2004 (8) TMI 621 - AT - Income Tax

Summary

Issues Involved:
1. Chargeability of capital gains on the sale of premises.
2. Determination of cost of acquisition for capital gains calculation.
3. Applicability of section 49(1)(ii) and section 49(1)(iii)(d) of the Income-tax Act.
4. Assessment of income from house property.
5. Non-granting of deduction under section 80L.

Detailed Analysis:

Issue 1: Chargeability of Capital Gains on the Sale of Premises
The primary issue was whether the sale of premises at G-002, Vikas Centre, Santacruz, Mumbai, resulted in chargeable capital gains. The assessee contended that there was no cost of acquisition, thus no capital gains tax was chargeable, referencing the Supreme Court decision in CIT v. B.C. Srinivasa Shetty [1981] 128 ITR 294 (SC). However, the Assessing Officer determined that the stamp duty paid at registration constituted the cost of acquisition, leading to a significant capital gains tax liability. The CIT(A) held that the asset was acquired as a gift or transfer to a trust, making it subject to capital gains tax under section 49(1)(ii) and section 49(1)(iii)(d).

Issue 2: Determination of Cost of Acquisition for Capital Gains Calculation
The cost of acquisition was a contentious point. The Assessing Officer used the stamp duty paid as the cost, while the assessee argued there was no cost. The CIT(A) and the Tribunal concluded that the cost of acquisition should be determined based on the cost to the previous owner, as per section 49(1)(iii)(d). The Tribunal confirmed that stamp duty expenses do not constitute the cost of acquisition. The matter was remanded to the Assessing Officer to calculate the cost of acquisition in line with section 49 and tax the resultant capital gain.

Issue 3: Applicability of Section 49(1)(ii) and Section 49(1)(iii)(d) of the Income-tax Act
The Tribunal upheld the CIT(A)'s finding that the property transfer was covered under section 49(1)(iii)(d), which pertains to transfers to a trust. It was concluded that the cost of acquisition should be the cost to the previous owner, in this case, Shri Madanlal Gupta. The Tribunal disagreed with the CIT(A)'s finding that the transfer constituted a gift under section 49(1)(ii), as there was no evidence of voluntary transfer without consideration.

Issue 4: Assessment of Income from House Property
The assessee raised a grievance that the CIT(A) did not adjudicate on the assessment of income from house property, which was assessed at Rs. 2,73,919 instead of Rs. 2,72,919 as returned by the appellant. The Tribunal directed the CIT(A) to consider and adjudicate this issue after providing a reasonable opportunity for hearing to both parties.

Issue 5: Non-granting of Deduction under Section 80L
The assessee also contended that the CIT(A) failed to adjudicate on the non-granting of deduction under section 80L. The Tribunal directed the CIT(A) to consider this issue in accordance with the law.

Conclusion:
The Tribunal confirmed the CIT(A)'s decision that the capital gains arising from the transfer of property were exigible to tax under section 45 read with section 49(1)(iii)(d). The cost of acquisition was to be calculated based on the cost to the previous owner. The Tribunal remanded the matter to the Assessing Officer for recalculating the cost of acquisition and directed the CIT(A) to adjudicate on the assessment of income from house property and the non-granting of deduction under section 80L. The appeals were thus partly allowed for the assessee and dismissed for the department.