ACIT 19(2), MUMBAI vs. KEKIN SHETH, MUMBAI

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ITA 5647/MUM/2016Status: DisposedITAT Mumbai25 April 2018AY 2011-124 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that indexation on the cost of acquisition should be applied from the year the previous owner first held the asset, not from when the assessee became the owner. This was based on the jurisdictional High Court's decision.

What were the facts?

The assessee inherited a property purchased by his father in 1967. When the assessee sold the property, he applied indexation from 01.04.1981, but the Assessing Officer restricted it to the year the property was passed on to the assessee (1996). The CIT(A) allowed the assessee's claim.

What were the issues?

Whether indexation for capital gains should be calculated from the year of original purchase by the previous owner or from the year of inheritance by the assessee.

Which sections of the Income-tax Act were involved?

Section 48,Section 2(42A)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLE

For Respondent: Shri Pooja Swaroop
Hearing: 18.04.2018Pronounced: 25.04.2018

O R D E R

PER C.N. PRASAD, JUDICIAL MEMBER

1.

This appeal is filed by the Revenue against the order of the Ld. Commissioner of income Tax (Appeals)–30, Mumbai dated 23.06.2016 for the Assessment Year 2011-12.

2.

The only issue in the appeal of the Revenue is regarding allowing the indexations on cost of acquisition w.e.f. 01.04.1981 instead of the (A.Y: 2011-12) Kekin Sheth Financial Year 1996-97 when the property was passed on to the assessee.

3.

Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought. Since the issue in appeal has been decided by the Hon'ble Jurisdictional High Court we proceed to dispose of the appeal on hearing the Ld.DR.

4.

Briefly stated the facts are that, on 29.11.1996 the property which was purchased in the year 1967 by assessee’s father was passed on to the assessee. The assessee during the current Assessment Year sold the said property and while computing the capital gains the assessee applied indexation from 01.04.1981 which the Assessing Officer denied. According to the Assessing Officer the indexation should be given from 29.11.1996 when the property was passed on to the assessee and not from 01.04.1981. The assessee contended that since he has inherited the property from his father which was purchased in the year 1967 the assessee should get indexation of the property from 1981 in view of the decision of the Hon'ble Bombay High Court in the case of CIT v. Manjula J. Shah [355 ITR 474]. However, the Assessing Officer observing that the decision of the Bombay High Court is not accepted by the Department, worked out the indexation from the F.Y. 1996 instead of 1981. On appeal

(A.Y: 2011-12) Kekin Sheth the Ld.CIT(A) allowed the claim of the assessee following the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Manjula J. Shah (supra) against which the Revenue is in appeal before us.

5.

Ld. DR vehemently supported the orders of the Assessing Officer.

6.

On a perusal of the orders of the Authorities below and the decision of the Hon'ble Jurisdictional High Court, we find that the issue in appeal is squarely covered by the decision of the Hon'ble Bombay High Court in the case of CIT v. Manjula J. Shah (supra) which decision was followed by the Ld.CIT(A) and allowed the claim of the assessee observing as under:

“4.1. I have perused the facts of the case material available on record and also the decisions of the Hon'ble ITAT and the decision of Hon'ble Bombay High Court in the case of CIT v. Manjula J. Shah (2011) 16 Taxman.com 42. In the said decision the Jurisdictional High Court held as under: - "Held, dismissing the appeal, (i) that when the legislature by introducing the deeming fiction seeks to tax the gains arising on transfer of a capital asset acquired under a gift or will the capital gain u/s. 48 have to be computed applying the deemed fiction. Therefore, the fiction contained in explanation 1(i)(b) to section 2(42A) has to be applied in determining the indexed cost of acquisition under section 48. (ii) that by applying the deeming provision contained in explanation 1(i)(b) to section 2(42A) the assesses was deemed to have held the asset from January 29, 1993 to June 30, 2003 by including the period for which the asset was held by the previous owner and, accordingly, held liable for Long term capital gains tax. While computing the capital gains, the indexed cost of acquisition had to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assesses became the owner of the asset". 4.2. The facts of the above cited case are similar to the present case. In the present case the appellant got possession of the flat in the year 1996 through succession. However, the property was held by the appellant's father since 1967. In the similar circumstances, Hon'ble Bombay High Court held that, while computing the capital gains, the indexation cost of acquisition had to be computed with reference to the year in which the previous owner first held the asset. The property had 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 become the owner of (A.Y: 2011-12) Kekin Sheth the asset: The above decision delivered by the jurisdictional High Court is binding on all lower authorities in the state, till the same is distinguished by the higher judicial forum. As on date, no such contrary view taken by the Apex Court in the cited case, in view of the same, respectfully following the decision, AO is directed to adopt the value as in 1981, to work out the indexation, as the property was held by his father since 1967, prior to appellant becoming the owner of the property in 1996. Accordingly, the ground of appeal is treated as allowed and the appellant succeeds on the grounds of appeal.”

7. In view of the above discussion, we do not find any infirmity in the order passed by the Ld.CIT(A). The grounds raised by the Revenue are rejected.

8.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on the 25th April, 2018.

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