TaxTMI 
TaxTMI 
2012 (12) TMI 1260
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....not been considered properly. 4. Notwithstanding above said grounds of appeal, it is submitted that the learned CIT(A) has erred in not considering that no addition can be made as no incriminating nature of documents were found and seized during the course of search and seizure operation in view of the Special Bench1 Judgment in the case of All Cargo Global Logistics Limited & Others as reported in 147 TTJ 513. 5. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 3. In the course of present appellate proceedings, before the Bench, ld. 'AR' vehemently contended that the findings of both the AO and the CIT(A), are contrary to the express provisions of section 2(42A) of the Act and Explanation 1(i)(b) thereto, and section 49 of the Act. He narrated factual history of the case, and stated that the appellant sold a plot of land, acquired by the assessee, as gift from his mother. Consequently, it was argued that the provisions of section 49 of the Act are applicable, to the fact-situation of the present case. The assessee appellant applied 'fair market value' of the impugned asset, as on....
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....ent and relevant to reproduce Explanation (1) to section 2(42A) of the Act, for the purpose of determination of the period of holding of the said asset, by the appellant, which reads as under : [Explanation (1) (i) In Determining the period in which any capital asset is held by the assessee b) "In the cost of a capital asset which becomes the property of the assessee in the circumstances mentioned in [sub sect ion (1) of section 49, there shall be included the period for which the asset was held by the previous owner, referred to in that section; ]. 6. The findings of the CIT(Appeals), as recorded in para 7 are reproduced hereunder, for the purpose of proper appreciation of the same: "7. I have considered the basis of addition made by the AO and the arguments of the AR on the issue. It is seen that the Assessing Officer has reworked the cost of acquisition on the basis of valuation of the plot as reflected in the gift deed dated 25/3/2003 on the basis of which the assessee has become owner of the plot. The assessee has not given any evidence as to on what basis the cost of the plot has been taken at Rs. 100/- per sq yard as on 1/4/1981. The basis adopt....
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.... "Capital gains- Cost of acquisition- Relevant year for indexation vis-a-vis property acquired under gift- Property purchased by assessee's daughter on 29th Jan., 1993, gifted to assessee on 30th June, 2003- As the previous owner held the capital asset from 29th Jan., 1993, as per Expln. 1(i)(b) to s. 2(42A) the assessee is deemed to have held the capital asset as long-term "capital asset from 29th Jan., 1993- Therefore, in determining the indexed cost of acquisition under s. 48, the assessee must be treated to have held the asset from 29th Jan.f 1993 and accordingly the cost inflation index for 1992-93 would be applicable in determining the indexed cost of acquisition- Contention of Revenue that as the assessee held the asset w.ef. 1st Feb., 2003, the first year of holding the asset would be financial year 2002-03 and accordingly, the cost inflation index for 2002-03 would be applicable is devoid of merit, because in that case, the assessee would not be liable for long-term capital gains tax by applying the deemed fiction contained in Expln. l(i)(b) to s. 2(42A) and s. 49(1)(ii)- In construing the words 'asset was held by the assessee' in cl. (iii) of s. 48, one ha....
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....would include the cost of improvement(s) made by the previous owner. The benefit of indexed cost of improvement would be available even if the capita! asset is acquired by the assessee under any gift, will or succession, trust etc. and improvement was made by the previous owner. If the contention of the Revenue is accepted, then benefit of indexed cost of acquisition will not be available to an assessee in a case covered by s. 49 from the date on which the asset was held by the previous 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 Explanation to s. 48. There 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". (Paras 10,13 & 14) The construction placed by the Revenue will lead to inconsistency and incongruities, ....
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.... cannot be applied for the purpose of s. 48. If ss. 2 (42A), 47(iii), 49(l)(ii)/(iii) and s, 55(2)(b)(ii) are read co-jointly then it appears that in law no "transfer" of a "capital asset" is considered to take place on inheritance and succession. The liability for capital gain arises only when the capital asset is actually transferred by the successor, it is only when the ultimate successor transfers the capital asset for a consideration the capital gains are assessed to tax. In assessing capital gain in the hands of successor, date of acquisition and period of holding is determined taking into consideration the date on which and the cost of which the first owner acquires the capital asset. It is for this reason s. 2(42A) uses the expression "in determining the period for which capital asset is held by the assessee". Sec. 48 incorporates computation mechanism for qualifying the 'capital gain' and therefore the expressions used in the computation formula should be given schematic interpretation. The scheme of taxation of "capital gain" can however, be understood by applying provisions of ss. 2(42A), 2(47), 47(ii), 48, 49(i)(ii) and 55(2)(b)(ii). As per the provisions of the....
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....by taking the cost as on 1st April, 1981, as 100 and applying the cost inflation index of the accounting year when the property was sold-As the cost of property by applying the cost inflation index in terms of s. 48(l)(a) was more than the sale consideration, no taxable capital gain accrued to the assessee." 8. The CIT(Appeals) disregarded the direct decisions quoted and relied upon by the appellant, during appel late proceedings before him. Having regard to the clear ratio laid down by the Hon'ble High Courts and Tribunals, in the decisions discussed above, the findings of the CIT(Appeals) cannot be sustained, in the matter, being contrary to the express provisions of section 2(42A) of the Act and Explanation (1) (i) (b) thereto and section 49(1) (ii) of the Act and Explanation thereunder. 9. Further, the appellant, before the CIT(Appeals), raised additional ground of appeal, in respect of computation of capital gains, by way of adoption of fair market value of the said asset, at Rs. 100/- per sq.yd., as on 1.4.1981, as is evident from reproduction of the same at page 5 of his order. It was contended before the CIT(A), that the appellant has statutory option for adoption....
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....The index cost of acquisition has been defined u/s 48 and Explanation (iii) thereto, which is reproduced hereunder : (iii) "indexed cost of acquisition" means 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; 12. In this context, it is pertinent to refer to the decision of the Hon'ble ITAT, Chandigarh Bench, in the case of Dy.CIT V Smt.Bal j inder Kaur & others (2008) 115 TTJ (Chd) 982, wherein it has been held that it is awel l settled proposition that the concept of 'fair market value' envisages existence of hypothetical seller and hypothetical buyer, in a hypothetical market. Therefore, determination of fair market value of capital asset, as on 1.4.1981, would involve a judgement of estimation, based on relevant factors. In the present case, appellant has fi led a certificate from the Patwari, before the CIT(Appeals), indicating the fair market value of the impugned asset at Rs. 100/- per sq.yd., as on 1....