2018 (10) TMI 794

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.... The appeal was disposed-off by the bench on 05/11/2015, however, the same has been recalled vide MA No. 213/Mum/2017 order dated 02/02/2018 for the reasons stated therein. Accordingly, the appeal has come up for fresh hearing before this bench. 2.1 Facts in brief are that the assessee being resident individual has been assessed u/s 143(3) on 19/12/2011 at Rs. 49.26 Lacs after certain adjustments as against returned income of Rs. 13.30 Lacs e-filed by the assessee on 31/03/2010. The only subject matter of dispute is nature of certain capital gains earned by the assessee during impugned AY upon sale of immoveable property situated at Flat No.41, Kahan Nagar Building, Kahan Nagar CHS Limited, NC Kelkar Road, Dadar, Mumbai - 28 admeasuring 433 Square Feets. 2.2 The facts on record reveal that the assessee had sold an immoveable property for Rs. 36.56 Lacs vide agreement dated 29/07/2008. The said property was acquired by the assessee through family arrangement vide agreement dated 10/08/2006. The assessee, claiming the same to be Long Term in nature, claimed exemption u/s 54EC for Rs. 37 Lacs against eligible investment made in NHAI Bonds. However, the Ld. AO opined that since the....

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....on of the appellant is that the property had devolved on the appellant through inheritance/gift and hence the period for which the property was held by the previous owner should be considered. 2.4 I have considered the submissions of the learned AR of the appellant but I am not in agreement with the same. In this case Mrs. Kantaben K. Shah, grandmother had died by intestate (without will) and hence by the law succession property firstly devolved on the sons and daughters of Mrs. Kantaben K. Shah. It is by a family arrangement and by an affidavit cum declaration that the property was acquired by the appellant on 08.08.2006. Further, section 49(1) does not make any mention of family arrangement. In any case the previous owners with reference to the appellant are the sons and daughters of Mrs. Kantaben K. Shah as they had acquired the property when the family arrangement was made. Therefore, in my considered view the appellant cannot take shelter of explanation 1(b) of section 2(42A) of the I.T. Act, 1961. The appellant became the owner of the property on 8.8.2006 which was sold by him on 29.7.2008 which is less than 36 months and hence capital gain arising there from is not LTCG. I....

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....well as benefit of Section 54EC was available to the assessee. The facts on record reveal that the assessee has invested an amount of Rs. 37 Lacs in the eligible bonds as against sale consideration of Rs. 36.56 Lacs and therefore, the value of investment itself nullifies the entire sale consideration reflected by the assessee against the sale of property. 6. While arriving at the above conclusion we draw strength from the decision of jurisdictional Hon'ble Bombay High Court rendered in the case of CIT Vs. Manjula J.Shah [355 ITR 474] wherein the Hon'ble Court, on similar facts and circumstances, have made the following observations:- "16) It is the contention of the revenue that since the indexed cost of acquisition as per clause (iii) of the Explanation to Section 48 of the Act has to be determined with reference to the Cost Inflation Index for the first year in which the asset was held by the assessee and in the present case, as the assessee held the asset with effect from 1/2/2003, the first year of holding the asset would be FY 2002-03 and accordingly, the cost inflation index for 2002-03 would be applicable in determining the indexed cost of acquisition. 17) We see no mer....

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....b) to Section 2(42A) of the Act cannot be applied in determining the indexed cost of acquisition under Section 48 of the Act. 19) It is true that the words of a statute are to be understood in their natural and ordinary sense unless the object of the statute suggests to the contrary. Thus, in construing the words 'asset was held by the assessee' in clause (iii) of Explanation to Section 48 of the Act, one has to see the object with which the said words are used in the statute. If one reads Explanation 1(i)(b) to Section 2(42A) together with Section 48 and 49 of the Act, it becomes absolutely clear that the object of the statute is not merely to tax the capital gains arising on transfer of a capital asset acquired by an assessee by incurring the cost of acquisition, but also to tax the gains arising on transfer of a capital asset inter alia acquired by an assessee under a gift or will as provided under Section 49 of the Act where the assessee is deemed to have incurred the cost of acquisition. Therefore, if the object of the legislature is to tax the gains arising on transfer of a capital acquired under a gift or will by including the period for which the said asset was he....