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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-57, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-57 dated 4.8.2016. The Assessment was framed by the Income Tax Officer (Intl. Taxn.)-3(2)(1), Mumbai (in short ITO) for the assessment year 2012-13 under section 253 of the Income Tax Act, 1961(hereinafter ‘the Act’).
The revenue has raised following grounds of appeal:
1. Whether the Ld. CIT(A) has erred on facts and in law by holding that the assessee is eligible for computing the Indexed Cost of Acquisition by taking the denominator as cost inflation index for F. Y. 1981-82 when Explanation (iii) to Section 48 of the Act clearly provides that the denominator should be cost inflation index for the first year in which the asset was held by the assessee, which is F.Y. 2005-06 in the case of the assessee.
2. Whether the Ld. CIT(A) has erred on facts and in law by holding that for computing the Indexed Cost of Acquisition, the first year in which the asset was held by the assessee would be the year beginning on 01.04.1981, that is, the latter of the year when it was held by the previous owner or 01.04.1981, whereas the assessee held the property for the first time only in FY 2005-06 when he inherited the property. 3. Whether the Ld. CIT (A) erred on facts and in law in allowing the computation of Indexed Cost of Acquisition by taking the fair market value on 01.04.1981 without considering that the legal fiction of 'the previous owner' of the property created in section 49(1) has been created only for purpose of determining the date of acquisition and cost of acquisition of property which is inherited by an assessee when read together with section 55(2)(b)(ii) of the Act and not for the purpose of computing the indexed cost of acquisition which is dealt with in Explanation (iii) to section 48 of the Act. 4. Whether the Ld. CIT(A) has erred on facts and in law by holding that the judgment of Hon'ble Bombay High Court in the case of Manjula J. Shah [355 ITR 474 (Bom)] was applicable in the present case without appreciating that this decision was based on a purposive interpretation of the words 'asset was held by the assessee' as mentioned in para 19 of the Order while Hon'ble Bombay High Court have now held in the case of M/s Vodafone India Services Pvt. Ltd. Union of India & Ors. (W.P. No.871 of 2014) that literal interpretation has to be resorted to in interpretation of tax statutes. 5. Whether the Ld. CIT(A) has erred on facts and in law in holding that the assesse is eligible for exemption under Section 54EC of the Act without taking into due consideration that the assessee has failed to invest Rs. 50 lakhs in long-term specified assets within six months from the date of transfer of original asset which is a sine qua non for applying Section 54EC of the I. T. Act. 6. Whether the Ld. CIT(A) has erred on facts and in law in relying on the provisions of Section 54(2) of the IT. Act without appreciating that the assessee has claimed exemption under Section 54EC of the IT. Act which relates to investments made in long-term specified assets and not under Section 54 of the Act as discussed by the Ld. CIT(A) in the appellate order. 7. Whether the Ld CIT(A) has erred on facts and in law in not appreciating that the IT Act contains a separate section, that is, Section 54EC, which provides for exemption to charge of capital gains in case of investments made in long-term specified assets within a period of six months from the date of transfer of the original asset.
8. Whether the Ld. CIT(A) has erred on facts and in law in holding that the assessee is eligible for exemption from charge of capitals gains on account of investments made in long-term specified assets before the due date for filing of return as provided in Section 54(2) whereas the assessee has not claimed exemption under Section 54 or 54F of the Act but under section 54EC of the IT. Act which required investment in long-term specified asset within a period of six months from the date of transfer of original asset (01.12.2011).
9. The Appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored.
10. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. We have seen that though the revenue has raised 10 grounds of appeal, however, as per our considered view, there is two substantial grounds of appeal involved in all grounds of appeal. Ground Nos.1 to 4 relates to whether the assessee is eligible for computing indexed cost from financial year 1981-82 or from the year when it was inherited by assessee.
4. Ground Nos.5 to 6 relates to whether the assessee is eligible for exemption under section 54EC of the Act?.
At the outset of hearing, the Ld. A.R. of the assessee submits that both set of grounds of appeal are covered in favour of assessee and against the revenue. The Ld. A.R. of the assessee further submits that ground No.I (consisting of Ground Nos.1 to 4) are covered in favour of assessee by the decision of Bombay High Court in the case of Manjula H. Shah 355 ITR 474 (Bom). The Ld. A.R. of the assessee further submits that he has already placed on record the copy of decision of the jurisdictional High Court. On going through the facts of the case and the ratio of decision in Manjula H. Shah (supra), the Ld. D.R. conceded that Ground No.1 of the appeal is covered in favour of the assessee. It was submitted that The Ld. CIT(A) granted the relief on the basis of decision of jurisdictional High Court.
We have considered the submission of the parties and gone through the order of authorities below. We have noted that in the statement of facts, the assessee has contended that the premise was acquired by mother of assessee in February, 1979. Consequentially, the fair market value as on 1.4.1981 was considered at the cost of acquisition. As the premises had been acquired by assessee on inheritance, the period of holding of asset as well as the cost in the hands of his late mother were considered on a duly index basis for computing the capital gain. However, the assessing officer took his view that assessee is entitled indexed cost only from the year when the property was received on inheritance by assessee and market value indexation from assessment year 2006-07.
7. The Ld. CIT(A) observed that assessee inherited the property only on the demise of his mother in the financial year 2005-06 related to assessment year 2006-07. The mother of assessee purchased the property in 1979, therefore, the case of assessee is clearly covered by section 49(1)(ii) of the Act and the cost of acquisition shall be deemed to be the cost for which the previous owner of property acquired it and adopted the indexation cost beginning from 1 st April, 1981 and accepted the contention of the assessee. The Hon’ble jurisdictional High Court in case of Manjula H. Shah (supra) while considering the similar question of law held as under:
While computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition hs to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset.
6. Considering the decision of Hon’ble jurisdictional High Court, we do not find any illegality or infirmity, rather the issue is covered in favour of the assessee. Hence, Ground No.I (consisting Ground Nos.1 to 4) of the appeal raised by revenue is dismissed.
Ground No II (No..5 to 8) is regarding eligibility of exemption under section 54EC of the Act. Ld. A.R. of the assessee submits that this ground of appeal is also covered in favour of the assessee and against the revenue. The Ld. A.R. further submits that the deposit in the capital gain account is made before the date of filing return of income under section 139 of the Act. For the year under consideration i.e. assessment year 2012-13, the CBDT in its order F.No.225/163/2012/ITA-II dated 31.7.2012, extended the due date for filing of return up to 31.8.2005. The assessee filed his return of income on 27.07.2012. Though the deposited the amount of ₹50 lakhs on 30.7.2012. The assessee issued a cheque for depositing the said amount of ₹50 lakhs in capital gain account on 30.7.2012 and the same was debited on 1.8.2012. Since, the due date for filing return was extended up to 31.8.2012. Therefore, the deposited amount in the said account was made before due date of filing of return under section 159(1) of the Act. In support of his submission, the Ld. A.R. of the assessee filed the copy of CBDT circular No.225/163/2012/ITA.II dated 31.7.2012 under section 139 of the Act.
On the other hand, the Ld. D.R. for the revenue has not disputed the factual position with regard to extension of due date of filing the return of income up to 31.08.2012 and the deposit made by assessee in capital gain account. We appreciate the assistance extended by ld. DR for the revenue in appreciating the facts of this case.
We have considered the rival submissions of the parties and gone through the orders of the authorities below. We have noted that the due date for filing return of income for assessment year 2012-13 was extended up to 31.8.2010 by CBDT in its circular dated 21.2.2012. The assessee deposited the capital gain in the National Highway Authority capital gain account on 30.7.2012. Therefore, assessee was entitled for exemption under section 54EC of the Act. In the result, the ground No.II (consisting ground Nos.5 to 8) raised by revenue is also dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 25-06-2018.