2014 (9) TMI 626 - AT - Income Tax

Tribunal rules indexed cost of gifted property based on previous owner's holding period

DEPUTY COMMISSIONER OF INCOME TAX Versus SHEETAL BEHL

The Tribunal upheld the CIT(A)'s decision, ruling that the indexed cost of acquisition for a property received as a gift should be computed from the date ... Exemption u/s 54 – computation of LTCG - indexation benefit for computing the indexed cost of acquisition – relief has been denied by the AO on the footing that benefit of indexation is available only from the date the property devolved on the assessee by way of gift and not from the date when it was held by the previous owner. - Held that:- referring to the two sections 29A; 2(42A); Explanation 1(b) to section 2(42A) and the expression “indexed cost of acquisition” used in section 48 defined in Explanation (iii) and Explanation (iv) it was submitted that the claim had wrongly been rejected by the AO and infact was fully covered in the assessee’s favour by virtue of the order of the Mumbai Bench of the Tribunal in the case of Manjula J. Shah [2009 (10) TMI 646 - ITAT MUMBAI] - order of the Tribunal in Manjula Shah was confirmed by the Hon’ble High Court [2011 (10) TMI 406 - BOMBAY HIGH COURT] The mere filing of a SLP or a Civil Appeal by a party cannot be a ground for either seeking a reversal of the order or for seeking an adjournment - The Courts and Tribunals are necessarily required to decide the issues arising before them on the basis of law as available on date and not keep the issues in abeyance ad infinitum on the plea that the decision has or may have been appealed against before a Higher Forum – revenue has made no attempt whatsoever to even seek an adjournment to verify the actual position and has merely made the submission casually - in case there is any interim order of a Higher Appellate Forum staying the proceedings, the Tribunal is bound to follow it – Decided against revenue. Issues Involved:1. Deletion of addition made by the Assessing Officer on account of exemption claimed under Section 54 of the Income Tax Act, 1961.2. Determination of the indexed cost of acquisition for computing long-term capital gains on property received by way of gift.Detailed Analysis:Issue 1: Deletion of Addition under Section 54The Revenue's appeal challenged the order of the CIT(A) which deleted an addition of Rs. 69,28,750 made by the Assessing Officer (AO). The AO had questioned the exemption claimed under Section 54 of the Income Tax Act, 1961, related to the computation of long-term capital gains on the sale of a property.Issue 2: Indexed Cost of AcquisitionThe core issue was whether the indexed cost of acquisition for the property, received as a gift, should be computed from the date the previous owner held the property or from the date the assessee received the gift. The AO had taken the view that the indexation should start from the year the assessee received the property (FY 2007-08), resulting in a higher taxable capital gain. The assessee argued that the indexation should start from the date the previous owner first held the property, relying on the decision in DCIT vs. Manjula J. Shah.Facts and Arguments:- The assessee received half share of a property in Vasant Vihar, New Delhi, as a gift from her mother on 27.02.2008.- The property had been held by various family members since 1971, and the assessee claimed indexation from 01.04.1981.- The AO, however, computed the indexed cost of acquisition from FY 2007-08, leading to an addition of Rs. 69,28,750 to the declared income.- The CIT(A) ruled in favor of the assessee, citing the Special Bench decision in Manjula J. Shah, which held that for assets acquired through gift, the indexation period includes the period held by the previous owner.Tribunal's Decision:- The Tribunal upheld the CIT(A)'s decision, emphasizing that the indexed cost of acquisition should consider the period the previous owner held the property.- It referenced the Delhi High Court judgment in Arun Shungloo Trust vs. CIT, which supported the assessee's position.- The Tribunal dismissed the Revenue's appeal, noting that the AO had accepted the factual matrix regarding the property's devolution.- The Tribunal criticized the Revenue for suggesting that the issue be restored to the AO without any substantial basis, terming it as potential harassment of the assessee.Legal Precedents:- The Tribunal cited the decisions of the Jurisdictional High Court and the Bombay High Court, which confirmed that the indexed cost of acquisition should be computed from the date the previous owner first held the asset.- The Tribunal dismissed the Revenue's argument about the potential filing of a Special Leave Petition (SLP) before the Supreme Court, stating that mere filing of an SLP cannot be a ground for reversing the impugned order.Conclusion:The Tribunal concluded that the indexed cost of acquisition for the property received by way of gift should be calculated from the date the previous owner first held the property. The appeal by the Revenue was dismissed, and the CIT(A)'s order was upheld. The Tribunal emphasized the need for fair representation and preparation by the Revenue, regardless of the amounts involved.