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Sanjay Harichand Kumar Versus Income-Tax Officer

2016 (7) TMI 689 - ITAT CHENNAI

Determination of capital gains on the sale of capital asset - short-term capital gains or long-term capital gains - exemption under section 54 denied - period of holding of property inherited by the assessee from his father - application of the cost of acquisition in terms of section 49(1)(iii)(a) - Held that:- In the present case, the assessee inherited the property on November 20, 2005. However, the said property was purchased by the assessee's ancestors, i.e., grandfather, the late Keshavdas .....

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s. In other words, capital gains has to be assessed as long-term capital gains by fixing the cost of asset as on April 1, 1981, and, thereafter, applying the cost of inflation index in terms of section49(1)(iii)(a) of the Act and, consequently, the assessee is also entitled for exemption under section 54 of the Act. - Decided in favour of assessee. - I. T. A. No. 549/Mds/2016 - Dated:- 27-5-2016 - Chandra Poojari (Accountant Member) And Duvvuru RL Reddy (Judicial Member) For the Appellant :T. Ba .....

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s of section 49(1)(iii)(a) of the Income-tax Act, 1961 and determining the capital gains on the sale of capital asset as short-term capital gains instead of long-term capital gains and refusing the exemption under section 54 of the Act. 3. The facts of the case are that the Assessing Officer received the information that the assessee had sold immovable property measuring an extent of three grounds and 858 square feet for ₹ 5,50,00,000 out of which one-sixth share of the assessee being S .....

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e year 1971. On the death of their father, i.e., Keshevdas on June 24, 2001, the assessee's father and his brother became entitled to half share each in the property. Out of his half share in the property, the assessee's father, i.e., Shri Harichand gifted one-third share in the property by deed of settlement dated November 20, 2005. The assessee became entitled to one-sixth share in that property. In the computation of total income submitted by the assessee, he has adopted the cost infl .....

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able, the Assessing Officer issued show-cause notice and reopened the assessment. The assessment was completed under section 143(3) read with section 147 of the Act on March 24, 2014, assessing the income of ₹ 48,88,895 by taking the cost of inflation index of 497 relevant for the financial year 2005-06 being the year of possession of the asset and thereby reworked the long-term capital gains and arrived at a tax demand of ₹ 11,71,780. Aggrieved, the assessee went in appeal before th .....

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Therefore, the Commissioner of Income-tax (Appeals) observed that there is no document to state when the assessee's father became the owner of the ancestral property. According to the Commissioner of Income-tax (Appeals), it is not possible to accept that the period of holding the property by the assessee's grandfather should also be taken into account. Before the Commissioner of Income-tax (Appeals), the assessee could not establish with a title deed or encumbrance certificate when the .....

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6. Therefore, the assessee sold the property under consideration for less than 36 months and, hence, capital gains should be assessed as short-term capital gains and the assessee is not entitled for corresponding deduction under section54 of the Act. Against this, the assessee is in appeal before us. 5. We have heard both the sides and perused the material on record. In this case, the assessee's grandfather acquired the property along with his two sons jointly in the year 1971. After the dem .....

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lation index of the said property to be computed from April 1, 1981, and, thereafter, indexation cost to be done. On the other hand, the contention of the learned Departmental representative is that the assessee's father became the legal heir of the impugned property after the demise of his grandfather on June 24, 2001. The settlement deed does not mention whether the assessee's father got the property through will or otherwise. If the assessee's father got the property through will, .....

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grandfather died on June 24, 2001, and after the death, the assessee's father and his uncle became entitled to half share each in the said property. Out of this half share in the property, the assessee's father gifted one-third share in the property by deed of settlement dated November 20, 2005. The assessee became entitled to one-sixth share in that property. As per section 49(1)(iii)(a) of the Act, whereas the capital asset became the property of the assessee by succession, inheritance .....

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ial year 1981-82 is required to be applied for the purpose of arriving at the index cost of asset. The Commissioner of Income-tax (Appeals) observed that the assessee became the owner of the property under consideration only on November 20, 2005, which was sold on February 2, 2006, within a gap of two and half months and it is resulted in short-term capital gains. According to the Commissioner of Income-tax (Appeals), the assessee became the owner of the property only on November 20, 2005, and t .....

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lation to the individuality of the assessee. Accordingly, it was held that for the purpose of determining the period of holding, intermediate transfers on account of succession are to be ignored. Similarly, in the case of Mrs. Pushpa Sofat v. ITO [2002] 81 ITD 1 (Chandigarh), the Chandigarh Bench of this Tribunal has expressed a similar view. We also noticed that as per the provisions of section 2(42A), Explanation 1(i)(b), it is stipulated that in determining the period for which any capital as .....

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