Tribunal rules in favor of assessee on tax issues involving inherited property and investment deductions

The Tribunal ruled in favor of the assessee on both issues. It held that the cost of inflation index for inherited property should be calculated from the year of purchase, not just from the date of inheritance. Additionally, the deduction u/s.54EC for investments made in two different financial years was allowed based on a High Court judgment clarifying legislative changes. The Tribunal emphasized the importance of considering legislative changes and judicial precedents in tax matters, providing clarity on the interpretation of relevant provisions of the Income Tax Act.

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Issues:
1. Cost of inflation index for inherited property.
2. Allowability of deduction u/s.54EC for investments made in two different financial years.

Issue 1: Cost of inflation index for inherited property

The appeal was against the order of the Commissioner of Income-tax (Appeals) regarding the cost of inflation index for an inherited property. The assessee contended that the cost of inflation index should be calculated from the year of inheritance, not from the date held by the previous owner. The property was inherited after the demise of the father, and the cost of indexation was disputed. The Assessing Officer treated the year of inheritance as the year of acquisition, leading to a higher assessment. The Commissioner of Income-tax (Appeals) upheld this decision, stating that the assessee became the owner of the property only after the father's death. The Tribunal referred to relevant sections of the Act and previous case law to determine the correct interpretation. It was held that indexation should be allowed based on the period of holding of the asset, irrespective of the individual owner. The Tribunal concluded that the cost of indexation should be applied as of 1.4.1981, the year the property was purchased, and not just from the date of inheritance in 2010. Citing precedents and the Supreme Court's decision, the Tribunal allowed the appeal in favor of the assessee.

Issue 2: Allowability of deduction u/s.54EC for investments made in two different financial years

The second ground of appeal concerned the deduction u/s.54EC for investments made in REC Bonds in two different financial years. The assessee invested Rs. 50 lakhs each in two financial years and claimed the deduction u/s.54EC. The Commissioner of Income-tax (Appeals) denied the claim based on the existing provisions of the Act. However, the Tribunal referred to a judgment of the jurisdictional High Court, which clarified the legislative changes regarding investments in long-term specified assets. The High Court's decision allowed investments made within six months of the sale but in two different financial years to be eligible for the deduction u/s.54EC. Relying on this judgment, the Tribunal reversed the decision of the Commissioner of Income-tax (Appeals) and allowed the claim of the assessee. Consequently, the appeal of the assessee was allowed in this regard.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, determining the correct application of the cost of inflation index for inherited property and allowing the deduction u/s.54EC for investments made in two different financial years. The judgment provided clarity on the interpretation of relevant provisions of the Income Tax Act and highlighted the importance of considering legislative changes and judicial precedents in tax matters.

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