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Facts
The appeal was filed with a delay of four days due to the assessee's age and health conditions. The core issue concerns the computation of long-term capital gains on the sale of land, where the Assessing Officer (AO) used the sale consideration as per section 50C but treated the cost of acquisition as nil. The assessee claimed the land was acquired through gift from her sons, who in turn received it from their grandfather.
Held
The Tribunal condoned the delay in filing the appeal. It was held that as per section 49 of the Act, the cost of acquisition for gifted property shall be the cost for which the previous owner acquired it, not nil. The matter was remanded to the AO to compute the capital gains by ascertaining the cost of acquisition from the original purchaser and applying indexation.
Key Issues
Whether the cost of acquisition for gifted property should be considered nil or the original purchase cost with indexation, and consequently, how long-term capital gains should be computed.
Sections Cited
143(3), 147, 50C, 49
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI JAGADISH
आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Order No.ITBA/NFAC/S/250/2024- 25/1064653302 (1) dated 06.05.2024. The assessment was framed by the Income Tax Officer, Ward-2(1), Salem for the assessment year 2011-12 u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.12.2018.
2. At the outset, it is noticed that this appeal is barred by limitation by four days. The facts are that the order of CIT(A) dated 06.05.2024 was received by assessee on 06.05.2024 as per Form No.36. The appeal should have been filed on or before 05.07.2024 but appeal was actually filed on 09.07.2024, thereby there is a delay of four days. The assessee has stated the following reason in its affidavit:- “b) Due to age factor and health conditions of the assessee was unable to contact her Chartered Accountant for making ready the appeal papers and for signing the same.”
The ld.Senior DR has objected for condonation of delay but by going through the smallness of delay and reason stated, we feel that there is sufficient cause for condonation of delay and hence, we condone the delay and admit the appeal.
The only issue in this appeal of assessee is as regards to computation of long term capital gain out of sale of 9716 sq.ft. of land at SF No.258/6, Rasi Nagar, Jagir Ammapalayam, Salem.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee during the financial year 2010-11 relevant to this assessment year 2011-12 sold land at Salem of 9716 sq.ft., out of total land owned by assessee along with her son Shri Rajeshkumar of 33,686 sq.ft., and assessee’s sale Rs.23,80,615/-. As per sale deed registered vide document No.4559/2010 dated 17.06.2010, the assessee sold her share of land of 7,371 sq.ft., out of total land up to 26,550 sq.ft., mentioned in this document for consideration of Rs.47,85,800/-. According to AO, the sale consideration recorded in the sale deed is lesser than the value determined by the Stamp Valuation Authority for the purpose of section 50C of the Act. Therefore, the AO computed the total consideration of the entire land at Rs.82,53,900/- and therefore, adopted the rate per sq.ft., at Rs.245.02, thereby the AO computed the assessee’s share at Rs.23,80,615/- (9716 sq.ft., x 245.02). Aggrieved assessee preferred appeal before CIT(A), who directed the AO to recompute the long term capital gain considering the value of cost of acquisition as on 28.10.2002 at Rs.6,00,000/- and after indexing the same, recompute the capital gain. Further aggrieved, assessee came in appeal before the Tribunal.
We noted that the AO has adopted the assessee’s share of sale consideration in term of section 50C of the Act at Rs.23,80,615/- but cost of acquisition is taken by the AO at nil. Now, assessee before us only stated the facts that this land originally was purchased by one Shri M.R. Vellappan vide sale deed dated 08.03.1974 registered vide document No.1107/1974. Shri M.R. Vellappan gifted this land to her Shri S. Siddeshkumar and Shri S.Rajeshkumar (two sons of assessee) vide gift settlement deed dated 28.10.2002. This way Shri S.Rajeshkumar got this land from his paternal grandfather Shri M.R. Vellappan on 28.10.2002. Shri S.Rajeshkumar and Shri S. Siddeshkumar, two sons of the assessee, gifted the above said land by gift settlement deed dated 03.01.2005 to the assessee. It means the genesis of this land starts from land purchased by Shri M.R. Vellappan vide document No.1107/1974 dated 08.03.1974. Now, the ld.AR for the assessee before us only requested the cost of acquisition should be taken as on 08.03.1974, the property purchased by Shri M.R. Vellappan and value as on 01.04.1981 or 01.04.2001 as the case may be, should be ascertained and thereafter indexation should be allowed accordingly. For this, the ld.AR for the assessee relied on the provision of section 49 of the Act. We, after hearing both the sides and going through the provisions of section 49 of the Act are of the view that where the capital asset become the property of the assessee under a gift, the cost of acquisition of the capital asset shall be deemed to be the cost for which the previous owners of the property acquired it and not ‘nil’ value is to be taken while computing capital gain. We agree with the proposition that in term of section 49 of the Act, cost of acquisition for which the previous owners of the property acquired it. In the present case, the property was acquired by one Shri M.R. Vellappan by sale deed dated 08.03.1974 registered vide document No.1107/1974 and AO has to compute the capital gain accordingly. We, after considering the facts in entirety, remand this matter for computing cost of acquisition as on the date of sale of this land by assessee i.e., as on 17.06.2010 in term of section 49 of the Act. The AO will verify the documents first and gather the facts and thereafter, in case the above stated position is correct, he will re-compute the cost of acquisition for the purpose of computing long term capital gain as per law. This issue of assessee’s appeal is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court at the time of hearing on 14th October, 2024 at Chennai.