2022 (7) TMI 215 - AT - Income Tax

Capital gain - acquisition of property by the assessee under the gift deed executed by his mother in terms of section 49(1) - determination of cost of acquisition in the hands of the assessee - HELD THAT - The language employed by section 49(1) of the Act is unequivocal. It contemplates that where the capital asset becomes the property of the assessee under a gift or will 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 asset incurred or borne by the previous owner or the assessee as the case may be. Nowhere in this section can we find the expression the fair market value . We do not know what prompted the mother of the assessee to offer the capital gains while receiving the flat No. 914 with reference to the fair market value. When the provisions speaks very clearly and unequivocally there is no reason to read something into it which the legislature did not intend. As in MINOR SHANTHI CHANDRAN 1999 (4) TMI 39 - MADRAS HIGH COURT Hon ble Court held in unequivocal terms that the cost of acquisition means cost of acquisition but not the value mentioned in the documents. Insofar as the tax law is concerned it is not open for any one to read into the section what is not to be found in that section or to substitute the expressions with some other words. Cost of acquisition means cost of acquisition but not the cost perceived by the mother at the time of receiving the flat. Inasmuch as the legislative language is clear and unambiguous we do not find anything perverse in the orders of the authorities below and merely because of some voluntary act of the mother of the assessee in valuing the property on higher side at the time of receiving of the same we do not accept the contention that the authorities should have accepted such escalated value. Law contemplates only cost of acquisition but not fair market value . Voluntary acts of the parties will not disturb the legal position or affect the impact of law. With this view of the matter we are of the considered opinion that there is nothing illegality or irregularity committed by the authorities below. We accordingly uphold the findings of the Ld. CIT(A) and decline to interfere with his findings - Assessee appeal dismissed.

Summary

Issues:
1. Cost of acquisition determination for capital gains tax calculation.

Analysis:
The judgment involves a dispute regarding the cost of acquisition for the purpose of calculating capital gains tax. The assessee, an individual deriving income from various sources, sold multiple flats during the financial year 2013-14 and declared a total income in the return filed for AY 2014-15. The Assessing Officer noted discrepancies in the cost of acquisition declared for two flats: one acquired through a gift deed and the other through a joint development agreement. The Assessing Officer computed the capital gains based on the cost of acquisition determined for the mother of the assessee. The CIT(A) upheld this decision, considering the deemed cost of acquisition under Section 49(1) of the Act. The assessee contested this decision, arguing that the cost of acquisition should be based on the value declared by the mother at the time of receiving the flat.

The Tribunal analyzed the facts and legal provisions, emphasizing the language of Section 49(1) which deems the cost of acquisition to be that of the previous owner, increased by any improvements. The Tribunal highlighted that the section does not refer to the fair market value. Referring to legal precedents, the Tribunal emphasized that the cost of acquisition should be based on actual costs incurred by the previous owner, not values mentioned in voluntary acts like gift deeds. The Tribunal concluded that the authorities' decision to consider the lower cost of acquisition was in line with the legislative intent, rejecting the contention that the higher value declared voluntarily should be accepted. The Tribunal upheld the CIT(A)'s findings, dismissing the assessee's appeal on the grounds of legality and regularity.

In conclusion, the Tribunal upheld the decision regarding the cost of acquisition for capital gains tax calculation, emphasizing the legislative language and rejecting the contention based on voluntary valuation. The appeal was dismissed, affirming the authorities' findings and the CIT(A)'s decision.