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Income Tax Appellate Tribunal, “H”
Before: HON’BLE SH. SANDEEP GOSAIN, JM & HON’BLE SH. A. L. SAINI, AM
Shri Karl Jimmy ITO (IT) 2(1)(1), R. no. 1724, 17th floor, Air Daruwalla, बिधम/ C/o- S. N. Karani & Co. India Building, Nariman CA, -C-10A, Dhanraj Vs. Point, Mumbai-400 021 Mahal, CSM Marg, Apollo Bunder, Mumbai-400001 स्थायीलेखासं./जीआइआरसं./ PAN No. AEEPD5217J (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant : Shri Manoj Kumar Singh, DR by प्रत्यथीकीओरसे/Respondentby : Shri Firoze B. Andhyarijine, AR सुनवाईकीतारीख/ : 05.11.2018 Date of Hearing घोषणाकीतारीख / : 01.02.2019 Date of Pronouncement आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeals)-56,
Shri Karl Jimmy Daruwalla, Mumbai, dated 23.05.17 for AY 2013-14 on the grounds mentioned herein below:-
1. "On the facts and in the circumstances of the case and in law, the Ld. CIT('A) erred in deleting the addition made by AO by relying on the judgement of Bombay High Court in the case of Manjula Shah Vs DCIT reported in 355 JTR 474 (Bom) (2013) when the SLP filed in the said case is pending before SC'."
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in taking year of acquisition as 1981 for the purpose of computation of LTCG even though the share in property was bequeathed in the year 1999 on the death of his mother.
The Appellant prays that the order of the Ld. CITA) on the above grounds be set aside and that of the Assessing Officer be restored.
The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.
As per the facts of the present case, the assessee is an Individual. During the year under consideration, the assessee has earned Income from Capital Gains and Income from Other
Shri Karl Jimmy Daruwalla, Sources. In the present case the assessee's mother had acquired the Asset earlier to 1981 and on her death, the share in the property was bequeathed to the assessee in the year 1999. The Assessee during the year under consideration sold Immovable Property for INR 3,84,37,500/- on 01.10.2012 (INR 2,59,37,500/- being assessees share as per Deed of Assignment of Lease and INR 1,25,00,000/- being assessee share as per Deed of Transfer of Tenancy).
The AO in the order of assessment had held that the benefit of indexed cost of acquisition is available to the assessee from the year only in which the share of the asset was acquired/inherited in the year 1999 relevant to FY 1999-2000. Accordingly, the contention of the assessee for claiming indexation from the year 1981 was rejected by the AO.
3. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties allowed the appeal of the assessee.
Shri Karl Jimmy Daruwalla, 4. Aggrieved by the order of Ld. CIT(A), revenue has filed appeal before us on the grounds mentioned herein above.
Ground No. 1 & 2 5. These ground raised by the revenue are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in taking year of acquisition as 1981 for the purpose of computation of LTCG, therefore we thought it fit to dispose of the same by this common order.
Ld. DR appearing on behalf of the department relied upon the orders passed by the AO and submitted that Ld. CIT(A) erred in deleting the addition made by AO by relying on the judgment of Bombay High Court in the case of Manjula Shah Vs DCIT reported in 355 ITR 474 (Bom) (2013) when the SLP filed in the said case is pending before the Hon’ble Supreme Court. It was further argued that the Ld.CIT(A) erred in taking year of acquisition as 1981 for the purpose of computation of LTCG even though the share in property was bequeathed in the year 1999 on the death of his mother.
Shri Karl Jimmy Daruwalla, 7. On the other hand, Ld. AR appearing on behalf of the assessee relied upon the orders passed by Ld. CIT(A). Apart from this, Ld. AR also relied upon the order passed by the Coordinate Bench of ITAT in the case of ITO Vrs Smt. Nita Narendra Mulani [2018] 96 taxmann.com 204 (Mumbai - Trib.), wherein it was held that For purpose of computing long- term capital gains in hands of an assessee who has acquired an asset under a gift, indexed cost of acquisition of such capital asset has to be computed with reference to year in which previous owner first held asset and also relied upon the order by Hon’ble Gujarat High Court in the case of Pr. CIT Vrs. Prakash Krishnalal Bhagwati [2018] 91 taxmann.com 291 (Gujarat), wherein it was held that Section 48, read with section 49, of the Income-tax Act, 1961 - Capital gain -Computation of (Cost inflation index) - In 1945, assessee's father acquired a property - On 8-3-2004, assessee inherited a capital asset/property on death of his father - Whether since capital asset had become property of assessee under a will, cost of acquisition was deemed to be cost for which previous owner, namely assessee's father, acquired it - Held, yes - Whether since property was acquired by Shri Karl Jimmy Daruwalla, father of assessee in year 1945, indexed cost of acquisition was required to be computed by considering cost of acquisition for year beginning on 1-4-1981 - Held, yes [Para 11]
We have heard the counsels for both the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities.
Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 5 to 7 of its order. The operative portion contained in para no. 7 of its order and the same is reproduced below:-
Decision I have carefully considered the facts of the case, submissions of the appellant as well as the contentions of the AO.
The Appellant during the year under consideration sold Immovable Property for INR 3,84,37,500/- on Shri Karl Jimmy Daruwalla, 0110.2012 (INR 2,59,37,500/- being appellants share as per Deed of Assignment of Lease and INR 1,25,00,000/- being appellants share as per Deed of Transfer of Tenancy). The relevant documents as required were submitted by the appellant during the assessment proceedings.
On perusal of the documents, it is seen that the Assignment of Lease is made between the Trustees and Beneficiaries of the Trust, and they are jointly known as Assignors of the one part and Noshir Darabshaw Talati and Rashna Noshir Talati of Mumbai called the Assignees of the Other Part. The Immovable Property being land and Building known as Villa Modern, Plot No. 96-D, Worli Estate, Scheme No. 52, Situated on Maulana Abdul Gaffar Road, at Worli Sea Face was sold for a total consideration of INR 51,87,50,000/-.
Further, it is an agreed fact as per the deed submitted that the land was owned since 1957 and was held by the Trust for the sole benefit of the beneficiaries of the Trust. The above said Immovable Property was transferred for a consideration of INR 51,87,50,000/-. Mrs. Roshan Jimmy Daruwalla, one of the beneficiaries died, leaving behind her husband and three sons, who are entitled to the undivided I/5th part
Shri Karl Jimmy Daruwalla, of said Trust Fund amounting to INR 2,59,37,500/- each.
During the course of the assessment proceedings, the AR of the assessee vide order sheet noting dated 22.02.2016 was asked to show cause as to why the claim of indexed cost of acquisition taken as on 01.04.1981 at Rs. 64,39,585/- should not be rejected, since the asset was acquired by the assessee in the year 1999 by way of transfer from the appellant's mother [late Mrs. Roshan Jimmy Daruwalla] and accordingly, the LTCG be worked out. In response, the AR vide letter dated 29.02.2016 submitted an explanation. The same has been reproduced & discussed in detail above in the AO's Contention.
In this regard, the Appellant also contended that Section 49(1) of the Act, sets out the cost of acquisition with reference to certain mode of acquisition which inter alia includes Will, Succession, inheritance or devolution of the property. The cost of acquisition of the asset, when the provisions of section 49(1) of the Act are applicable, is deemed to be the cost at which the previous owner of the asset acquired it as increased by the cost of any improvement incurred or borne by the previous owner or the appellant, as the case may be. Thus, in the present case, where the Shri Karl Jimmy Daruwalla, capital asset became the property of the appellant in the circumstance specified in Section 49(1) of the Act and capital asset became the property of the previous owner before April 1,1981 in term of section 55(2)(b)(ii) of the Act, the appellant has the option to take actual cost or FMV of the asset, as on April 1, 1981 as the cost of acquisition.
The Appellant during the appellate proceedings, has also relied upon the decision of the Jurisdictional court i.e. Bombay High Court in the case of Manjula J. Shah v Commissioner of Income Tax-12 [2011] 16 taxmann.com 42 [Bombay HC] wherein it is a settled matter that while computing capital gains arising on transfer of a capital asset acquired by assessee under a gift, indexed cost of acquisition has to be computed with reference to year in which previous owner first held the asset and not year in which assessee became owner of the asset.
Further, the appellant has also relied upon various other judgments to support their claim, which are:
• Asstt. DIT v. Rajeev Ajmani [IT Appeal No. 2057 of 2011] (Delhi). • Kamal Mishra v. ITO [2008] 19 SOT 251 (Delhi). • Smt. Mina Deogun v. ITO [2008] 19 SOT 183 (KoL).
Shri Karl Jimmy Daruwalla, • Mrs. Pushpa Sofat v. ITO [2002] 81ITD1 (Chd.)(SMC).
• Dy. CIT v. Smt. Meera Khera [2004] 2 SOT 902 (Mum.).
• Asstt. CIT v. Kotak Mahindra Bank Ltd. [IT Appeal No. 2672 of 2006] (Mum.).
• Arun Shungloo Trust v. CIT [2012] 18 taxmann.com 261 However, the AO has rejected the claim of the appellant by contending that the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Manjula J. Shah has not been accepted by the Department and SLP has been filed against the decision of Hon'ble Bombay High Court, which is pending before the Hon'ble Supreme Court.
Respectfully following the decisions of the Jurisdictional High Court in the case of Manjula J. Shah v Commissioner of Income Tax-12 [20111 1.6 taxmann.com 42 [Bombay HC1], the benefit of indexation on computation of capital gains arising on transfer of a capital asset acquired under a gift / inheritance should be with reference to year in which previous owner first held the asset and not the year in Shri Karl Jimmy Daruwalla, which assessee became owner of asset. Therefore,- the contentions of : are found to be correct.
In view of the above, the grounds 1 to 4 are allowed.
After having gone through the facts of the present case, judgment cited by the parties and hearing the parties at length, we find that Ld. CIT(A) while appreciating the facts of the present case had rightly relied upon the decision of the Jurisdictional court i.e. Bombay High Court in the case of Manjula J. Shah v Commissioner of Income Tax-12 [2011] 16 taxmann.com 42 [Bombay HC] wherein it was held that while computing capital gains arising on transfer of a capital asset acquired by assessee under a gift, indexed cost of acquisition has to be computed with reference to year in which previous owner first held the asset and not year in which assessee became owner of the asset. Therefore, Ld. CIT(A) had rightly accepted the contention of the assessee.
Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no Shri Karl Jimmy Daruwalla, reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT(A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the revenue stands dismissed.
Ground No. 3 & 4 11. These grounds raised by the revenue are general in nature, thus requires no specific adjudication.
In the net result, the appeal filed by the revenue stands dismissed with no order as to cost.