2011 (3) TMI 1809 - AT - Income Tax

Summary

Issues involved: Appeal by revenue against CIT(A) order regarding cost of acquisition u/s 49(i)(iii) for assessment year 2005-06.

Details of the judgment:

1. The assessee, an individual, sold three plots of land in Gujarat during the previous year, holding different shares in each. The AO found that the assessee acquired partial shares through HUF partition in 1985 and inherited the remaining shares from the mother in 2003. The AO questioned the indexed cost of acquisition claimed by the assessee based on the year of acquisition. The assessee revised the computation, taking different base years for different shares.

2. The AO computed the indexed cost of acquisition for each plot based on the revised computation provided by the assessee. The CIT(A) accepted the assessee's plea, citing the decision of the Special Bench in the case of Manjula J. Shah. The revenue appealed to the Tribunal against the CIT(A) order.

3. The Tribunal noted the Special Bench decision which emphasized that the indexed cost of acquisition should consider the period for which the asset was held by the previous owner, not just the assessee. The Tribunal found no fault in the CIT(A) order and dismissed the revenue's appeal.

4. The Tribunal upheld the CIT(A) decision based on the interpretation of Explanation (iii) to section 48 of the Income Tax Act, emphasizing the need to consider the period of holding by the previous owner for computing the indexed cost of acquisition. The appeal by the revenue was consequently dismissed.

5. The Tribunal pronounced the order on March 9, 2011, affirming the CIT(A) decision in favor of the assessee regarding the indexed cost of acquisition for the plots of land sold during the assessment year 2005-06.