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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI R.C.SHARMA (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against order dated 30/06/2014 passed by the Ld. CIT(Appeals)-10, Mumbai, for the Asst. year 2011-12.
Brief facts of the case are that the assessee filed its return of income declaring the total income of Rs.3,42,316/-. The return was processed u/s 143(1) and after scrutiny the AO determined the total income at Rs. 2,23,42,320/- The assessment order was challenged by the assessee by filing first appeal before the Ld. CIT(A), on the ground that the AO has erred in computing the long term capital gains without considering the indexed cost of acquisition with reference to the year in which the previous owner had held the asset and further erred in not allowing deduction u/s 54 on the purchase of new residential house. The Ld. CIT(A) allowed the appeal of the assessee following the ratio laid down by the Hon’ble jurisdictional High Court in CIT vs. ManjulaJ Shah, of 2010 dated 13.02.2012 and Hon’ble Delhi High Court in Arun Shungloo Trust vs. CIT, ITA No 116 of 2011 and issued direction to the AO to work out the cost of indexation from 1.4.1981, while determining the total income on transfer of the flat in question and to allow the benefit under section 54 of the Income Tax Act,1961 (in short the Act).
Against the said order, the revenue is in appeal on following effective grounds of appeal:-
“1..On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of Hon’ble Bombay High Court in the case of Manjula J. Shah, thereby considering the date of acquisition of property by the previous owner for the purpose of applying the cost of indexation, while computing LTCG without appreciating the fact that the Department has filed SLP against eh said case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the exemption u/s 54 of the I.T.Act to the Assessee without appreciating the fact that the assessee did not claim the same in the return of income filed for the instant AY i.e. 2011-12.”
Before us the Ld. Authorised Representative (AR) submitted that the assessee has acquired residential flat at 2-B Garden Rose, Andheri (W) Mumbai by way of gift from his mother in the year 2010. The said flat had been inherited by the mother of the assessee after the death of her husband in 2000. Her husband had purchased the said property in the year 1971.The appellant/assessee sold the said flat on 29/01/2011 for a consideration of Rs.
2,30,00,000/- and while computing the Long Term Capital Gain, he took the cost of indexation form the year 1981, being the cost to the previous owner i.e. to his mother in the year 1971. The appellant purchased a new residential house for Rs. 3,36,40,000/- on 02/12/2010 thus the assessee is entitled for deduction u/s 54 of the Act. The Ld. AR further submitted that the assessee’s case is squarely covered by the decision of the Hon’ble Bombay High Court in the case of Manjula J. Shah. On the other hand the Ld. Departmental Representative (DR) submitted that the department has filed SLP against the judgment of Hon’ble Bombay High Court in Manjula S Shah relied upon by the Ld. CIT(A). Secondly, the Ld. CIT(A) has allowed the exemption under section 54 of the Act, without appreciating the fact that the assessee has not claimed the same in its return. Therefore, the impugned order is liable to be set aside.
We have heard the rival submissions of the parties and also perused the material placed before us in support of their respective contentions. The Ld. CIT(A) has allowed the appeal of the assessee holding as under:-
“6. I have considered the A.Os order as well as the appellant AR’s submissions. Having considered both, I find that the issue involved in this appeal, which has been contested by the appellant through both the grounds of appeal is covered in favour of the appellant by the decision of jurisdictional Bombay High Court in the case of CIT vs. Manjula J. Shah reported in of 2010 dated 13/02/2012 and also by the decision of the Hon’ble Delhi High Court in ITA No. 116/20100 in the case of Arun Shugloo Trust vs. CIT. Accordingly, keeping reliance on both the decisions, the appellant’s appeal is allowed. Accordingly, the A.O is also directed to work out the cost of indexation from the year 01.04.1981, while determining the total income on transfer of the flat as detailed above. Further to that, the A.O is also directed to allow the appellant the benefit available to the appellant on account of subsequent respective investment made in residential house u/s.54 of the Act as claimed under the provisions of law of the I.T.Act. Accordingly, the appellant’s appeal is allowed.”
The Ld. CIT (A) has passed the impugned order as per the principal of law laid down by the Hon’ble Jurisdictional High Court of in Manjula J. Shah (supra) followed by the Hon’ble Delhi High Court in the case of Arun Shugloo Trust (supra). In Manjula S Shah case (supra), the question before the Hon’ble Bombay High Court was that while computing the capital gains arising of transfer of capital acquired under a gift, whether the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset or the year in which the assessee became the owner of the asset? The Hon’ble Court decided the issue in question in favour of the assessee and against the revenue holding as under:-
“In the result, we hold that the ITAT was justified in holding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has 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.”
So far as the second ground of appeal is concerned, the same is consequential in nature. Since, it has been established that the assessee has earned long term capital gain from transfer of a long term capital asset and purchased a residential house within a period of one year before the date of transfer of long term capital asset, the assessee is entitled for exemption under section 54 of the Act. We find no merit in the contention of the Ld. DR. In our considered view, there is no scope to interfere with the order of the Ld. CIT(A). We therefore, uphold the order passed by the Ld. CIT (A) and dismiss both the grounds of appeal raised by the revenue.
In the result appeal filed by the revenue for the A.Y. 2011-12 is dismissed.
Order pronounced in the open court 2nd June, 2016.