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TMI Blog1987 (3) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the said interest in the property; such cost amounted to Rs. 21,648 (House-tax Rs. 650 plus construction of the wall Rs. 998 plus litigation fees Rs. 20,000. As against this the assessee and his co-owners of the aforesaid 50 per cent share in the property got Rs. 12 lakhs on the sale of their rights in the property on 24th Nov., 1978 to M/s AMCO construction and the assessee's share (29.16 per cent therein amounted to Rs. 3,49,926 This left a surplus of Rs.3,28,278,which was invested to the extent of Rs. 3,20,815 in specified assets (Units with the UIT). Hence the balance of Rs. 7,463 was assessable as capital gain. The assessee appealed. 3. From the papers placed before us it would appear that the arguments for the assessee proceeded on the following factual position claimed for the assessee before the CIT(A). (i) 23, Ansari Road Darya Ganj,New Delhiwas a single storeyed building standing on 1162 sq. yds. of land (area of the whole plot was 2450 sq. yds.) One Haji Mohd. Yousuf was the sole registered owner of the property in 1947 having purchased it earlier along with one Mohd. Asking in 1945. (ii) One Radha Kishan Kapoor became a tenant of the said property some time prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohd. Yousuf to the two plaintiffs (Feroza Begum and Mumtaz Begum). (b) The defendants rested the said suit mainly on the ground of limitation and adverse possession. (c) To enter into an amicable settlement the parties have entered into a compromise i.e. to confer full absolute and exclusive ownership of the respective portions allotted to the plaintiffs on the one hand and to the defendants on the other. The defendants acknowledged the plaintiffs to be the full and absolute owners of the portion marked out and allotted to them and similarly the plaintiffs acknowledged the defendants to be the absolute owners of the portion marked out and allotted to them. (d) The plaintiffs acknowledged the defendants to the full and absolute owners by adverse possession of the property marked out and allotted to them. Under this arrangement the plaintiffs get on the one hand an approximate area of 1225 sq. yards and the defendants also got an approximate area of 1225 sq. yards. (e) The defendants to hand over vacant and peaceful possession of the portion marked out as that allotted to the plaintiffs by or before 22nd July., 1974 The defendants to furnish a bank guarantee of Rs. 50,000 to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC). 8. The CIT(A) found no substance in the above argument. According to him that decision would only apply to an asset in the acquisition of which it is not possible to envisage a cost, e.g. goodwill. In the instant case, the asset was a house property. It was, therefore, possible to envisage the cost thereof. In this view he rejected the assessee's claim that the asset in question had no cost of acquisition. According to the CIT(A) what was relevant was the nature of the asset and not the manner in which the asset is acquired by an individual 9. The CIT(A) then went on to consider what would be the cost of acquisition for the computation of capital gains in this case. He referred in this contention to the decision of the Delhi High Court in the case of Addl. CIT vs. Mohan Lal jain (1983) 140 ITR 200 (Del). In this case the Karta of the assessee HUF acquired 40 shares in a company of the value of Rs.40,030. from his own moneys. Later he impressed the shares with the character of HUF property. The assessee HUF sold the shares for Rs. 61,000 and disclosed surplus of Rs. 21,000 as capital gain. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee became the owner of the property on account of adverse possession and the cost of acquisition which has to be taken into account is that of the previous owner, i.e., the two ladies who had filed a suit of eviction and possession. Again it is not clear whether the period of 12 years expired before or after the date on which the said immovable property was received as gift by the above two ladies from Hazi Mohd.Yousuf. In case the period of 12 years expired prior to the date on which the said immovable property was gifted by Hazi Mohd. Yousuf, then the said Hazi Mohd. Yousuf will be the previous owner of the property and the cost of acquisition to the said Hazi Mohd. Yousuf will be the cost paid by him when the said property was purchased by him in 1945 The provisions contained in s. 55 further lay down that where the capital asset for the purpose of ss. 48&49 becomes the property of the assessee before 1st Jan., 1964, then, the cost of acquisition of the asset to the assessee will be the cost of acquisition or the fair market value as on 1st Jan., 1964 at the option of the acquisition which has to be taken into account will be that cost of acquisition of the previous owner. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and he became a legal owner on 30th Jan., 1974 Hence the fair market value of the property as on 1st Jan., 1974 was irrelevant The CIT(A) misdirected himself in directing the ITO to allow the assessee the option of taking the fair market value as on 1st Jan., 1964 as the cost of acquisition Secondly the Departmental Representative also strongly assails the finding of the CIT(A) that the cost of acquisition here was the cost of acquisition to the previous owner The submition is that the cost of acquisition was only Rs. 21.648 as held by the ITO and nothing more. The assessee had no rights at all in the property. He was residing there without the sanction of law. By spending Rs. 21,648 he obtained a perfectly valid title to the property and only this could be the cost of acquisition. 13. The Departmental Representative also disputes the factum of adverse possession. She points out that the facts on record show that M. Yousuf left for Pakistan in 1947.R.K.Kapoor was admittedly the tenant of the premises there.He died in 1955 Hence he had held adverse possession. Even assuming it was adverse possession within the strict meaning of the term in law, the period was only 8 years. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is submitted that the CIT(A) had before him a report on the market value of the property as on 29th Oct., 1967 estimating the value of the whole property at Rs. 15,56,000 in which the assessee's share was 29.16per cent The contention for the assessee is that the CIT(A) should have himself arrived at a finding on the value of the property and not sent it back for enquiry. 16. The second objection is that the CIT(A) erred in holding that there was cost of acquisition to the assessee The assessee's case is that there could be no cost of acquisition in the instant case, the property having been acquired by adverse possession. The third objection is that assuming but not admitting that there was cost of acquisition such cost has to be determined at the market value as on 21st July, 1974 when the property was partly surrendered by way of possession to the opposite party Without prejudice to this claim, the assessee's further claim is that the market value as on 29th Oct., 1987 should have been treated as cost of acquisition. 17. We have heard the parties on the cross objection also We have considered the position. We are wholly in agreement with the order of the CIT(A) when he says t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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