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TMI Blog2014 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... f sec. 2(42A) is only for determining the period held by the as for the purpose of treating the asset as a long term capital gain and Explanation (iii) to section 48 clearly states that the cost inflation index shall be from the first year in which the asset was held by the assessee. 3. The decision of the Special Bench of the ITAT in the case of Manjula J. Shah, ITA no.7315/M/2007 dated 16.6.2009 has not been accepted by the Department." 2. Facts in brief:- The assessee has inherited through probate of Will, lease hold rights acquired from Bombay Port Trust in relation to the land and building known as "Shelleys Hotels". These lease hold rights were earlier acquired by late Shri B.R. Shelley, father of the assessee vide deed of assignment dated 28th December 1966. Shri Shelley expired on 23rd July 1993 and the lease hold rights was devolved upon the assessee through the probated Will. The assessee sold the assignment lease hold rights, vide deed of assignment dated 22nd December 2006 to Shubh Hospitality Pvt. Ltd. The Assessing Officer held that since the assessee had acquired the asset from her late fatHer on 23rd July 1993, and therefore, indexation should be allowed from this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable in the case of the appellant and not the provisions of section 55(2)(b) which apply to "other capital asset", as the capital asset under reference is "leasehold rights." II.(i) Learned CIT(A) erred in law as well as on facts in disallowing the claim of the appellant made u/s.54F. (ii) Erred in not accepting that the house property under reference was purchased by the appellant with the basic intention to use the same for commercial purposes and as such should not have been held that the appellant has purchased residential house. (iii) Erred in not appreciating the fact that till 31.3.2007 the possession of said the property was not made available to the appellant by the builder for want of completion of the work and in absence of any user of the property till 31.3.2007, erred in holding that the appellant has acquired residential house in assessment year 2007 -08 and thereby denying the claim of appellant under the provisions of section 54F." 6. As stated in the forgoing paragraphs, the assessee had acquired lease hold rights of the land and building through Will from her late father, who had acquired the lease hold right at Rs. 3.50 lakhs, vide deed of assignment dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties and on a perusal of the findings of the Assessing Officer and the learned Commissioner (Appeals), we find that both the Revenue authorities have held that cost of acquisition should be taken on the value on which it was acquired by the previous owner that is at 3.50 lakhs, on 28th December 1966. Whereas, the assessee has adopted the market value as on 1st April 1981, for the purpose of cost of acquisition. In the present case, the subject matter of sale is lease hold rights. Section 55 provides the meaning of "adjustment", "cost of improvement" and "cost of acquisition" for the purpose of section 48 and 49. Sub-section (2) of section 55, provides the meaning of cost of acquisition in the following manner:- (2) [For the purposes of sections 48 and 49, "cost of acquisition",- [(a) in relation to a capital asset, being goodwill of a business [or a trade mark or brand name associated with a business] [or a right to manufacture, produce or process any article or thing] 1[or right to carry on any business], tenancy rights, stage carriage permits or loom hours,- (i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential flat no.ACER-502 at Mundhwa, Pune, for consideration of Rs. 1,25,00,000, on 17th February 2007. The Assessing Officer required the assessee as to why the claim for deduction claimed under section 54F, should be allowed under proviso (a)(ii) to section 54F(1), which provides that the claim for deduction will not be allowed to the assessee who has purchased any residential house other than the new asset within a period of one year after the date of transfer of original asset. In response, the assessee submitted that the claim under section 54F, is made for investment in residential house for Forest Castles Flat at Pune in connection with the capital gain arising from the sale of lease right of Shelley Estate. The other two flats purchased in Water Front at Pune was not meant for residential purpose but the basic intention of the assessee was to use it for commercial purpose. Besides this, till 31st March 2007, possession of this property was not given to the assessee by the builder as it was given on 29th May 2007, the assessee was handed over the possession of the said flats, therefore, her claim cannot withdrawn. The Assessing Officer rejected the assessee's contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be held that the assessee has bought residential unit other than the one purchased earlier. In other words, he reiterated the submissions made before the authorities below. 17. On the other hand, the learned Departmental Representative strongly relied upon the order of the Assessing Officer and the learned Commissioner (Appeals) and submitted that there is a clear cut violation of the conditions as laid down in section 54F, as given in proviso thereto, therefore, the claim of deduction has rightly been denied by the Assessing Officer and confirmed by the learned Commissioner (Appeals). 18. We have heard the rival contentions, perused the relevant findings of the authorities below and the material available on record. The assessee has claimed the deduction under section 54F on account of long term capital gain, arising out of sale of lease right of the property. The capital gain arising out of transfer of such a long term capital asset was utilized for purchasing of a residential flat at Forest Castles, Mundhawa, Pune. Besides this, the assessee has also purchased two adjacent flats in a different locality and in a different building called as Water Front. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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