us, detailed arguments have been made by both the sides. The learned Departmental representative supported the orders of the Assessing Officer and has submitted that the order of the .....

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sides, the orders of the lower authorities and material placed before us for our consideration as well as the judgments relied upon before us. 7. The brief facts culled out from the orders of the lower authorities, which remained undisputed before us, are that the impugned land was originally acquired in the family partnership, M/s. Krishnagopal Rungta, in 1963. The firm was regularly assessed to tax. The assessee along with his two sons was 50 per cent. partner in the firm. Subsequently, the fa .....

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le properties were settled as per award No. 70 of 1986. The award was filed with the hon'ble High Court of Bombay for its approval. A copy of the award is placed at page 26 of the paper book. The properties were held by individuals, firms and Hindu undivided family, and by this arrangement Hindu undivided family assets were partitioned and other assets were also distributed. To facilitate the implementation of the understanding, it was agreed between the parties that the assets will be trans .....

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ed November 15, 1985, and award of the High Court dated January 21 1987. Now, for the purpose of determining holding period, to compute taxable amount of capital gain in the hands of the assessee, we need to address the issue that when the assessee became the owner of the said land, and accordingly, holding period of the land would be reckoned from that date. 9. In our considered opinion, the aforesaid family arrangement/settlement (which has been given legal recognition by the hon'ble High .....

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transfer within the meaning of section 45 by the Department, in that case, applying the provisions of section 45, it would have brought to tax some amount of capital gain in the hands of the firm of the Hindu undivided family, etc., in the year 1987, i.e., when the High Court passed the order, when the assessee allegedly becoming the owner, as has been contended by the Assessing Officer in the assessment order. But no such action has been taken by the Revenue. In our considered view, under the l .....

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th. It was just refixation of the rights which the assessee was already having, in one way or the other. In our considered view, the assessee was the beneficial owner of the impugned property since 1963, being 50 per cent. partner in the firm which was owner of the said property. Impliedly, it can also be said that the assessee was holding the property as beneficial owner since 1963. 10. With a view to simplify this issue further, we have analysed the meaning of the expression "held by the .....

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s principle is subject to the context in which the words are used as the words reflect the intention of the Legislature. The words have to be construed and interpreted to effectuate the object and purpose of the provision, when they are capable of multiple meanings or are ambiguous. Isolated reading of words can on occasions negate the very purpose. Lord Diplock had referred to the term, 'business' as an 'etymological chameleon', which suits its meaning to the context in which it .....

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asset. Capital assets can consist of rights other than ownership right in an asset, like lease hold rights, allotment rights, etc. The sequitur, therefore, is that the word 'held' or 'hold' is not synonymous with right over the asset as an owner and has to be given a broader and wider meaning. In Black's Law Dictionary, Sixth Edition, the word 'hold' has been given a variety of meanings under nine different headings. Four of them, i.e., 1, 4, 8 and 9 read as under : .....

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; to maintain possession of or authority over.' As per clause 8, the word 'hold' means to possess or occupy, to be in possession and would also include to keep, retain and maintain possession or authority over an asset. The word 'held' thus can be interpreted to embrace the idea of actual possession of the assessee. In Budhan Singh v. Babi Bux, AIR 1970 SC 1880 (at page 1884) the word 'held' was interpreted to mean 'lawfully held, to possess by legal title'. T .....

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#39;owner' has designedly not been used by the Legislature. The word 'hold', as per dictionary meaning, means to possess, be the owner, holder or tenant of (property, stock, land . . .). Thus, a person can be said to be holding the property as an owner, as a lessee, as a mortgagee or on account of part performance of an agreement, etc. Conversely, all such other persons who may be termed as lessees, mortgagees with possession or persons in possession as part perform ance of the contr .....

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ding will determine whether the consideration should be taxed as a short-term capital gains or long-term capital gains. Thus, the conversion of the leasehold right into freehold by way of improving the title over the property would not affect the taxability of the gain from such property, which is relatable to the period over which the property is held. 13. The hon'ble Delhi High Court in CIT v. K. Ramakrishnan [2014] 363 ITR 59 (Del) ; [2014] 225 Taxman 123 has held that for the purpose of .....

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