INCOME TAX OFFICER (IT) 3(2)(1), MUMBAI vs. MR.NAUSHAD D MADON, MUMBAI

The only issue in this appeal of Revenue is against the order of CIT(A) holding that the asset held by the previous owner and the period pertaining to that is to be considered for the purpose of computation of long term capital gain and indexed cost of acquisition is to be considered with reference to the year in which the previous owner became owner. For this Revenue has raised the following ground No. 1: -

We have heard rival contentions and gone through the facts and circumstances of the case. The brief facts are that the assessee was having 1/3rd share of property which inherited by assessee on 19.10.1989 on demise of Late. Mr. Minocheher Phirozeshah Lentin which share with Mrs. Meher D. madon, mother of the assessee, the assessee & Firdaus D Madon with 1/3 share for each. On 12.03.2008, the assessee was inherited 50% of the 1/3 share on demise of Mrs. Meher D. Madon, mother of assessee. The assessee declared total consideration for sale of residential premise i.e. 50% of the share of the property at ₹ 19 crores (total consideration of the property was 38 crores). The 50% share 3 pertains to assessee’s sister. The assessee adopted the date of acquisition that being the date when the property was purchased by his father before 01.04.1981. Accordingly, the assessee adopted the value as on 01.04.1981 and indexed the cost of acquisition after adopting the indexation as on 01.04.1981 but the AO adopted the cost of acquisition as on 01.04.1989 of 1/3 share and as on 01.04.2007 for another 1/3 share and accordingly, computed the long term capital gain. The CIT(A) after considering the submissions of the assessee and following the decision of Hon’ble Bombay High Court in the case of CIT vs. Manjula J. Shah [2013] 355 ITR 474 (Bombay) directed the AO to re-compute the long term capital gain by taking date of acquisition as on 01.04.1981. The CIT(A) allowed the claim by observing in Para 3.3 as under: - “3.3 I agree with the submission of the appellant that the date of acquisition of the property should be taken 1981-82 when the first owner purchased it. In terms of section49(1)(2), of the IT Act. The decision of the Bombay High Court in the case of CIT vs. Manjula Shah in Appeal No 3378 of 2010 has put to rest the controversy. The Hon’ble High Court has categorically given ruling that the index cost of acquisition has to be computed in which the previous owner held the asset and not the year in which the appellant become the owner of the asset.

We have heard rival contentions and gone through the facts and circumstances of the case. We noted from the orders of lower authorties that the assessee’s father acquired this property before 01.04.1981. The assessee’s father died on 19.10.1989. On demise of assessee’s father, the property is divided into Mrs. Meher D. madon, mother of the assessee, the assessee & Firdaus D. Madon with 1/3 share for each. The assessee inherited the 50% property of the 1/3 share on demise of Mrs. Meher D. Madon, mother of assessee on 12.03.2008 and sold this property in this relevant assessment year. The assessee declared total consideration for sale of residential premise i.e. 50% of the share of the property at ₹ 19 crores (total consideration of the property was 38 crores). The 50% share pertains to assessee’s sister. The long term capital gain is to be computed in term of the decision of Hon’ble Bombay High Court in the case of Manjula J. Shah (supra) and in term of the provision of section 49(1)(iii)(a) of the Act, the indexation cost is to be adopted as on 01.04.1981 and accordingly, indexation is to be allowed. We find no infirmity in the order of CIT(A). Hence, the appeal of Revenue is dismissed 5. In the result, the appeal of Revenue is dismissed.