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2016 (12) TMI 546 - AT - Income TaxComputation of capital gains - adoption of the indexed cost of acquisition with reference to the year in which previous owner first held the asset and not the year in which the assessee became owner of the asset by way of inheritance - Held that - The learned Commissioner of Income Tax (Appeals) following the decision of the Hon ble High Court of Bombay in the case CIT Vs. Manjula J.Shah 2011 (10) TMI 406 - BOMBAY HIGH COURT held that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. Since the learned Commissioner of Income Tax (Appeals) has only followed the decision of the Hon ble High Court of Bombay in arriving at his decision, we do not find it necessary to interfere with the order of the learned Commissioner of Income Tax (Appeals) on this issue. - Decided in favour of assessee Disallowance being investment claimed as deduction under section 54 - Held that - The assessee had made the payment to the builder and it was beyond her control to compel the builder to comply with the terms and conditions of the initial agreement she entered with the builder for constructing her residential flat. Therefore, following case Smt. Shasi Varma Vs. CIT reported in 1996 (3) TMI 65 - MADHYA PRADESH High Court we are of the considered view that the assessee is entitled for the deduction under section 54 of the Act. - Decided in favour of assessee Disallowance of the claim of exemption under section 54 of the Act in respect of investment in house property outside India - Held that - On perusing the provisions of section 54 of the Act we find that the benefit of section 54 of the Act was specifically denied for any residential house property acquired outside India by the Finance Act, 2014 w.e.f. 01.04.2015. Before that no such restriction existed in the Act. The relevant case before us is for the assessment year 2010-11. In this period, the assessee had the benefit of few Tribunal decisions in her favour on the issue which she relied while claiming the benefit of section 54 of the Act. Further, as pointed out by the learned Authorized Representative the decision of the Hon ble Gujarat High Court in the case Leena Jugalkishor Shah Vs. ACIT 2016 (12) TMI 351 - GUJARAT HIGH COURT is also in favour of the assessee on the identical circumstances. Thus no hesitation to hold the issue in favour of the assessee who had invested the sale proceeds of her asset in a residential house property in California(USA). Therefore, we hereby direct the learned Assessing Officer to grant the benefit of section 54 - Decided in favour of assessee
Issues Involved:
1. Date of acquisition in the case of inheritance of asset for the purpose of calculating indexed cost of acquisition while calculating capital gains. 2. Disallowance of ?1,50,00,000/- being investment claimed as deduction under section 54 of the Act. 3. Disallowance of the claim of exemption under section 54 of the Act in respect of investment in house property outside India for ?2,05,92,000/-. Issue-wise Detailed Analysis: 1. Date of Acquisition in the Case of Inheritance of Asset for Calculating Indexed Cost of Acquisition: The primary issue in the Revenue's appeal was whether the indexed cost of acquisition should be computed with reference to the year in which the previous owner first held the asset or the year in which the assessee became the owner by way of inheritance. The assessee had sold a residential property and computed the capital gains by adopting the date of acquisition as 01/04/1981, the date when the previous owner first held the asset. The Assessing Officer (AO) computed the indexed cost from 28.02.2008, the date the assessee inherited the property. The Commissioner of Income Tax (Appeals) (CIT(A)) followed the decision of the Bombay High Court in CIT Vs. Manjula J. Shah, which held that the indexed cost of acquisition should be computed from the year the previous owner first held the asset. The Tribunal upheld the CIT(A)'s decision, agreeing that the indexed cost of acquisition should be computed from the year the previous owner first held the asset. 2. Disallowance of ?1,50,00,000/- Investment Claimed as Deduction Under Section 54 of the Act: The assessee had invested ?1,50,00,000/- in a capital gain scheme account and later entered into an agreement with a builder for a residential flat. Due to delays by the builder, the construction was not completed within the prescribed three years. The AO disallowed the deduction under section 54, and the CIT(A) upheld this decision, noting the lack of evidence for substantial completion of construction. The Tribunal, however, found that the assessee had made a bona fide investment and the delay was beyond her control. Citing the Madhya Pradesh High Court decision in Smt. Shasi Varma Vs. CIT, which held that substantial investment in construction within the stipulated period satisfies section 54, the Tribunal allowed the deduction of ?1,50,00,000/-. 3. Disallowance of Exemption Under Section 54 for Investment in House Property Outside India for ?2,05,92,000/-: The assessee had purchased a residential house in California, USA, and claimed a deduction under section 54. The AO disallowed this claim, relying on a decision that interpreted section 54 to apply only to properties within India. The CIT(A) upheld this view. However, the Tribunal noted that the restriction on properties outside India was introduced only by the Finance Act, 2014, effective from 01.04.2015, and was not applicable for the assessment year 2010-11. The Tribunal also cited the Gujarat High Court decision in Leena Jugalkishor Shah Vs. ACIT, which allowed the benefit of section 54 for properties outside India before the amendment. Consequently, the Tribunal directed the AO to grant the benefit of section 54 for the assessee's investment of ?2,05,92,000/- in the USA. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, granting the benefits of indexed cost of acquisition from the date the previous owner first held the asset, and deductions under section 54 for investments both in delayed construction and in a property outside India.
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