9911796707
TMI Blog2013 (4) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... uare links and his daughter named Smt. Shyamala Kumari was given an extent of 55 cents and 371 square links. Smt. Shyamala Kumari is married to Shri V.K.Mohan. The assessee herein and her younger sister Ms. Archana Mohan are the children of the Smt. Shyamala Kumari and Shri V.K.Mohan. 3. On 09.07.1984, Shri Suresh Babu gifted the property acquired by him by way of gift from his father, viz., 57 cents and 47 aquare links, in favour of his nieces viz., Ms. Anjana Mohan, the assessee herein and Ms. Archana Mohan. Since they were minors at that point of time, Shri Suresh babu executed a trust deed and appointed their parents viz., Shri V.K.Mohan and Smt. Shyamala Kumari as trustees with the condition that the trustees shall hold the property in trust and for the benefit of the beneficiaries viz., Ms. Anjana Mohan and Ms. Archana Mohan. Further they should transfer the trust property in equal shares in favour of the beneficiaries upon their attaining majority. Thus, the assessee herein and her sister got rights over 28.5235 cents each over the property gifted by their maternal uncle Shri Suresh Babu after they became majors. 4. Smt. Shyamala Kumari, the mother of the assessee herein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration). 8. The assessee herein declared long term capital gains on sale of property no.1. But she did not declare any capital gain on the sale of Property no.2 on the plea that she never got the possession of that property and further the sale proceeds were received and enjoyed by her father Shri V.K.Mohan. It is also pertinent to note that Shri V.K.Mohan declared the long term capital gains on sale of Property No.2 in his return of income and claimed exemption u/s 54 on the value of residential house property acquired by him. 9. The assessing officer re-computed the Long term capital gain on sale of Property No.1 by making many adjustments. One of such adjustments relate to the cost inflation index relating to the first year in which the asset was held by the assessee. The assessee adopted the cost inflation index of "125" applicable for the financial year 1984-85, since she became the owner of the Property No.1, by virtue of settlement deed dated 09-07-1984. However, the assessing officer did not accept the same. He referred to clause (iii) of Explanation to sec. 48 of the Act, which defines the term "indexed Cost of acquisition" as under:- "indexed cost of acquisition" me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2012 rendered by the Hon'ble High Court of Delhi in the case of Arun Shungloo Trust Vs. CIT in ITA No.116/2011, wherein an identical issue was decided by the High court in favour of the assessee. In the above said case, a reference was made to the decision rendered by the Hon'ble Bombay High Court in CIT Vs. Manjula J Shah (2012)(204 Taxman 691)(2012)(249 CTR (Bom) 270) (wrongly mentioned by Ld CIT(A) as (2011)(16 taxman 42)) and the Hon'ble Delhi High Court extracted with approval the following observations made by Hon'ble Bombay High court in the case cited above:- "17. We see no merit in the above contention. As rightly contended by Mr. Rai, learned counsel for the assessee, the indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was 'held by the assessee'. Since the expression 'held by the assessee' is not defined under s. 48 of the Act, that expression has to be understood as defined under s. 2 of the Act. Explanation 1(i)(b) to s. 2(42A) of the Act provides that in determining the period for which an asset is held by an assessee under a gift, the period for which the said asset was held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a capital asset acquired by an assessee by incurring the cost of acquisition, but also to tax the gains arising on transfer of a capital asset inter alia acquired by an assessee under a gift or will as provided under s. 49 of the Act where the assessee is deemed to have incurred the cost of acquisition. Therefore, if the object of the legislature is to tax the gains arising on transfer of a capital asset acquired under a gift or will by including the period for which the said asset was held by the previous owner in determining the period for which the said asset was held by the assessee, then that object cannot be defeated by excluding the period for which the said asset was held by the previous owner while determining the indexed cost of acquisition of that asset to the assessee. 7 I.T.A. No. 50/Coch/2011 In other words, in the absence of any indication in cl. (iii) of the Explanation to s. 48 of the Act that the words 'asset was held by the assessee' has to be construed differently, the said words should be construed in accordance with the object of the statute, that is, in the manner set out in Expln. 1(i)(b) to s. 2(42A) of the Act. 19. It is true that the words of a statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struing the words used in s. 48 of the Act, then the gains arising on transfer of a capital asset acquired under a gift or will will be outside the purview of the capital gains tax which is not intended by the legislature. Therefore, the argument of the Revenue which runs counter to the legislative intent cannot be accepted." The special bench decision in the case of DCIT vs. Manjula J.Shah (318 ITR (AT) 417) has been upheld by Hon'ble Bombay High Court. The decision of Ld CIT(A) is in accordance with the decision of Hon'ble Bombay High Court referred supra. Hence we uphold his order on this issue. 12. The next issue contested by the revenue is whether the Ld CIT(A) was justified in deleting the capital gain relating to "Property No.2". Let us recapitulate the facts relating to the same. The mother of the assessee Smt. Shyamala Kumari obtained the Property No.2 by way of gift from her father and she transferred it by way of a settlement deed in favour of her spouse Shri V.K.Mohan. The said Shri V.K.Mohan, in turn, transferred it by way of a settlement deed in favour of her daughter Ms. Anjana Mohan, the assessee herein on 08-06-2005. Ms. Anjana Mohan executed a Power of Attorney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer. As per sec. 47(iii) any transfer of a capital asset under a gift or will or an irrevocable trust does not constitute transfer. Hence the property gifted to the assessee was not a transfer and hence the property shall belong to Shri V.K.Mohan. (c) The provisions of sec. 60 of the Act, the income arising to a person by virtue of a transfer, where there is no transfer of asset from which the income is received, shall be chargeable to tax as the income of the transferor. (d) Shri V.K. Mohan initially gifted the property with a revocable gift deed to his daughter and did not part away with the possession of the same to her. (e) By virtue of the Power of Attorney given by the assessee, Shri V.K.Mohan became absolute owner and hence he has acted as the undisputed owner of the Property No.2. Hence he received the entire sale consideration through his bank account and also made reinvestment in his name in order to claim exemption from capital gain. Hence he was acting as a principal himself and not as an agent of the assessee herein. (f) The gift deed also suffers from one more major lacunae for the reason that it has not been pointed out s to whether the assessee herein, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation and has every right of alienation also. And I agreed and consented for the same...." A plain reading of the recitals would show that Shri V.K.Mohan has handed over the possession of the Property No.2 to the assessee herein. 18. Further following recitals made in the irrevocable Power of Attorney dated 13-07-2005 executed by the assessee herein in favour of Shri V.K. Mohan show that the assessee herein accepted the gift and was also in possession of the property:- ".....And whereas the Property having an extent of 55.371 cents (22.40 Ares) of land comprised in Sy. No.217/9-33-1 (22.500 cents) 217/9 (1.200 cents), 206/4 (21.371 cents) 217/9-34 (3 cents) and 209/8-13 (7.250 cents) of Sasthamangalam Village has been acquired by me as per Settlement Deed No. 2244/05 dated 08-06-05 of Sasthamangalam Sub Registrar Office, Thiruvananthapuram. 19. As per the provisions of sec. 47(iii) of the Act, the transfer of property by way of settlement deed by Shri V.K.Mohan to the assessee herein is not considered as a "transfer' and hence the same is not assessable to capital gains. On the execution of the Settlement deed, the assessee herein became absolute owner of the Property No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
