INCOME TAX OFFICER (IT)-2(1)(1), MUMBAI vs. SHRI PSALM SOLI DASTUR, MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2014-15 contest the order of Ld. Commissioner of Income- Tax (Appeals)-56, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-56/ITO(IT)-2(1)(1)/2016-17/162-D dated 23/08/2017 on following grounds of appeal: - Shri Psalm Soli Dastur Assessment Year :2014-15 “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 ITR 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.ClT(A) erred in directing the AO that indexed cost of acquisition should be taken from the year in which previous owner acquired the asset i.e. 01/04/1981 and not from the year in which assessee became owner of the asset for the purpose of computation of LTCG."

2.1 Facts on record reveal that the assessee being non-resident individual was assessed for impugned AY u/s 143(3) on 15/12/2016 at Rs.153.09 Lacs after certain adjustments as against returned income of Rs.0.10 Lacs e-filed by the assessee on 30/07/2014. 2.2 During assessment proceedings, it transpired that the assessee sold a piece of land i.e. Plot No.3, admeasuring 514.42 Square Meters situated at village Bandivali, Near caves Road, Jogeshwari (E), Mumbai for sale consideration of Rs.160 Lacs. The cost of acquisition of the same was taken as Rs.20.57 Lacs, being fair market value of the land as on 01/04/1981 based on valuation report of government registered valuer. The indexed cost by applying applicable cost inflation index was worked out to be Rs.193.21 Lacs and accordingly, Long Term Capital Loss was reflected as Rs.33.21 Lacs. The only point of dispute under appeal is applicable cost of acquisition of the said plot of land. 2.3 Upon perusal of ownership documents, it transpired that the said plot of land devolved upon assessee vide deed of settlement dated 11/05/1987 executed by the settlor of the land Dr.Adi Eruch Dastur in favor of certain trustees for the benefit of the assessee since assessee was minor at that point of time. The trustees consented to act as such till Shri Psalm Soli Dastur Assessment Year :2014-15 the assessee attained the age of 18 years. The market value of the plot on the date of settlement as cited in the deed of settlement, in terms of valuation report dated 30/10/1986, was stated to be Rs.1.12 Lacs. The same led the Ld. AO to form an opinion that the cost of acquisition was to be taken as Rs.1.12 Lacs as against Rs.20.57 Lacs taken by the assessee and the applicable cost of index would be the index for AY 1987-1988. Although the assessee defended the same on the strength of decision of Hon’ble Bombay High Court rendered in CIT Vs. Manjula J.Shah [16 Taxmann.com 42], however, not convinced, Ld. AO adopted the cost of acquisition as Rs.1.12 Lacs and re-worked the gains at Rs.152.98 Lacs. The Ld. AO, inter-alia, observed that the revenue was under appeal before Hon’ble Supreme Court against the cited decision of Hon’ble Bombay High Court.

Shri Psalm Soli Dastur Assessment Year :2014-15 5. We have carefully heard the rival submissions and perused relevant material on record. The undisputed position that emerges is that the assessee has acquired the said land through gift / inheritance vide deed of settlement dated 11/05/1987. The said land was acquired by the owner / donor / settlor before 01/04/1981. Therefore, for the purpose of computing assessee’s holding period, the holding period of the owner / donor / settlor was also to be counted while working out the capital gains. Further, the benefit of indexation would also be available to the assessee as available to the owner / donor / settlor. The said legal position is squarely in line with the binding judicial precedent in the shape of cited decision of Hon’ble Bombay High Court which has already attained finality by way of dismissal of revenue’s SLP. The first appellate authority has provided relief to the assessee by following the same and therefore, no infirmity could be found in the same.