DCIT, LUDHIANA vs. SH. TAJINDER SINGH, LUDHIANA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘B’, CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.59/Chd/2017 (Assessment Year : 2009-10) The D.C.I.T., Vs. Sh.Tajinder Singh, Circle-6, 1021-Basant City, Part-II, Ludhiana. Ludhiana. PAN: ADDPS7027D (Appellant) (Respondent)

Appellant by : Shri Manjit Singh, Sr.DR Respondent by : Shri Sudhir Sehgal, Adv. Date of hearing : 21.03.2018 Date of Pronouncement : 15.06.2018

ORDER PER ANNAPURNA GUPTA, A.M. : This appeal has been preferred by the Revenue against

the order of Ld. Commissioner of Income Tax (Appeals)-3,

Ludhiana dated 26.10.2016 relating to assessment year

2009-10.

143(3) of the Income Tax Act, 1961 (in short ‘the Act’) in

this case was completed on 30.1.2010. Subsequently, the

case was reassessed u/s 147 of the Act assessing the

capital gain at Rs.1,68,01,607/- (wrongly mentioned as

Rs.1,69,65,484/- in the CIT(A) order para 4.1) as against

Nil declared by the assessee. The Assessing Officer noted

that the assessee had sold residential property in two equal

parts for Rs.1.79 crores each, one in the preceding

assessment year and other part in the impugned

assessment year. The Assessing Officer also noted that the

assessment for the preceding year i.e. assessment year

2008-09 had been completed u/s 147 of the Act assessing

the capital gain on half of the properties sold at

Rs.1,69,65,484/-. The Assessing Officer noted that the

assessee had acquired the property from his mother by way

of a Registered Will dated 31.8.2003 after her death. He

further noted that for the purpose of calculating the capital

gain earned on the sale of the property the assessee had

taken the cost of the property at the rate prevailing as on

said date i.e. 31.8.2003 at Rs.25,000/- per sq.yd. which

was in contravention of the provisions of section 49(1)(ii) of

the Act, as per which in the case of inherited/gifted

property the cost to the previous owner had to be taken as

the cost to the assessee The Assessing Officer, therefore,

referred the matter to the DVO to verify the cost of land and

construction, who assessed the value of the property at

Rs.17,47,000/-. The Assessing Officer further noted that

the assessee had claimed indexation benefit from the year

1981. He, therefore, asked the assessee why the indexation

benefit be not given from 2003 instead of 1981. Not

satisfied with the reply of the assessee the Assessing Officer

computed the capital gain for the year at Rs.1,68,01,607/-

(wrongly mentioned as Rs.1,69,65,484/- in the CIT(A) order

para 4.1),after taking the cost to the previous owner as

determined by the DVO as the cost of the asset and

allowing indexation on the same from the year 2003 when it

was received by the assessee under a will from his mother.

the issue was linked to assessment year 2008-09 which had

been decided by the CIT(Appeals). The assessee pointed out

that the Ld.CIT(Appeals) in A.Y 2008-09,had directed

adoption of cost to the original owner as the cost of the

asset to the assessee in terms of the provisions of section

49(1)(ii) of the Act and further directed that benefit of

indexation of the cost of the asset be allowed from the year

1981 and not 2003 when the asset devolved on the

assessee, following various decisions of the High Court and

Tribunal in this regard. It was also pointed out that the

CIT(A) had allowed deduction u/s 54 partly in A.Y 2008-09

directing the balance to be allowed in the succeeding year

i.e the impugned year in the case before us. The assessee,

thereafter filed a revised computation of its capital gain ,in

accordance with the order passed by the CIT(A) in the

preceding year and after claiming benefit of balance

deduction u/s 54 ,as directed by the CIT(A) in A.Y 2008-09

praying that the capital gain be assessed at Rs.47,87,587/-

as computed. The Ld.CIT(Appeals) after considering the

assessee’s submissions and on going through the order of

the Ld.CIT(Appeals) for the preceding year found merit in

the contentions of the assessee and therefore assessed the

capital gain at Rs.47,87,587/- as submitted by the assessee

in its revised calculation .

appeal before us raising the following grounds:

“i. Whether on the facts and in the circumstances of the case Ld. Commissioner of Income Tax (Appeals) was justified in taking the F.Y. 1981-82 as the year in which asset was first held by the previous owner instead of F.Y. 2003- 04 applied by the Assessing Officer by not appreciating the fact that the assessee became the owner of the asset in the year 2003 after the death of his mother and as per her registered will. ii. Whether on the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) was justified in assessing the net Capital Gains at Rs.47,87,587/- against the net Capital gains calculated by the AO at Rs.1,26,54,873/- which includes deduction of Rs.99,14,638/- u/s 54 of the Act as against Rs.60,34,5 16/- allowed by the AO. iii. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off.” 5. Taking up ground No.i, it was pointed out that the

grievance of the Revenue in the said ground is against the

grant of benefit of indexation of cost of the asset to the

assessee from financial year 1981-82 in which the asset

was first held by the previous owner as against financial

year 2003-04 when the assessee became the owner of the

asset after the death of his mother.

that the Hon'ble Jurisdictional High Court in the case of

DCIT Vs. Sushil Kumar, 23 Taxman 788 had decided this

issue in favour of the assessee and also the Hon'ble Bombay

High Court in the case of CIT Vs. Manjula J. Shah, 355 ITR

Hon’ble Jurisdictional High Court in the case of Sushil

Kumar (supra) categorically holding that in cases where

assets are acquired by devolution on partition of assets by

HUF or otherwise the cost of the asset for the purpose of

computing capital gains in the hands of the person to whom

it devolves is the cost to the previous owner and the benefit

of indexation of the same is also to be given from the year

in which it was held by the previous owner, as under:

“11. On conjoint reading of sections 47, 48 and 49, what emerges is that where there is any distribution of capital asset on total or partial partition of a Hindu undivided family, there is no transfer and therefore, no capital gains tax under section 45 of the Act is exigible thereon. Further, the cost of acquisition in such cases would be the cost for which the previous owner of the property had acquired which shall be increased by any cost of improvement in the capital asset incurred or borne by the previous owner or the assessee as the case may be. The cost of acquisition of the asset by the Hindu undivided family augmented by the costs of improvement made by it to the asset will be taken as the cost of its acquisition in the hands of the assessee. Once the cost of acquisition of the previous owner is taken as the cost of acquisition of the assessee, necessarily, the fiction is to be carried to its logical conclusion. In such a situation, by deeming fiction, the assessee shall for all intents and purposes be deemed to be the owner of the capital asset on the date when the previous owner had the title to it for the purposes of computation of capital gains under section 45 read with sections 47, 48 and 49 of the Act. For calculating the quantum of capital gains, in clause (ii) of Section 48 of the Act, for the words “cost of acquisition” and “cost of any improvement”, the words “Indexed cost of acquisition” and “Indexed cost of improvement” respectively had been substituted. Thus, the indexed cost of acquisition of such capital asset shall be computed by taking the Cost Inflation Index of the year in which the previous owner first held the asset.” 7. Ld Counsel for the assessee therefore contended that

there was no error in the order of the CIT(A) allowing

benefit of indexation from the year of ownership to the

previous owner.

of the Assessing Officer

in the ground raised by the Revenue. The issue relating to

the year from which benefit of indexation is to be granted to

the assessee in cases where assets are acquired by way of

gift or will from previous owners has been decided by the

Hon'ble Jurisdictional High Court in the case of Sushil

Kumar (supra) as pointed out by the Ld. counsel for

assessee clearly holding that the indexation is to be granted

from the year in which the asset was held by the previous

owner. No contrary decision was brought to our notice by

the Ld. DR. In view of the same, we uphold the order of the

Ld.CIT(Appeals) granting benefit of indexation to the cost of

the asset from the year in which it was held by the previous

holder. Ground of appeal No.1 raised by the Revenue is,

therefore, dismissed.

vis a vis the grant of deduction of Rs.99,14,638/- u/s 54 of

the Act granted to the assessee by the CIT(Appeals) as

against Rs.60,34,516/- allowed by the Assessing Officer.

for assessee pointed out that the said deduction had been

granted as per the directions of the CIT(Appeals) in the

preceding year wherein the balance of the surplus invested

by the assessee for the purpose of claim of deduction u/s

54 of the Act was allowed to be carried forward for claiming

deduction in the impugned year.

showing therein the capital gain as assessed by the AO for

assessment year 2008-09 allowing the balance benefit u/s

54 to be given in assessment year 2009-10 i.e. the

impugned year at Rs.60,34,516/- as under:

AY 2008-09 CAPITAL GAIN AS ASSESSED BY DEPARTMENT SALES CONSIDERATION 17900000 LESS COST 292.5*1500*551/463 522156 LESS CONSTRUCTION 346500*551/463 412360 CAPITAL GAIN 16965484 LESS 54EC 5000000 LESS 54 11965484 BALANCE BENEFIT OF SEC 54 TO BE GIVEN IN AY 2009-10 6034516

aforesaid calculation, the AO in the impugned year had also

allowed benefit of deduction u/s 54 to the extent of

Rs.60,34,516/-. Ld Counsel thereafter pointed out that

the said calculation of capital gain had been changed on

account of the order of the Ld.CIT(Appeals) for assessment

year 2008-09 by virtue of which the benefit u/s 54 to be

carried forward in assessment year 2009-10 amounted to

Rs.99,14,638/- as under:

Effect of CIT(A) order SALES CONSIDERATION 17900000 LESS COST 292.5*2400*551/100 3668020 LESS CONSTRUCTION 171800*551/100 946618 CAPITAL GAIN 13085362 LESS 54EC 5000000 LESS 54 8085362 BALANCE BENEFIT OF SEC 54 TO BE GIVEN IN AY 2009-10 9914638 14. The Ld. counsel for assessee stated that since the

CIT(Appeals) for assessment year 2008-09 had assessed the

capital gain at Rs.1,30,85,362/- as against

Rs.1,69,65,484/- calculated by the Assessing Officer the

surplus of benefit u/s 54 of the Act earlier allowable to it at

Rs.60,34,516/- as per the Assessing Officer’s calculation

had increased to Rs.99,14,638/-. Thus the Ld. counsel for

assessee pointed out that since the CIT(Appeals) had

modified the order of the Assessing Officer the assessee was

now entitled to benefit u/s 54 at Rs.99,14,638/- and not

Rs.60,34,516/-.

submissions of the assessee. In view of the above since the

assessed surplus investment of the assessee in the

preceding year amounted to Rs.99,14,638/- which was

eligible for set off against the capital gain of the impugned

year, we hold that the assessee is entitled to claim benefit

of the same. Grounds of appeal raised by the Revenue

restricting the claim to Rs.60,34,516/- are, therefore,

rejected and dismissed.

Order pronounced in the Open Court.

Sd/- Sd/-

(SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 15th June, 2018 *Rati*

Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR

Assistant Registrar, ITAT, Chandigarh