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2024 (11) TMI 32
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....ving 'material bearing' to case proceedings is sustainable action? ii. Whether according to the facts and circumstances of the case, under Section 2 (47) (i) (ii), 47(iii), 48, 49 of the Income Tax Act, 1961, the cost of acquisition would 'relate back' to date of 'transfer through will' to the beneficiary (son)? 3. The Appellant-Assessee (Rajiv Mehra) was adopted by Permanand Mehra through adoption deed dated 07.06.1965. Property namely House No. 21, Khasra No. 291 measuring 3 Kanals 4-1/2 Marlas situated at Tungbala Urban, Maqbool Road, Tehsil & District Amritsar was purchased by Permanand Mehra by way of Registered Deed dated 06.06.1963. A Will was executed by Permanand Mehra in favour of the Appellant-Assessee on 26.04.1983. The Appellant-Assessee's father expired on 21.05.1997. In his Will, he gave life interest to his wife Vimal Kumari, but did not gave her right of title, nor a right to sell, mortgage or alienate the house. The Appellant-Assessee's mother, Vimal Kumari Mehra also bequeathed all her property, moveable or immovable in the name of her son, Rajiv Mehra, Appellant-Assessee herein and to his Hindu Undivided Family. 4. The settlement was also arrived ....
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....The Appeal filed by the Revenue was allowed by the ITAT vide its order dated 19.03.2013, but it did not take into consideration the documents filed by the AppellantAssessee as there was no application moved by the Appellant-Assessee under Rule 46A of the Act of 1961 for admitting additional evidence under the provisions of the Income Tax Rules, 1962 (hereinafter referred to as "the Rules of 1962"). 9. The question No. (i) is whether the additional evidence as produced by the Appellant-Assessee before the ITAT should have been considered by it. 10. While in civil proceedings, the provisions contained under Order 41 Rule 27 CPC, enables the appellate Court to take additional evidence under exceptional circumstances, but in cases relating to Income Tax, Rule 46-A of the Rules of 1962 will have to be taken into consideration. 11. Rule 46-A of the Rules of 1962 provides as under:- "46A. Production of additional evidence before the Deputy Commissioner (Appeals) and Commissioner (Appeals). (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or d....
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....cquisition of the residential house has been taken as per the provision of Section 48 and 49 of the Act of 1961 to be 551/463 while the Appellant-Assessee had claimed indexation cost by multiplier of 551/100 while it should be 551/463. 13. It is noticed that no Will was produced before the Assessing Officer and CIT(A), however, at the stage of Appeal before the ITAT, the Appellant-Assessee produced the Will which was considered by it. The ITAT has found that there was no application moved under Section 46-A of the Rules of 1962 and the additional evidence as well as grounds regarding the Will having been executed in favour of the Appellant-Assessee, could not have been considered. 14. We are in agreement with the view taken by the ITAT in this regard. The provisions of the Act of 1961 are to be read as it is. No addition or subtraction can be made in the Rules of 1962 nor any principles of natural justice, where not applicable, can be applied, nor can any other provisions regarding equity be made applicable while construing the provisions of the Rules. It is an admitted position that there was a violation of Rules 46-A of the Rules of 1962 and therefore, such documents could ....
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....shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if- (a) at least twenty-five per cent of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company, and (b) such transfer does not attract tax on capital gains in the country, in which the amalgamating company is incorporated; (viaa) any transfer, in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949 (10 of 1949), of a capital asset by the banking company to the banking institution. Explanation.-For the purposes of this clause,- (i) "banking company" shall have the same meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (ii) "banking institution" shall have the same meaning assigned to it in sub-section (15) of section 45 of the Banking Regulation Act, 1949 (10 of 1949); (viab) any transfer, in a scheme of amalgamation, of a capital asset, being a share of....
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....tion 9, which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the demerged foreign company to the resulting foreign company, if- (a) the shareholders, holding not less than three-fourths in value of the shares of the demerged foreign company, continue to remain shareholders of the resulting foreign company; and (b) such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated: Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause; (vid) any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking; (vii) any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a share or shares held by him in the amalgamating company, if- (a) the transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company exc....
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....mely:- (i) the fund is not a person resident in India; (ii) the fund is a resident of a country or a specified territory with which an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A has been entered into; or is established or incorporated or registered in a country or a specified territory as may be notified by the Central Government in this behalf; (iii) the fund and its activities are subject to applicable investor protection regulations in the country or specified territory where it is established or incorporated or is a resident; and (iv) fulfils such other conditions as may be prescribed; (B) an investment vehicle, in which Abu Dhabi Investment Authority is the direct or indirect sole shareholder or unit holder or beneficiary or interest holder and such investment vehicle is wholly owned and controlled, directly or indirectly, by the Abu Dhabi Investment Authority or the Government of Abu Dhabi: or (C) a fund notified by the Central Government in the Official Gazette in this behalf subject to such conditions as may be specified;] (b)"relocation" means transfer of assets of ....
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.... section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (viic) any transfer of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee being an individual; (viid) any transfer of a capital asset, being conversion of gold into Electronic Gold Receipt issued by a Vault Manager, or conversion of Electronic Gold Receipt into gold. Explanation - For the purpose of this clause, the expressions "Electronic Gold Receipt" and "Vault Manager" shall have the meaning respectively assigned to them in clauses (h) and (i) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Vault Managers) Regulations, 2021 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992). (viii) any transfer of agricultural land in India effected before the 1st day of March, 1970; (ix) any transfer of a capital asset, being any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to the Government or a University or the National Museum, National Art Gallery, Natio....
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....); (xiii) any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of demutualisation or corporatisation of a recognised stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company : Provided that- (a) all the assets and liabilities of the firm or of the association of persons or body of individuals relating to the business immediately before the succession become the assets and liabilities of the company; (b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession; (c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and (d) the aggregate of the shareholding in the company of the partners of the firm is not less than....
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....of five years from the date of conversion; (e) the total sales, turnover or gross receipts in the business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; (ea) the total value of the assets as appearing in the books of account of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed five crore rupees; and (f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion. Explanation.-For the purposes of this clause, the expressions "private company" and "unlisted public company" shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008 (6 of 2009); (xiv) where a sole proprietary concern is succeeded by a company in the business carried on by it as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the....
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....ss of consolidation of the schemes of mutual fund in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); (c)"equity oriented fund" shall have the meaning assigned to it in clause (38) of section 10; (d)"mutual fund" means a mutual fund specified under clause (23D) of section 10; (xix) any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund. Explanation.-For the purposes of this clause,- (a)"consolidating plan" means the plan within a scheme of a mutual fund which merges under the process of consolidation of the plans within a scheme of mutual fund in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); (b)"consolidated plan" means the plan with which the consolidating plan m....
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....ctively been substituted: [Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government: ] [Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section:] [Provided also that no deduction shall be allowed in computing the income chargeable under the head "Capital gains" in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.] Explanation. - For the purposes of this section,- (i) "foreign currency" and "Indian currency" shall have the meanings respectively assigned to them in section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973); (ii) the conversion of Indian currency into foreign currency and the rec....
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....69, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. Explanation.-In this sub-section the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this subsection. (2) Where the capital asset being a share or shares in an amalgamated company which is an Indian company became the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company. (2A) Where the capital asset, being a share or debenture of a company, became the property of the assessee in consideration of a transfer referred to in clause (x) or clause (xa) of section 47, the cost of acquisitio....
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....set referred to in clause (iv) or, as the case may be, clause (v) of section 47 is deemed to be income chargeable under the head "Capital gains" by virtue of the provisions contained in section 47A, the cost of acquisition of such asset to the transferee-company shall be the cost for which such asset was acquired by it. (4) Where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under clause (vii) or clause (viia) or clause (x) of sub-section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii) or clause (viia)." 16. Section 47 (iii) of the Act of 1961, specifically lays down that any transfer of a capital asset under a gift or will or an irrevocable trust would not be covered by the provisions of Section 45(1) of the Act of 1961 and taking into consideration the transfer of capital asset cannot be computed in terms of Section 45 of the Act of 1961. Thus, the present transfer of property has to be examined in terms of Section 47 of the Act of 1961 which specifically takes into consideration Section 47....
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....tlement entered into by the parties bona fide for the purpose of putting an end to the dispute among family members. Could it be said that this amounts to a transfer of or creation of an interest in property? For, unless it does, the action of Kadma Kuar would not fall within the purview of the aforesaid clause of Section 37. In Mt. Hiran Bibi v. Mst. Sohan Bibi, AIR 1914 Privy Council 44, approving the earlier decision in Khunni Lal v. Govind Krishna Narain, ILR 33 All 356 (PC), the Privy Council held that a compromise by way of family settlement is in no sense an alienation by a limited* owner of family property. This case, therefore, would support the conclusion that the transaction does not amount to a transfer. Mr. Sinha, however, contends that the transaction amounts to creation of an interest by the ward in property which was under the superintendence of the Court of Wards and in support of his contention relies on Man Singh v Nowlakhbati, 53 Ind App 11. In the first place once it is held that the transaction being a family settlement is not an alienation, it cannot amount to the creation of an interest. For, as the Privy Council pointed out in Mst. Hiran Bibi's case, AI....
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....evice to divide it with the next reversioner, the giving of a small portion of it to the widow for her maintenance not being objectionable, and' consequently that the transaction was valid under the principles laid down by the board 46 Ind App 72. We may further point out that this decision does not refer to their decisions in AIR 1914 Privy Council 44 and ILR 33 All 356(PC), and it cannot be assumed that they intended to depart from their earlier view." 21. Thus, in the present case, since there was admittedly a family settlement whereafter, it has been held by the ITAT that the assessee became the owner/title holder of the capital asset, then his case has to be examined in terms of Section 49 (i) of the Act of 1961. Thus, the said family settlement cannot be treated as transfer of property. 22. In the case of Sahu Madho Das Vs. Mukand Ram; AIR 1955 Supreme Court 481 the Supreme Court has held as under:- "It is well settled that a compromise or family arrangement is based on the assumption that there is an antecedent title of some sort in the parties and the agreement acknowledges and defines what that title is, each party relinquishing all claims to pr....
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....ous owner but only from the date the capital asset was transferred to the assessee. This will lead to a disconnect and contradiction between "indexed cost of acquisition" and "Indexed cost of improvement" in the case of capital assets where s. 49 applies. This cannot be the intention behind the enactment of s. 49 and its 3 Explanation to s. 487 here is no reason or ground why the legislative would want to deny or deprive an assessee benefit/advantage of the previous holding for computing "Indexed cost of acquisition" while allowing, the said benefit for computing "Indexed cost of improvement". 15. Normally literal rule of construction is applied and the words of the statute are to be understood in their ordinary and popular sense, but this is subject to the rider that this should not lead to absurdity, contradiction or stultification of the statutory objective. Literal construction should be avoided, if it leads to unwarranted repugnance's or inconsistencies. In such circumstances the expressions/words can be interpreted by the Courts to avoid absurdities and inconsistencies between the provisions. In the present case, as noticed above, the construction placed by the Reven....
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.... year in which assessee's asset is transferred to the Cost of Inflation Index for the year beginning on 1.4.1981. It was therefore, that the Tribunal in our opinion correctly held that the indexed cost of acquisition shall have to be worked out with reference to 1.4.1981 since in the present case the asset was acquired by the previous owner of the property. Learned counsel for the Revenue however, submitted that such interpretation would fail to take into account the expression "Cost Inflation Index for the first year in which the asset was held by the assessee". In his opinion the "assessee" referred to under such expression would be the present assessee previous owner. In our and not opinion, the such interpretation cannot be accepted. We say so for the following reasons. Firstly, by virtue of a deeming fiction provided in sub-section (1) of section 49, cost of acquisition in hands of the assessee would be the cost for which the previous owner of the property acquired it. It is for this purpose that we need to fall back on computation provision of section 48. When we do so, we work out the cost of acquisition of the asset in the hands of previous owner. While doing so, cannot....
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....d rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence; (3) The family arrangement may be even oral in which case no registration is necessary; (4) It is well settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of Section 17(2) of the Registration Act and is, therefore, not compulsorily registrable; (5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is....
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....ment already arrived at between the parties was, therefore, a valid family settlement to be noticed for the purpose of computation and computation of capital gains in terms of Section 49 (1) (i) of the 1961 Act. The cost inflation index is to be calculated with reference to the year 01.04.1981 by treating the acquisition of the property as purchased by the father of the petitioner Permanand Mehra on 01.04.1963 through registered-deed dated 06.06.1963. 33. Thus, we find that a family settlement is not required to be compulsorily registered. 34. On similar grounds, we find that the High Court of Judicature of Bombay in the case of Rohan Developers Pvt. Ltd. Vs Income Tax Officer (International Taxation)-3 and others, in CWP-339 of 2011, decided on 03.02.2022 also held as under:- "13. Therefore, the cost of acquisition of the said property in the hands of seller is deemed to be the cost for which the said property was acquired by late Mrs. Dolly Jehangir Gazdar and the period of holding of late Mrs. Dolly Jehangir Gazdar, Mrs. Rhoda Rustom Framjee and Mr. Rustom Framjee are also to be included in the period of holding of seller for ascertain the period for which the pro....