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.
Year of Index to compute capital gain on sale of inherited asset
CIT Vs. Gautam Manubhai Amin (Gujrat High Court), Tax Appeal No. 699 of 2013, Date- 03.09.2013
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/-.
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 and the decision of the Bombay High Court in the case of CIT Vs. Manjula J. Shah (supra).
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.
AN assessee called Narayana Coaching Centre, a proprietary concern was taken over by Narayana Learning Pvt Ltd. The Service Tax authorities issued a Show Cause Notice to Narayana Learning Pvt Ltd for the service rendered by Narayana Coaching Centre. The demand was confirmed on Narayana Coaching Centre and not Narayana Learning Pvt Ltd.
The CESTAT observed, "it appears that no show-cause notice was issued to the present appellant; the show-cause notice is a foundation of the adjudication and without service of show-cause notice defence is denied. That makes adjudication fatal. The appellant not having been brought home to the charge following the ratio laid down by Hon'ble Supreme Court in the judgment in the case of Commissioner of C. Ex., Bangalore vs. Brindavan Beverages (P) Ltd.- 2007-TIOL-118-SC-CX the demand of Rs. 2,23,16,485/- for the year 2010-11 does not sustain. Appellant succeeds on this count."
A demand of Rs. 2.23 crores goes out of the window because they did not know as to who should be put on notice. [2013-TIOL-1984-CESTAT-BANG]
Revenue cannot keep quiet when such huge demands are lost on such technical grounds. They rushed to the High Court with an appeal. The High Court observed, " The learned Tribunal found that no show cause has been issued to the assessee. In that view of the matter, we are unable to interfere with this fact-finding. When the show cause notice was not issued to the assessee, the proceedings in connection therewith is a nullity and the adjudication thereof is also non est." 2014-TIOL-2445-HC-AP-ST
They did not exactly rush to the Supreme Court, but filed an SLP with the usual delay.
The Supreme Court magnanimously condoned the delay - but dismissed the petition on 7th January 2015 [2015-TIOL-03-SC-ST]
Revenue must be aware of the story of a battle being lost because a nail was lost.
| | Year of Cost Inflation Index in case of Assets Received Under Gift |
ASSETS RECEIVED UNDER GIFT - Where A acquired agricultural lands in 1961, and after converting them into non-agricultural use in 1962 gifted the lands to B in 1966, and later B sold them, the cost of acquisition under section 49(1)(ii) would be the amount originally paid by A, and not the value on the date […
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