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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
per sale deed which is valued by stamp duty authority at Rs. 3.78 Cr.
Hence, we cannot doubt the expenses of building as claimed by the assessee. We find the claim of the assessee of Rs. 10,00,000/- invested in cost of construction/cost of improvement as originally claimed and we allow the same.
As regards to third issue, the facts are that the property sold by the assessee i.e, Plot No.1246, Anna Nagar, Chennai was acquired by the assessee by way of inheritance settled by his father Shri A. Joga Rao on 04.11.2013 vide settlement deed No.5847/2013. By virtue of which the assessee became 1/4th co-owner of this property. This property was acquired by assessee’s father Shri A. Joga Rao, as originally purchased from Tamil Nadu Housing Board on 28.02.1980 for a sum of Rs. 28,215/-. The A.O while computing the long term capital gain has taken the cost of acquisition of this land at Rs.28,125/- and indexed the same from the date when the assessee acquired this property by way of inheritance settled by his father in his favour on 04.11.2013. The A.O took the value for indexation purpose as on 04.11.2013 and indexed the cost of acquisition at Rs.35,795/- and adopted the capital gain at Rs. 7,79,64,205/-. Aggrieved, the assessee & 782/Chny/2022 :- 8 -: raised objection before DRP, the DRP rejected the objection of the assessee by observing in Para 5.1 to 5.3 as under:
“5.1 Panel: During the course of DRP Proceedings, this panel has carefully considered and perused the submissions and objections of the assessee. The contention of the assessee is that AO at the para 11 of the Draft Assessment Order has adopted the cost of acquisition as Rs.28,2 1 5/- being amount paid by the assessee/objectors father/previous owner on 28.02.1980 as against the claim of guideline value as on 1.4.2001 at Rs. 1360 per sqft for total extent of 5000 sqft. 5.2 Assessee further stated that the option is provided to the taxpayer to adopt fair market value as on 01.04.200 l as against the original cost of acquisition prior to the said date and that option is admittedly exercised by the assesee while reporting the long term capital gains as part of return of income filed for the assessment year under consideration. The relevant provisions in expiation below section 55(2)(ac) of the Act vesting the option to the tax payer for adopting the fair market value as on 01.04.2001. 5.3 Having considered the submissions, this panel has examined the facts of the case and found that Assessing Officer has rightly re-computed the capital gains by disallowing the expenses and deduction claimed with respect to sale and giving benefit of indexation from 2013. Further, this panel found that AO has rightly denied the adoption of guideline value as on 01.04.2001as the cost of acquisition, because the property was settled to the assessee only on 04.11.2013. Accordingly, the indexation and guideline benefit shall be applicable only from 2013.”
Aggrieved, the assessee came in appeal before the Tribunal.
7.1 We have heard the rival contentions and gone through the facts and circumstances of the case on this third issue. We have perused the material and noted that the admitted facts are that this property was acquired originally by assessee’s father Shri A. Joga Rao from Tamil Nadu Housing Board for a sum of Rs. 28,215/- on 28.02.1980.
This property was settled by way of inheritance on the assessee along & 782/Chny/2022 :- 9 -: with other three co-owners by assessee’s father Shri A. Joga Rao on 04.11.2013 vide settlement deed No.5847/2013.
7.2 In the given facts as argued by Ld. counsel for the assessee, Shri N. Arjunraj, C.A that in the case of inheritance the cost to the previous owner that has to be taken into account as the cost of acquisition of assessee’s share received consequent upon family settlement and not the amount as on the date of settlement deed. The Ld. counsel for the assessee stated that in the case of family settlement, it is the cost of the previous owner, on the date on which previous owner became only, is to be taken into account as the cost of acquisition upon family settlement and not the value as on the date of family settlement i.e., on 04.11.2013. The Ld. counsel for the assessee particularly referred to the provision of Section 49(1)(iii)(a) of the Act.
The Ld. counsel for the assessee also relied on one CBDT Circular No.31 (LXXVII-5) D of 1962, dated 21.09.1962, which reads as under:
“Capital gains tax property acquired by inheritance-Deduction of cost of acquisition of asset Cost to the previous owner-whether "previous owner" includes "previous owners"-Whether substitution of fair market value as on 1-1-1954 permissible."For the purposes of computation of capital gains under section 45 read with section 48, section 49 and section 55(2)(ii) of the Income-tax Act, 1961, a question has arisen as to how the cost of acquisition of an asset should be determined where it has been inherited by an assessee from a person who in turn had inherited it from another person.
Under clause (ii) of sub-section (2) of section 55 of the Income- tax Act, 1961, where the capital asset became the property of the assessee by any of the modes specified in section 49 including inheritance, and the capital asset became the property of the & 782/Chny/2022 :- 10 -: previous owner before the 1-1-1954, "cost of acquisition" means the cost of the capital asset to the previous owner or fair market value of the asset on 1-1-1954, at the option of the assessee. It has been argued that in a case of successsive inheritance (of the type referred to in the preceding paragraph) the provisions of section 55(2)(ii) would not apply and that these provisions would apply only to a case where some actual cost was incurred by the immediate previous owner.
The Board have, however, been advised that the above view is not correct. Where section 49 applies, the provisions of section 55(2) also become applicable and in the context the expression "the previous owner" need not be taken to mean merely the immediately preceding owner but may be construed as including "the previous owners". In such a case where an assessee acquires an asset by inheritance from a person who in turn had also acquired the same by inheritance before the 1-1-1954, therefore, the assessee has the option of substituting the fair market value of the asset as at 1-1-1954, in place of the original cost, if it is to his advantage. "[Circular No.31 (LXXVII-5) D of 1962, dated 21-9-1962.]”
7.3 The Ld. counsel for the assessee also relied on to the decision of Hon’ble Jurisdictional High Court in the case of CIT v. Shanthi Chandran [2000] 241 ITR 371,373 (Mad.) and CIT v. S. Krishnamurthy [1985] 152 ITR 669, 673-74 (Mad.)
7.4 On the other hand, the Ld. CIT-D.R and Sr. D.R relied on the assessment order and that of the DRP.
7.5 We noted that the Hon’ble Madras High Court in the case of CIT v. Shanthi Chandran, supra, has considered the identical issue and has held that the family settlement in this context is analogous to a partition as envisaged in Section 49(1)(i) of the Act. It was held as even in the case of family settlement, it is the cost of the previous & 782/Chny/2022 :- 11 -: owner that is to be taken into account as cost of acquisition of shares received consequent upon family settlement and not the amount mentioned in the family settlement deed. We noted that further Hon’ble Madras High Court in the case of CIT v. S. Krishnamurthy, supra, has held interpreting the provision of Section 49(1)(iii)(a) of the Act that speaks of succession, inheritance or devolution. In view of the above position, we are of the view that it is the cost of acquisition of the assessee will be of cost of acquisition by his father on 28.02.1980 at Rs. 28,215/-. But, by virtue of second Proviso to Section 48 of the Act and determination of holding period I.e., inclusion will be according to clause(b) of Explanation 1 to Section 2(42A) of the Act, the indexed cost of acquisition is to be taken as the year beginning as on 01.04.2001 as the first year in which the asset was held by the assessee. The relevant provision of Section 48 of the Act reads as under:
“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 improvement" had respectively been substituted:”
7.6 And the indexed cost of acquisition as explained by Section 48 in Explanation (iii) as as under: & 782/Chny/2022 :- 12 -: (iii) "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as 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, 2001], whichever is later”
7.7 The A.O has to determine the fair market value as on 01.04.2001 and thereafter, he has to allow indexation benefit to the assessee in term of Section 48, second Proviso and Explanation (iii) of the Act.
We direct the A.O to adopt the cost of acquisition as fair market value in the present case of the assessee as on 01.04.2001 as the assessee has adopted this fair market value at Rs. 1,360/- per Sq. ft. and for this, the assessee has taken the basis. The indexation benefit from 01.04.2001 is available to the assessee in view of Section 2(42A) more particularly Explanation 1(b), which reads as under:
“b) in case of a capital asset which become the property of the assessee in the circumstances mentioned in sub-section 1 of section 49 there shall be included the period for which the asset was held by the previous owner referred to in the said section.”
7.8 In view of the above, we direct the A.O to adopt the guideline value on as 01.04.2001 as the cost of acquisition and thereby, given index benefit accordingly. We direct the A.O accordingly.
Coming to the second issue, we direct the A.O to allow the indexation benefit to the cost of improvement as on the date of 01.04.2001 in term of the decision given above by taking the cost of construction/cost of improvement at Rs. 10,00,000/- and taking fair & 782/Chny/2022 :- 13 -: market value as on 01.04.2001 of the same and allow index accordingly. We direct the A.O accordingly.
The 4th issue in this appeal of the assessee is as regard to denial 9. of claim of tax exemption u/s. 54 of the Act in regard to assessee invested a sum of Rs. 88.20 Lakhs in the purchase of house property.
The assessee submitted agreement dated 23.10.2018 entered with one Shri Suraj Dutta and Mrs. Sanjan Suraj Morajkar. The assessee also submitted proper proof of payment made to the builder M/s. Sun Estates. The assessee also submitted a copy of completion certificate as per the project completion and handing over on 01.04.2022. The objection of A.O was that the property was not registered within the stipulated period of three years as mandated by provisions of Section 54 of the Act. The DRP also rejected the claim of the assessee by observing in para 6.2 to 6.4 as under:
“6.2 Having considered the submissions, this panel has examined the tax exemptions claimed under section 54 by assessee. Having examined the facts, this panel found that assessee submitted copy of agreement dated 23.10.2018 alongwith project completion certificate. As per the project completion certificate this property was handed over 01.04.2022 which is beyond stipulated time of 3 years as mandated in the Act. Since the property is not registered within stipulated time, the transfer is not complete within the meaning of transfer of property act and ineligible to claim deduction under section 54. 6.3 During the course of DRP proceedings, assessee stated that delay in getting completion certificate and handing over of the flat (as at 01.4.2022) is attributable to the covid 19 related lockdown and restrictions. Thus, it is clear that assessee admitted that there & 782/Chny/2022 :- 14 -: is delay in getting completion certificate and handing over of the flat within stipulated time. 6.4 In view of the above discussion, this panel is of the considered view that Assessing Officer has rightly disallowed the tax exemptions claimed under section 54 of the Act. Accordingly, the ground of objection of the assessee is therefore rejected.”
9.1 We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, the assessee sold the property vide agreement entered with one Shri Suraj Dutta and Mrs. Sanjan Suraj Morajkar dated 23.10.2018. We noted that as per project completion certificate, this property was handed over as on 01.04.2022 which is admittedly beyond three years from the date of sale, but assessee’s contention was that this delay in getting completion certificate and handed over of possession of plot is attributable due to Covid-19 related lockdown and restrictions. The Ld. counsel for the assessee filed a copy of Hon’ble Supreme Court vide order in SMW(C)
No.3 of 2020 dated 23.03.2020 extended the limitation for all action at the hand of any authorities or individuals and subsequently in M.A.
No.665 of 2021 had restored the order dated 23.03.2020, in continuation of order dated 23.09.2021. The relevant portions of the order dated 10.01.2022 are extracted herewith for your perusal.
I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasijudicial proceedings.
& 782/Chny/2022 :- 15 -:
II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.
9.2 The assessee contended that further the Hon’ble Supreme Court has extended the limitation order up to 30.05.2022 and the delay in filing of any appeal or anything or action would be done up to 30.05.2022. It means that this delay has to be excluded for the purpose of computation of any limitation.
9.3 In view of the above, and the fact that the assessee has made payments to the builder in 2018 & 2019 only and the receipts are enclosed at Page Nos.200-204 of assessee’s paper book, we are of the view that the assessee has complied with the provisions of the Act and hence, he is entitled for the claim exemptions u/s. 54 of the Act.
9.4 In term of the above, the appeal is allowed accordingly. The A.O is directed accordingly.
Being similar facts are in taking a consistent view, we also allow this appeal accordingly. & 782/Chny/2022 :- 16 -: 11. In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open Court on 25th April, 2023.