IT : In computing long term capital gains on sale of inherited asset, indexed cost of acquisition is to be computed with reference to year first held by previous owner
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[2013] 38 taxmann.com 42 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax -I
v.
Gautam Manubhai Amin*
M.R. SHAH AND MS. SONIA GOKANI, JJ.
TAX APPEAL NO. 699 OF 2013†
SEPTEMBER 3, 2013
Section 48, read with section 49, of the Income-tax Act, 1961 - Capital gains - Computation of [Inherited property] - Assessment year 2006-07 - Whether for purpose of computing long-term capital gains in hands of an assessee who has acquired an asset under inheritance, indexed cost of acquisition of such capital asset is to be computed with reference to year in which previous owner first held said asset - Held, yes [Para 7] [In favour of assessee]
FACTS
| ■ | The assessee inherited property along with his brother on the demise of their father on 23-12-1998. The property was sold for a consideration of Rs. 3.35 crores. The assessee calculated his share of capital gain at Rs. 21,24,438 taking the benefit of "Cost Inflation Index" as per the base year 1981-82. | |
| ■ | The Assessing Officer passed an order of assessment considering "Cost Inflation Index" as per the Financial Year 1998-99 on the ground that property had been acquired by the assessee on 23-12-1998. On appeal, Commissioner (Appeals) held that the "Cost Inflation Index" was to be taken with reference to 1-4-1981. | |
| ■ | On appeal, the Tribunal confirmed the order passed by the Commissioner (Appeals). | |
| ■ | On Revenue's Appeal: |
HELD
| ■ | The issue involved is squarely covered by the decision of this Court in the case of B.N. Vyas v. CIT [1986] 159 ITR 141/25 Taxman 133 and the decision of the Bombay High Court in the case of CIT v. Manjula J. Shah [2012] 204 Taxman 691/16 taxmann.com 42 (Bom.) wherein it has been held that for the purpose of computation of long term capital gain, 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. [Para 7] | |
| ■ | In view of the above, no error has been committed by the Tribunal in dismissing the appeal preferred by the revenue and confirming the order passed by Commissioner (Appeals) allowing the indexed cost of acquisition from the base year, i.e., from 1-4-1981 and thereby deleting the addition of Rs. 1,00,76,878 on account of long term capital gain. [Para 8] |
CASE REVIEW
B.N. Vyas v. CIT [1986] 159 ITR 141/25 Taxman 133 (Guj) and CIT v. Manjula J. Shah [2012] 204 Taxman 691/16 taxmann.com 42 (Bom.) (para 6) followed.
CASES REFERRED TO
Dy. CIT v. Manjula J. Shah [2010] 35 SOT 105 (Mum.) (SB) (para 3), CIT v. Manjula J. Shah [2012] 204 Taxman 691/16 taxmann.com 42 (Mum.) (para 3) and B.N. Vyas v. CIT [1986] 159 ITR 141/25 Taxman 133 (Guj.) (para 6).
K.M. Parikh for the Appellant.
ORDER
M.R. Shah, J. - Present Tax Appeal is preferred by the Revenue challenging the impugned judgment and order passed by the learned ITAT dated 7.12.2012 passed in I.T.A. No.2194/Ahd/2012 with respect to Assessment Year 2006-07 with the following proposed substantial question of law:—
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal substantially erred in law in not distinguishing the mandate given in Explanation (iii) to section 48 and section 49(1)(iii) and not appreciating that while provisions of section 49(i)(iii) is only for determining the cost of acquisition, and in the case of the assessee provisions of both the sections would apply?"
2. The assessee in his individual capacity inherited the property i.e. Bungalow situated near Grid Sub-Station, village Gotri, Vadodara along with his brother on the demise of their father late Shri Manubhai G. Amin on 23.12.1998. The property was sold for a consideration of Rs.3.35 crores. Thus, the assessee calculated his share of capital gain at Rs.21,24,438/- taking the benefit of "Cost Inflation Index" as per the base year 1981-82. The Assessing Officer was of the opinion that "Cost Inflation Index" should be as per the Financial Year 1998-99, as the property was acquired by the assessee on 23.12.1998. Consequently, the capital gain was recomputed by the Assessing Officer and the assessee's 50% share was assessed at Rs.1,25,76,878/-.
3. Feeling aggrieved by and dissatisfied with the order of assessment passed by the Assessing Officer considering "Cost Inflation Index" as per the Financial Year 1998-99 on the ground that property has been acquired by the assessee on 23.12.1998, the assessee preferred appeal before the CIT(Appeals). The CIT(Appeals) relying upon the decision of the learned appellate Tribunal in the case of Dy.CIT v. Manjula J. Shah [2010] 35 SOT 105(Mum.) (SB), which was later on affirmed by the Bombay High Court in the case CIT v. Manjula J. Shah [2012] 204 Taxman 691/16 taxmann.com 42 and held that the "Cost Inflation Index" was to be given as on 1.4.1981.
4. Feeling aggrieved by and dissatisfied with the order passed by the learned CIT(Appeals), the Revenue preferred appeal before learned ITAT and by impugned judgment and order the learned ITAT had dismissed the said appeal confirming the order passed by CIT(Appeals).
5. Feeling aggrieved by and dissatisfied with the impugned judgment and order passed by the learned ITAT, Revenue is before this Court with aforesaid proposed question of law.
6. Heard Shri K.M. Parikh, learned advocate appearing on behalf of the Revenue and considering the material on record and the impugned order passed by the learned ITAT as well as the order passed by the CIT(Appeals), the question which is posed for consideration is whether for considering the long term capital gain "Cost Inflation Index" is required to be considered at the date on which the property was inherited in the name of the assessee or as per the previous cost of acquisition at which previous owner had acquired the capital asset. The issue involved is squarely covered by the decision of this Court in the case of B.N. Vyas v. CIT [1986] 159 ITR 141/25 Taxman 133 (Guj.) and the decision of the Bombay High Court in the case of Manjula J. Shah (supra).
7. In the aforesaid decisions, it is held that for the purpose of computation of long term capital gain, 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. In the aforesaid decisions, it was a case of gift. However, same analogy would be applied with respect to the property of inheritance.
8. In view of the above, no error has been committed by the learned ITAT in dismissing the appeal preferred by the Revenue and confirming the order passed by CIT(Appeals) allowing the indexed cost of acquisition from the base year i.e., from 1.4.1981 and thereby deleting the addition of Rs. 1,00,76,878/- on account of long term capital gain. No substantial question of law arise and hence present appeal deserves to be dismissed and is accordingly dismissed.
9. In the facts and circumstances of the case, there shall no order as to costs.
Regards
Prarthana Jalan
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