2023 (4) TMI 852 - AT - Income Tax

Long term capital gain - relevant date for claiming benefit of Indexation - Property received under WILL - Period of holding of previous owner - sale of immovable property - as AO held that the benefit of indexation will be available only from the financial year 2007-08 instead of the financial year 1981-82 as claimed by the assessee - AO granted the deduction on an ad-hoc basis @2% towards all expenses incurred on transfer by the assessee - CIT-A granted partial relief to the assessee - HELD THAT - On similar issues, as raised in the present appeal, the coordinate bench of the Tribunal in the case of the brother of the assessee Sohrab Fali Mehta 2023 (4) TMI 467 - ITAT MUMBAI for the assessment year 2016-17 partly allowed the appeal filed by the Revenue wherein held assessee would be entitled for indexed cost of acquisition benefit from F.Y.1981-82 on the cost. Also partial allowance of expenditure incurred wholly and exclusively in relation to the transfer of the subject mentioned property. Computing the long-term capital gains as per provisions of section 50C - HELD THAT - As decided in case Maria Fernandes Cheryl vs ITO 2021 (1) TMI 620 - ITAT MUMBAI amendment made in the scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis- -vis stamp duty valuation from 5 percent to 10 percent are effective from the date on which section 50C, itself was introduced, i.e 1-4-2003. Thus we direct the AO to compute the capital gains after granting the benefit of the 3rd proviso to section 50C of the Act to the assessee. As a result, ground No. 4 is allowed for statistical purposes.

Summary

Issues Involved:
1. Indexation of cost of acquisition.
2. Deduction of expenses incurred on transfer of property.
3. Application of section 50C for computing capital gains.

Summary:

Issue 1: Indexation of cost of acquisition
The Revenue challenged the CIT(A)'s decision to allow indexation from the financial year 1981-82 based on the Bombay High Court decision in CIT vs. Manjula J. Shah. The Tribunal upheld the CIT(A)'s decision, noting that the issue is covered by the High Court's ruling, which states that the indexed cost of acquisition should be computed with respect to the year in which the previous owner first held the asset. Consequently, the assessee is entitled to indexation from FY 1981-82.

Issue 2: Deduction of expenses incurred on transfer of property
The Revenue contested the CIT(A)'s allowance of various expenses such as brokerage, solicitor's fees, and payments to the occupier. The Tribunal found that similar issues had been decided in favor of the assessee's brother in a previous case. Specifically:
- Brokerage of Rs. 42,36,500/- was allowed in full as it was paid for services directly related to the sale.
- Solicitor's fees of Rs. 50,00,000/- were partly allowed, with Rs. 18,07,258/- considered reasonable for services related to the transfer.
- Payment of Rs. 10,00,000/- to the tenant for vacating the premises was allowed as it was necessary for the transfer.

Issue 3: Application of section 50C for computing capital gains
The assessee's cross objection included a plea to compute capital gains based on actual sale consideration rather than stamp duty value as per section 50C. The Tribunal directed the Assessing Officer to grant the benefit of the 3rd proviso to section 50C, following the decision in Maria Fernandes Cheryl vs ITO, which allows a tolerance band for variations between stated sale consideration and stamp duty valuation.

Conclusion:
The appeal by the Revenue was partly allowed, granting partial relief on the expenses incurred. The cross objection by the assessee was partly allowed for statistical purposes, directing the computation of capital gains with the benefit of the 3rd proviso to section 50C.