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TMI Blog2012 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... arking, then the investment in the flat and car parking will be considered as investment in the residential house. Therefore same is eligible for exemption u/s 54. Appeal decides in favour of assessee Capital Gain – Whether Cost of improvement along with value of flat eligible for exemption u/s 54 - Assessee claimed exemption u/s 54 on the cost of purchase of new flat, car parking and cost of improvement in the new flat – Held that:- As the assessee has duly recorded all the expenditure in the books of account and the payments were made by account payee cheque. Therefore Assessee is entitled to cost of improvement except the air-conditioning plant which cannot he treated as integral part of the flat. Appeal decides partly in favour of assessee Transaction in shares, held as business income or capital gain – Held that:- As concluded from fact the motive of the assessee is not to earn the profit at the earliest possible opportunity available. When the holding period of the shares giving rise to short term capital gain in the majority of cases is more than three months, than it is clear that the intention of the assessee was to earn the gain due to appreciation of value of capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer noticed that the assessee sold her shares of the property in question which was received by her and her son as per the family arrangement dt 15.6.2006. The assessee claimed indexation cost of acquisition with reference to 1.4.1981 on the ground that the previous owner purchased the property before 1.4.81. The Assessing Officer did not allow the claim of indexation with reference to 1.4.81 as he was of the opinion that the benefit of indexation was to be allowed only with reference to the date on which the assessee became the owner as per Explanation III of sec 48 of the I T Act. 3.2 On appeal, the CIT(A) has allowed the claim of the assessee by following the decision of the Special Bench of the Tribunal in the case of DCIT vs Manjula J Shah reported in 318 ITR (AT) 417. 4 Before us, the ld DR has submitted that the CIT(A) has decided the issue without considering the provisions of sec. 48 of the I T Act. As per the said provisions, the indexation cost of acquisition of the property is required to be done with reference to the year in which the assessee has acquired the property. He has relied upon the order of the Assessing Officer. 4.1 On the other hand, the ld AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the cost which the previous owner of the property acquired it, as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee, as the case may be. Thus, when the cost of property is deemed to be the cost for which the previous owner has acquired, then the indexation cost of acquisition of the property as per Explanation to sec. 48 of the I T Act is required to be computed with reference to the date of acquisition when the previous owner has acquired the property or on 1.4.81 whichever is later. It is not disputed that the property was acquired by the previous owner before 1.4.81. Therefore, indexation cost of acquisition is required to be done with reference to 1.4.81. The Special Bench of the Tribunal in the case of Manjula J Shah (supra) has considered and decided an identical issue. The conclusion part of the decision in para 21 is as under: For the reasons given above, we are of the view that for the purpose of computing long term capital gains arising from the transfer of a capital asset which had become property of the assessee under gift, the first year in which the capital asset was held by the assessee has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s attached with the flat in the society. Therefore, when any flat in the society is purchased along with car parking, then the investment in the flat and car parking will be considered as investment in the residential house. In view of the settled proposition, we do not find any error or illegality in the impugned order of the CIT(A), qua this issue and the same is upheld. 8 Ground no.3 is regarding exemption u/s 54 on cost of improvement. 8.1 The assessee claimed exemption u/s 54 on the cost of purchase of new flat, car parking and cost of improvement in the new flat of Rs.2,97,459/- The Assessing Officer disallowed the exemption with regard to the cost of improvement of Rs.2,94,429/-. 8.2 On appeal, the CIT(A) allowed the claim of the assessee by observing that the Assessing Officer did not even examine the books of account for verification of the expenditure incurred by the assessee on improvement. 9 Before us, the ld DR has submitted that the CIT(A) has considered additional evidence in violation of Rule 46A of I T Rules. He has further submitted that the assessee has not produced any evidence before the Assessing Officer in support of the claim of expenditure made. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating when he required the appellant to file documentary evidence. In the above circumstances, 1 find that the appellant is entitled to cost of improvement except the air-conditioning plant which cannot he treated as integral part of the flat. Accordingly, I direct the A.O. to allow exemption u/s.54 in respect of the cost of improvement of Rs. 1,97,459/-. Further, the Assessing Officer. shall adopt the correct figure of Rs.93,40,760/- towards cost of the flat as against Rs.90,70,760/- wrongly adopted in the assessment order. 10.2 Out of Rs.2,97,459/- the CIT(A) has allowed the cost of improvement of `.1,97,459/- by excluding the cost of air-conditioning plant. Thus, it is clear from the findings of the CIT(A) that the assessee has duly recorded all the expenditure in the books of account and the payments were made by account payee cheque. Therefore, there was no scope of any doubt or genuineness on this account. 10.3 In view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A) on this issue; accordingly, the same is upheld. 11 Ground no.4 is regarding short term capital gain offered by the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of other transactions, the holding period is more than 3 months and upto one year. Therefore, the majority portion of the short term capital gain was earned by holding the shares for more than 5 to 7 months. He has further submitted that the assessee has not borrowed any funds for investment in shares but her own fund was used. He has further contended that in the earlier years, the revenue has accepted the capital gains offered by the assessee on sale and purchase of shares. Therefore, as per rule of consistency, the revenue cannot deny the claim of the assessee for this year when the claim of the assessee was accepted in earlier years. He has relied upon the decision of the Tribunal as well as Hon ble jurisdictional High Court in the case of Commissioner of Income-tax v. Gopal Purohit reported in 336 14 We have considered the rival contention as well as relevant material on record. In order to decide the issue of nature of transactions in purchase and sale of shares whether investment or trading, various factors are to be taken into consideration. Broadly speaking these factors are; the intention of the assessee at the time of purchase of shares whether the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions during the year is only 109 therefore it cannot be said that the assessee has carried out large number of transactions. The assessee has shown the shares as investment in the books of accounts and not as stock in trade. The valuation of the shares shown by the assessee was at cost and not as in the case of stock-in-trade. Thus, if we apply the various criteria, which are relevant for deciding the nature of transaction, than except the volume, all other factors are supporting the case of the assessee; to say that the nature of transaction is investment and not trading. It is well settled proposition that no single criteria can be a decisive factor for determining the nature of transaction. 16.1 As evident from the pattern of transactions that the motive of the assessee is not to earn the profit at the earliest possible opportunity available. It is not the case where it can be said that the intention of the assessee was not to hold the shares for a longer period but to earn profit in the short period as per the volatile condition of share market. When the holding period of the shares giving rise to short term capital gain in the majority of cases is more than three month ..... 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