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TMI Blog2010 (5) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Held that: entire indexed cost of acquisition has to be deducted from the amount received by the appellant. – The question of law decided in favor of assessee - ITA No.1000 of 2009 - - - Dated:- 17-5-2010 - Mr. A.K. Sikri and Mr. Justice Ajit Bharihoke, JJ. Appellant through: Mr. O.S. Bajpai, Sr. Advocate with Mr. V.N. Jha, Advocate Respondents through: Mr. Sanjeev Sabharwal, Advocate. JUDGEMENT A.K. SIKRI, J. 1. Though this appeal was admitted on a limited question formulated by the appellant as Question of Law No. (d), in order to appreciate that question, some broad factual narration would be needed. 2. The appellant is a Non- Resident Indian and Swiss National. He is the uncle of one Ms. Reeta Wahi. The property bearing No.13, Kautilaya Marg, Chanakyapuri, New Delhi (hereinafter referred to as "the subject property) was purchased in March 1994 in the name of Reeta Wahi for a consideration of Rs.1.49 crores. The entire amount for purchase of this property was advanced by M/s. Vaishali International and Management Resources Ltd. (hereinafter referred to as the "VIMAR") to Reeta Wahi. This company, VIMAR, is substantially owned by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t their dispossession. These were treated as preliminary issues and arguments were heard by the learned Single Judge on these issues. Learned Single Judge vide his order dated 01.05.2006 decided the aforesaid preliminary issues in favour of the appellant. The court accepted the submission of the appellant that in fact money was paid by the appellant for purchase of the subject property and Reeta Wahi who was his niece held the property in fiduciary capacity. Such a transaction was saved by the provisions of Section 4(3)(b) of the Benami Transaction (Prohibition) Act, 1988. Detailed reasons were given by the Court in support of its view as to how there was fiduciary capacity between the appellant and Reeta Wahi and Reeta Wahi held the property on behalf of the appellant in a fiduciary capacity. On this basis, issued No. 1 was decided in favour of the appellant and it was also held that the plaint could not rejected under Order VII Rule 11 of the Code of Civil Procedure. 7. After this decision of the learned Single Judge of this Court, the parties settled the disputes. Settlement Deed dated 25.11.2006 was signed between the appellant, Reeta Wahi and Sanjit Bakshi, the developer. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as developer to settle the matter with the appellant. The amount of Rs.4 Crores was, therefore, rightly treated as capital gain. 10. So far so good. However, the appellant had also raised another issue before the AO, viz., exact amount which was to be deducted from the aforesaid receipt of Rs.4 crores to arrive at actual capital gain. The contention of the appellant was that cost of acquisition of the aforesaid property was to be deducted. Property was purchased at Rs.1.49 crore, indexed cost of acquisition as per formula under the Act was Rs.2,25,00,731/-. The appellant wanted entire amount of acquisition, viz., Rs.2.25 Crores to be deducted from Rs.4 Crores received by him to make him liable to pay him capital gain on the net amount arrived in the aforesaid manner. The AO, however, did not accept this plea of the appellant and held that since total consideration was Rs.15.76 crores, the appellant would be entitled to only proportionate deduction. In this manner, he allowed deduction of Rs.57.10 lakhs and held that capital gain would be Rs.3,42,89,377/-. Calculation arrived at by the AO in his aspect is as under: "Capital Gain in respect of the property in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion also. In this way, we do not find any merit in ground No. 1 to 7 of the appeals raised by the assessee." 14. We feel that the approach of the Tribunal in this behalf is self-contradictory. The appellant is treated as the absolute owner of the property while holding that the amount of Rs.4 crores received by the appellant is exigible to tax as capital gain and this was not capital receipt. For this purpose, the authorities below heavily relied upon the judgment dated 18.14.2006 of this Court in CS (OS) No.690 of 2004 holding that the entire sale consideration was given by the appellant while purchasing the property in the name of Reeta Wahi, who held the same in fiduciary capacity. Thus, when entire sale consideration is treated to have been treated capital gain, it defies common sense as to how the appellant would be given only proportionate deduction and not the entire cost of acquisition when the entire money was spent by the appellant and on that basis he was treated as the real owner of the property in question. 15. Section 45 of the Act makes income from capital gains exigible to tax. Section 48 thereof stipulates the "Mode of Computation". It reads as under: "Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exchange prescribed in this behalf; (iii) "Indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later; (iv) "Indexed cost of any improvement" means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place; (v) "Cost Inflation Index" for any year means such Index as the Central Government may, having regard to seventy-five per cent of average rise in the Consumer Price Index for urban non-manual employees for that year, by notification in the Official Gazette, specify 759 in this behalf." As per this Section cost of acquisition of asset and cost of any improvement is to be deducted from the consideration received as a result of transfer of the capital asset. It is held by the Bombay High Court in the case of Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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