SASIDHAR MALLADI,CHENNAI vs. ITO, CHENNAI

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ITA 3390/CHNY/2016Status: DisposedITAT Chennai10 February 2017AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal observed that a settlement deed should be viewed similarly to a gift deed for considering the holding period of the previous owner. However, the lower authorities had not verified the settlement deed to ascertain if it was a pure settlement or a transfer for consideration and who the actual owner was.

What were the facts?

The assessee sold a property for ₹2,56,50,000 on 25.10.2012, which he received through a settlement deed dated 12.10.2012. The property was originally purchased by his mother in FY 2006-2007. The dispute arose over which financial year's cost inflation index should be applied for computing capital gains.

What were the issues?

The key issue was whether the cost inflation index should be computed with reference to the year the property was purchased by the assessee's mother or the year the assessee received it through a settlement deed. The Tribunal also needed to verify the nature of the settlement deed.

Which sections of the Income-tax Act were involved?

Section 48

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Income Tax Appellate Tribunal, ‘D’ BENCH : CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]

For Respondent: Shri. Durai Pandian, IRS, JCIT

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER This appeal filed by the assessee is directed against an order dated 26.09.2016 of ld. Commissioner of Income Tax (Appeals)- 16, Chennai, for the impugned assessment year.

2.

Assessee has taken altogether six grounds of which ground Nos.1 & 6 are general in nature needing no specific adjudication.

ITA No. 3390/Mds/2016 :- 2 -:

1.

Ld. Counsel for the assessee at the outset submitted that he was not pressing grounds other than ground No.5 which is regarding application of cost inflation index for computing capital gains.

Facts apropos are that assessee has sold a property for a 3. admitted sale consideration of �2,56,50,000/- on 25.10.2012. Sale was affected by executing a general power of attorney in favour of one Shri.K. Ravichandran and one Shri. K.K.Mani. While computing capital gains arising out of above sale, assessee had applied base inflation index as applicable for the financial year 2006-2007.

Contention of the assessee was that the said property was purchased by his mother during financial year 2006-2007 and he had received a share therein through a settlement deed dated 12.10.2012. Relying on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Manjula J. Shah 355 ITR 474, assessee argued before ld. Assessing Officer that cost inflation index had to be computed with reference to the year of purchase of property by his mother. However, ld. Assessing Officer did not accept this contention. According to him, assessee became owner of the property only through the settlement deed dated 12.10.2012, and by virtue of Explanation (iii) to Sec. 48 of the Income Tax Act, 1961 cost inflation index to be applied was that for financial year 2012-2013. Capital gains of the assessee was recomputed accordingly by the ld. Assessing Officer.

ITA No. 3390/Mds/2016 :- 3 -:

4.

Assessee’s appeal on this issue did not meet with any success. Ld. Commissioner of Income Tax (Appeals) held that by virtue of Explanation (iii) to Sec. 48 of the Act, ld. Assessing Officer was justified in considering financial year 2012-2013 as the base year for applying cost inflation index.

5.

Now before us, ld. Authorised Representative assailing the orders of the lower authorities submitted that base year was to be construed with reference to the year of purchase of the property by assessee’s mother. Reliance was once again placed on the judgment of Hon’ble Bombay High Court in the case of Manjula J. Shah (supra).

6.

Per contra, ld. Departmental Representative strongly supported the orders of the authorities below.

We have considered the rival contentions and the orders of 7. the authorities below. Assessee had specifically relied on the judgment of Hon’ble Bombay High Court in the case of Manjula J. Shah (supra) wherein it was held that holding period of the previous owner also should be considered for computing the indexed cost where the property came to the name of the assessee through a gift deed. In our opinion a settlement deed cannot be viewed differently.

Nevertheless, we find that none of the lower authorities had verified the settlement deed dated 12.10.2012, by virtue of which assessee

ITA No. 3390/Mds/2016 :- 4 -: claimed ownership of the property which was sold. A careful verification of such settlement deed is necessary since the sale was affected within a fortnight of the date of the settlement. It is necessary to verify whether settlement deed was a pure settlement or a transfer for consideration. It is also necessary to verify who was the actual owner of the property which was sold. We therefore, set aside the orders of the lower authorities and remit the issue regarding computation of capital gains and application of cost inflation index back to the file of the ld. Assessing Officer for consideration afresh in accordance with law.

8.

In the result, the appeal of the assessee is partly allowed for statistical purpose. Order pronounced on Friday, the 10th day of February, 2017, at Chennai.

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