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TMI Blog2018 (8) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... red. 2. Brief facts and of the case are that the assessee filed return of income declaring taxable income of Rs. 14,31,06,210/- for Assessment Year 2011- 12. The assessment was completed on 07.03.2014 under section 143(3). The Assessing Officer while passing the assessment order made the addition of Long Term Capital Gain (LTCG) of Rs. 15,98,01,636/- on account of income earned on sale of share in land at Plot No. 91, Nepean Sea Road, Mumbai. On appeal before the ld. CIT (A), the entire addition was deleted. The ld. CIT (A) while allowing appeal of the assessee held that the assessee be allowed benefit of indexed cost of acquisition with reference to the year in which the previous owner first held the asset. Therefore, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us. 3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits the grounds of appeal raised by the Revenue in the present appeal is covered in favour of assessee and against the Revenue by the decision of CIT vs. Manjula J. Shah 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers the capital asset acquired under a gift or will for valuable consideration. 11. The mode and the manner of computing the capital gains is provided under Section 48 of the Act. As per Section 48, the income chargeable under the head "capital gains" is liable to be computed by deducting from the full value of the consideration received on transfer of the capital asset, the amount of expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Where the assessee acquires any capital asset under a gift or will without incurring any cost of acquisition, there would be no capital gains liability. However, Section 49(1)(ii) of the Act provides that in the case of an assessee acquiring an asset under a gift or will, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee as the case may be. Thus, on account of the deeming fiction contained in Section 49(1)(ii) of the Act, gains arising on transfer of a capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicability of the deemed date of holding the asset from 29/1/1993 while determining the indexed cost of acquisition under clause (iii) of the Explanation to Section 48 of the Act. 15. For better appreciation of the dispute, we quote the relevant part of Section 48 herein :- " Mode of Computation. 48. The income chargeable under the head "capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the result of the transfer of the capital asset the following amounts, namely:- expenditure incurred wholly and exclusively in connection with such transfer; the cost of acquisition of the asset and the cost of any improvement thereto; Provided that .......... Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the previous owner shall be included. As the previous owner held the capital asset from 29/1/1993, as per Explanation 1(i)(b) to Section 2(42A) of the Act, the assessee is deemed to have held the capital asset from 29/1/1993. By reason of the deemed holding of the asset from 29/1/1993, the assessee is deemed to have held the asset as a long term capital asset. If the long term capital gains liability has to be computed under Section 48 of the Act by treating that the assessee held the capital asset from 29/1/1993, then, naturally in determining the indexed cost of acquisition under Section 48 of the Act, the assessee must be treated to have held the asset from 29/1/1993 and accordingly the cost inflation index for 1992-93 would be applicable in determining the indexed cost of acquisition. 18. If the argument of the revenue that the deeming fiction contained in Explanation 1(i)(b) to Section 2(42A) of the Act cannot be applied in computing the capital gains under Section 48 of the Act is accepted, then, the assessee would not be liable for long term capital gains tax, because, it is only by applying the deemed fiction contained in Explanation 1(i)(b) to Section 2(42A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) to section 2(42A) of the Act. 20. 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 contrary the expression 'asset held by the assessee' in clause (iii) of the Explanation to Section 48 of the Act has to be construed in consonance 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 the capital gains tax which is not intended by the legislature. Therefore, the argument of the revenue which runs counter to the legislative intent cannot be accepted. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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