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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-57, Mumbai [in short CIT(A)], Appeal No. CIT(A)-57/Arr.382/2017-18 vide order dated 16.11.2017. The Assessment was framed by the Income Tax Officer, Ward 3(3)(1), 2 Mumbai (in short ‘DCIT/ ITO / AO’) for the A.Y. 2014-15 vide order dated 19.12.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) directing the AO to take the period of holding of the asset by the previous owner for the purpose of computation of long term capital gain and indexation of cost of acquisition has to be computed with reference to the year in which original owner acquired the property. For this Revenue has raised the following ground: - “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in including the period of holding of the assets by the previous owner for the purpose of computation of long term capital gain, whereas the indexed cost of acquisition has to be computed with reference to the year in which the assessee had become the owner of the property after the death of her father.”
3. Briefly stated facts are that the assessee along with her brother sold their ancestral property bearing Flat No 17A, Jaldarshan, Nepean Sea Road, Mumbai-400 036, which was actually owned by their father. The assessee’s father acquired this property on 27.10.1970, which was inherited by assessee and her brother on the demise of their father on 29.03.2009. The assessee sold this property for a total consideration of ₹ 5.51 crores in which assessee’s share was 50%. The assessee offered long term capital gain after claiming the indexation from 01.04.1981 and offered capital gain at ₹ 1,46,59,408/-. The AO noted that this property 3 was purchased by assessee’s father on 27.10.1970 and this property was inherited by the assessee along with her brother on expiry of her father on 29.03.2009. But the AO has denied the claim of assessee and indexation cost of acquisition taken as on 1.04.1981 computed the long term capital gain as if the property is acquired by assessee on 29.03.2009 (on the death of assessee’s father). Accordingly, the AO computed the long term capital gain at ₹ 2,03,35,122/-. Aggrieved assessee preferred the appeal before CIT(A). 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) and directed the AO to re-compute the capital gain by taking the index cost of acquisition as on 01.04.1981 by observing in Para 3.3. as under:-
“Decision I agree with the submission of the appellant that the date of acquisition of the property should be 1981-82 when the first owner purchased it. In terms of section 49(1)(2) of the IT Ad. 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.