2012 (7) TMI 496 - HC - Income Tax

Determination of the cost of acquisition - computation of the period for which the asset is held by the assessee - property transferred to the assessee under a will or by inheritance - Held that - 50% portion of the property acquired by the respondent from his father, the cost of acquisition must be determined to be the cost at which the respondent s grandfather or in any event the respondent s father acquired the property and not the date on which the respondent acquired it. Computation of the period for which the respondent held that 50% portion of the property he acquires from his mother - Held that - The respondent s mother also acquired the property under her husband s will. She therefore, acquired the property by a mode of acquisition referred to in section 49(1)(ii). Thus the date of the acquisition of her share in the property is not relevant. The last previous owner of her share was therefore her husband s father and at the highest her husband - If therefore a capital asset becomes the property of the assessee in the circumstances mentioned in section 49(1) and the period for which it is held as determined by section 49(1) r.w.s. 2(42A) is more than the period stipulated in section 2(42A), the case would not fall within the ambit of a short term capital asset - the respondent must be deemed to have held this 50% share in the property also from 1.4.1981 - in favour of respondent.

Summary

Issues:
1. Determination of the cost of acquisition.
2. Computation of the period for which the asset is held by the assessee.

Analysis:

Issue 1: Determination of the cost of acquisition

The case involved a dispute regarding the calculation of long-term capital gains under the Income Tax Act, 1961. The appellant challenged the order of the Commissioner of Income Tax (Appeals) before the Income Tax Appellate Tribunal (ITAT). The appellant argued that the period for holding 50% of the property inherited from the respondent's mother should start from 01.04.1981, whereas the ITAT held that it should start from 21.08.1988. The key contention revolved around the interpretation of Section 49 of the Act, which deals with the determination of the cost of acquisition. The Tribunal's decision was based on the fact that the respondent's mother acquired her share in the property under her husband's will, falling under a specific mode of acquisition as per Section 49(1)(ii).

Issue 2: Computation of the period for which the asset is held by the assessee

The second issue in the case was the computation of the period for which the respondent held the 50% portion of the property acquired from his mother. The Tribunal held that the period for holding this portion should start from 21.08.1988, the date on which the respondent's mother became the owner of her share in the property under her husband's will. However, the Court analyzed the relevant provisions of the Income Tax Act, particularly Section 2(42A) and Section 49(1), to determine that the respondent should be deemed to have held this 50% share in the property from 01.04.1981, considering the definition of "previous owner" as per the Act.

In conclusion, the Court answered the questions in favor of the respondent, determining that the period of holding for the entire property should be considered from 01.04.1981. As a result, the appeal was dismissed, and the cross-objections were disposed of accordingly, with no order as to costs.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Court's interpretation of the relevant provisions of the Income Tax Act in resolving the dispute.