TaxTMI 
TaxTMI 
2020 (8) TMI 725
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....nd his wife Dr. Sulochana Gunasheela and two daughters Dr. N. Madhavi Gunasheela & Dr. Devika Gunasheela (the assessee in this appeal) as legal heirs entitled to succeed to 1/3rd share each of the property. On 30.09.2009, Dr. Sulochana Gunasheela, the mother of the assessee, through a registered release deed, released her /3rd share of right and title in the property in favour of her two daughters Dr. Madhavi N. Gunasheela and Dr. Devika Gunasheela (the assessee in this appeal). Thus, the assessee and Dr. Madhavi N. Gunasheela became owners of 1/2 share each of the property. On 29.09.2011 the assessee and her sister Dr. Madhavi N. Gunasheela sold the property for a sale consideration of Rs. 3,02,40,000/-. The assessee received a sum of Rs. 1,51,20,000/- as her share in the sale consideration for sale of ½ share of right title and interest over the property. 3. For assessment year 2012-13, the assessee filed a Return of income, declaring Long term Capital Gain on sale of her share of the property. The computation of long term capital gain given by the assessee was as follows: "Computation of Capital Gains on transfer of commercial property at Basavanagudi jointly hel....
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....ost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted. Explanation (iii) to section 48 defines "indexed cost of acquisition" to mean an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later; Long term capital are recorded at cost price in books. Despite increasing inflation, they exist at the cost price and cannot be revalued. When these assets are sold, the profit amount remains high due to the higher sale price as compared to purchase price. This also leads to a higher income tax. The cost inflation index is applied to the long-term capital assets, due to which purchase cost increases, resulting in lesser profits and lesser taxes to benefit taxpayers. The intention of the legislature is to tax the real gain on transfer of the capital asset not the profit due to inflation. In order to achieve this objective, the "Indexation" is introduced in cap....
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....he date of transfer of the original asset, is chargeable under the head "Income from house property". 8. For Exemption u/s.54 & 54F, the assessee is given 2 years to purchase the house property or 3 years for construction of the house property, but the capital gain on the transfer of original house property is taxable in the previous year in which transfer took place. Hence, the assessee will have to take a decision for the purchase/construction of the house property till the date of furnishing of the return otherwise the capital gain would become taxable. The amount of capital gain, which is not utilized by the assessee for the purchase or construction of the new house before the date of furnishing of the return of income, shall be deposited by him under the Capital Gains Account Scheme, before the due date of furnishing the return. In the present case the Assessee deposited the unutilized capital gain in capital gains Account Scheme before the due date for funishing the return of income. 9. The A.O. pointed out to the assessee that exemption u/s 54 of the Act would be available only if the property that was transferred was a residential house and since as per the schedule o....
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....in computing capital gain for want of proof. Finally, the A.O. computed the Long term Capital Gain as follows: "The above analysis of facts and law necessitates the re-computation of taxable LTCG as under: 1. Sale consideration: Rs. 1,51,20,000/- 2. Cost of acquisition: Rs. 1,80,000/- 3. Indexed cost of Acquisition: Rs. 2,70,775/- 4. Commission paid: Rs. 0/- 5. Long term capital gain: Rs. 1,48,49,225/-" 13. Aggrieved by the order of the A.O., assessee preferred appeal before the CIT(A). The CIT(A) formulated the following issues as arising for consideration before her: "2.4 The issues which arise from the grounds raised by the appellant therefore are:- (a) Whether the appellant is entitled for deduction u/s 54? (b) Whether the appellant is entitled to the alternative claim for deduction u/s 54F? (c) Whether cost of acquisition as on 01.04.1981 is to be taken at Rs. 150/- per sq.ft. as worked out by the appellant or Rs. 100/- per sq.ft. as worked by the Assessing Officer. (d) Whether the appellant is eligible to indexation w.e.f. 01.04.1981 being the cost of acquisition in the hands....
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....ould be accepted without any evidence thereof. Under such facts, I hold that the Assessing Officer has been reasonable and fair in adopting the value at Rs. 100/- per sq.ft. The same is upheld. 3. However, as regards indexation, I agree with the appellant that in the light of judicial decisions cited by the appellant, particularly in the case of Karnataka High Court in the case of Smt. Kaveri Thimmaiah and others reported in 369 ITR 81, the appellant is eligible to indexed cost of acquisition from date of holding by previous owner. Therefore, indexation is allowed w.e.f. 1.4.1981 itself in respect of 2/3rd share of the property inherited from father in 2004-05. However, in respect of 1/3rd share inherited/gifted from mother in 2009-10, indexation is to be worked out from the time the same was held by the mother, i.e. on the death of father of the appellant in 2004-05 when the previous owner acquired it. The Assessing Officer is directed to re-compute Long Term Capital Gains accordingly." 16. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal. 17. We have heard the rival submissions. As far as the issue with regard to the exemption u/s....
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.... 1,00,000 3,79,125 7,37,255 Less: Deduction u/s 24(a) 77,439 30,000 1,13,738 2,11,177 Income from House Property 1,80,691 70,000 1,13,738 5,16,078 3. The case was reopened for the following reason: "During the assessment proceedings of A.Y. 2012-13 the A.R. has admitted that the Rent received from properties of Dobhi & Nagadevanahalli is nothing but lease rent and not the rent received against the house properties under Chapter VI-C of the Income-tax Act, 1961. Based on the Ars admission, it is inferred that the assessee during the AY 2011-12 has wrongly declared the land rent of Rs. 7,37,255/- which is received from Dobhi & Nagadevanahalli as income from House Property. By doing so, the assessee has claimed 30% deduction u/s 24(a) amounting to Rs. 2,11,177/-." 19. Ultimately, in the order of assessment, the assessee accepted that the property at Dhobi Ghat of Thalgatpura and Nagadevanahalli property were not buildings that were let out and the rent received was only in respect of land and therefore, the assessee was not entitled to deduction of 30% of the rent received u/s 24(a) of the Act. The assessment was according....
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....nd factsw of the present case, we are of the view that the claim of the assessee for adopting FMV as on 01.04.1981 at Rs. 150/- per sq.ft. is reasonable and the same is directed to be accepted. 22. The third issue that needs to be adjudicated is with regard to allowing benefit of indexation to the assessee. We have already seen that the property was acquired by M. Gunasheela on 10.09.1979 and that on his death on 30.11.2004, wife of Gunasheela released her 1/3rd share in favour of her two daughters and thereby, the assessee and his sister got half share each of the property. This deed of release was dated 30.09.2009. The assessee claimed indexation benefit from 01.04.1981 itself. The CIT(A) allowed the benefit of indexation from 2004-05 for 1/3rd share, which the assessee inherited from Gunasheela on his death on 30.11.2004. As far as indexation for half share in the 1/3rd share which the Assessee got by way of release from her mother is concerned, the AO allowed indexation only from 2009-10 because the release deed was dated 30.09.2009. In our view, the assessee should be allowed the benefit of indexation right from 01.04.1981. In this regard, the provisions of section 55(2)....