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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 ..... n section 55(2)(a)(ii) will not be applicable – thus, the cost of acquisition has to be worked out as per clause (b) of section 55(2), which provides that it is the option of the assessee if the property has been acquired by the assessee before 1st April 1981 to adopt the fair market value as on 1st April 1981 - the assessee has opted to fair market value as on 1st April 1981, and therefore, the assessee has rightly adopted the fair market value of the asset as on 1st April 1981 – thus, the order of the CIT(A) is set aside and the AO is directed to take the fair market value as adopted by the assessee as on 1st April 1981 for the purpose of cost of acquisition – Decided in favour of assessee. Claim made u/s 54F disallowed - acquisition of another residential house - Held that:- The assessee has claimed the deduction u/s 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 - the assessee has also purchased two adjacent flats in a different locality and in a different building called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpired 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 date and not from 1st April 1981, as claimed by the assessee. The learned Commissioner (Appeals), however, allowed the assessee s claim following Special Bench decision of the Tribunal, Mumbai Bench, in DICT v/s Manjula J. Shah, 318 (AT) 417 (SB), wherein it was held that for the purpose of indexation the date should be reckoned from the date from which the original owner held the property. 3. Before us, both the parties admitted that the decision of the Special Bench of the Tribunal has now been approved by the Hon'ble Jurisdictional High Court, since reported in [2013] 355 ITR 474. 4. In view of the admitted position of law as upheld by the Hon'ble Jurisdictional High Court in Manjula J. Shah (supra), that indexed cost of acquisition as envisaged in Explanation (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty 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 ₹ 3.50 lakhs, vide deed of assignment dated 28th December 1966, and the assessee had acquired the said lease hold on the said property through Will on 23rd July 1993. These lease hold rights were later on assigned or sold vide deed of assignment dated 22nd December 2006, for ₹ 15,86,19,000. The assessee has taken the fair market value of the said lease hold right on the property as on 1st April 1981, while computing the long term capital gain. The Assessing Officer, however, held that the assessee s option to take the market value as on 1st April 1981, is not correct and the same should be taken at the cost to the earlier owner i.e., who had acquired it which was for ₹ 3.50 lakhs. After analysing the provisions of section 55, in detail, he took the cost of acquisition at ₹ 3.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 of the purchase price; and (ii) in any other case [not being a case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49], shall be taken to be nil; 11. Thus, clause (a) of sub section (2) of section 55, provides that for the purpose of section 48 and 49, the cost of acquisition in relation to a capital asset as mentioned in clause (a) is to be adopted in two way one in case where asset has been acquired by way of purchase from the previous owner then it is the amount of purchase price and secondly, in other cases not covered within sub clause (i) to (iv) of sub section 1 of section 49, then it shall be taken at nil . Thus, in the later category, the cost of acquisition has to be taken at nil un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght 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 and held that the proviso (a)(ii) to section 54F(1) clearly prohibits the claim of deduction under section 54F if the assessee has purchased any other residential house besides one residential house, purchased within the period of one year. The documents submitted by the assessee i.e., purchase agreement clearly suggested that the two new flats at Water Front were residential units and hence, the intention to use as commercial as claimed by the assessee, does not absolve the assessee. Accordingly, he held that exemption under section 54F on the purchase of residential flat on long term capital gain will not be available to the assessee. 15. Before the learned Commissioner (Appeals), the same co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low 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 Officer has denied the claim of exemption under section 54F on the ground that the assessee has purchased residential house again after purchasing earlier residential unit within a period of one year from the date of transfer. This clearly prohibits the claim of deduction under section 54F under sub clause (ii) of clause (a) of proviso to section 54F(1). Whereas, the assessee s case has been two fold i.e., the second residential flat purchased in the building Water Front was intended to be used for commercial purpose and secondly, without prejudice the possession of the said flats were given in the next financial year i.e., on 29th May 2007, therefore, the claim of deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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