TaxTMI 
TaxTMI 
2014 (9) TMI 1303
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....) Whether on the facts and circumstances of the case, the first year in which the asset was held by the respondent/assessee as appearing in the explanation to section 48 (mode of computation) of the Income Tax Act, 1961, should be the year in which the final partition of the HUF was actually effected and decreed by the District Court on 19.5.1998 or whether it can be construed to be earlier than 1.4.1981? ii) Whether in facts and circumstances of the case, the impugned orders of the Appeal Court's at Annexure A 2 and A. 3 are legally sustainable in the eyes of law? 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.152 of 2014 may be noticed. The respondent-assessee filed his return for the assessment year 2009-10 at an income of 46,11,493/- including Long Term Capital Gain (LTCG) of 35,53,500/-. The assessment was completed under Section 143(3) of the Act at an income of 11,38,960/- plus LTCG of 1,11,48,931/- respectively. The respondent became the owner of two properties namely a hotel and a plot on 19.5.1998 in pursuance of the Hindu Undivided Family partition vide order of the then Additional District Judge, Bathinda. Acco....
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....rs :- (i) any distribution of capital assets on the total or partial partition of a Hindu undivided family; (ii) xxxx xx xx xx xx xx xxx xxx xxx xxx xxx" Clause (i) of this sub section deals with a case where the capital asset which the assessee has sold has come to him on the distribution of the assets of a Hindu undivided family on its total or partial partition. Under Section 47(i), no capital gains is attracted where a Hindu undivided family disrupts and its assets are distributed among its members. 9. The 'mode of computation' of capital gains has been specified under Section 48 of the Act. The provision which is relevant for the purposes of present appeal is in the following terms:- "48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: Provided xx xx xx xx xx xx....
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....other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or (c) on any distribution of assets on the liquidation of a company, or (d) under a transfer to a revocable or an irrevocable trust, or (e) under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause (via)or clause (viaa)or clause (vica) or clause (vicb) of section 47; (iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969, 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 c....
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....pelling the contention of the revenue had noticed as under:- "The second issue relates to the addition of 75,95,431/- on account of Long Term Capital Gains on the sale of Hotel and plot of land for 1,41,75,000/- during the previous year relevant to the assessment year 2009-10. It is a fact that the bigger HUF of the respondent/assessee owns the property before 01.04.1981 which is clear from the various partial partitions made by the bigger HUF on 30.01.1964, 05.02.1964 and 12.04.1971 which were duly accepted by the department u/s 171 (3) on 14.01.1966, 12.04.1971 and 21.12.1974 respectively. The full partition was made on 20.02.1995 which was accepted by the A.O. on 19.02.1998. However, the respondent/ assessee also got it made Rule of Court of Law from Additional District Judge on 19.05.1988. The A.O. has himself accepted the claim of the respondent/assessee u/s 49(1)(i) of the Act taking the cost of the previous owner as on 01.04.1981. However, the A.O. has applied the Cost of Inflation Index for the year 1998-99 instead of 1981-82. The respondent/ assessee has pointed out that this very A.O. has accepted the cost of Inflation Index of 1981-82 instead of 1998-99 in....
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....iv) of this sub-section Explanation 1 (i)(b) to section 2(42A) defining "Short Term Capital Asset":- "Short term Capital Asset" means a capital asset held by an respondent/ assessee for not more than 36 months immediately preceding the date of transfer. Explanation 1(i)(b):- in the case of a capital asset which becomes the property of the respondent/ assessee in the circumstances mentioned in sub-section (1) of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section ." Explanation (iii) to Section 48:- Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as the 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 respondent/ assessee or for the year beginning on the 1st day of April, 1981, whichever is later. The issue is directly covered by the latest Special Bench decision of Mumbai Bench in the case of DCIT vs. Manjula J Shah 318 ITR (AT) 417 where in it was held as under:- "We are of the view ....