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TMI Blog2015 (5) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... to an assessee by allowing indexation is with a view to offset the effect of inflation. As per CBDT Circular No.636, dated August 31, 1992, a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular further provides that the cost of acquisition and the cost of improvement have to be inflated to arrive at the indexed cost of acquisition and the indexed cost of improvement and then deduct the same from the sale consideration to arrive at the longterm capital gains. If indexation is linked to the period of holding the asset and in the case of an assessee covered under section 49(1) of the Act, the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee.Since the assessee, in the present case, is held liable for long-term capital gains tax by treating the period for which the capital asset in question was held by the previous owner as the period for which the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trict Valuation Officer, as determined by the Commissioner of Income Tax (Appeals) ? b) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in applying the cost inflation index with effect from 1.4.1981 instead of the year 1999-2000, in which the assessee inherited the property, contrary to the provisions of Explanation (iii) to section-48 of the Income Tax Act, 1961, to the effect that it would be applied with effect from the first year in which the assessee held the property, or 1.4.1981, whichever is later, on the ground that a literal interpretation of the provisions was to be discarded ? c ) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in holding that the rent from the property at Panchasheel Park, New Delhi, was to be assessed under the head Income from House Property and not as Income from Other Sources , though the land stood in the name of the assessee s husband? The facts and circumstances of the case are briefly stated as follows:- A residential house situate at Premises No.47, Golf Links, New Delhi was purchased by Sardar Pratap Singh on 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation made by the registered valuer was on the higher side, there was no occasion for the assessing officer to refer the matter to the valuation officer under section 55A. therefore, the valuation at a sum of ₹ 18,40,244/- as at 1st April, 1981 was correctly accepted by the learned Tribunal. The first question is answered in the positive and against the revenue. Mr. Agarwal, learned advocate appearing for the revenue submitted that the computation of capital gains has to be made in accordance with section 48 and in particular explanation (iii), which provides as follows:- (iii) indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as the 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 Mr. Agarwal is correct when he submitted that the benefit of cost inflation index going by clause (iii) of the Explanation quoted above should be available to the assessee from the year 1999 when she inherited the property which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T- I Vs. Rajesh Vitthalbhai Patel reported in (2013) 37 Taxmann. Com 439 wherein the following views were expressed:- 7. Under section 48 of the Act, thus capital gain is computed by deducting from the full value of the consideration received or accruing as a result of the transfer, the amounts of expenditure incurred wholly and exclusively in connection with such transfer, the cost of acquisition of the asset and the cost of any improvement thereto. Term cost of acquisition of the asset is explained in Explanation (iii) to section 48. In terms of such explanation, indexed cost of acquisition would be an amount which bears to the cost of acquisition the same proportion as the 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. In simple words therefore for an asset acquired prior to 1.4.1981 the indexed cost of acquisition would be the cost of acquisition multiplied by the ratio of the Cost Inflation Index in the year in which assessee s asset is transferred to the Cost of Inflation Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation sought to be given by the Revenue would be unacceptable because there is no provision under which the cost of acquisition in the hands of the assessee in cases such as gift on the date of acquisition of the property can be made and found in the Act. A Serious road-block would be created if such property is acquired through Will and would, therefore, have no reference to its actual cost on the date of operation of the Will . Mr. Murarka has also relied upon a judgment of C.I.T Vs. Manjula J. Shah reported in (2013) 355 ITR 474 (Bom) and referred to paragraphs 21 to 24 of the judgement which are as under:- 21) To accept the contention of the Revenue that the words used in clause (iii) of the Explanation to section 48 of the Act has to be read by ignoring the provisions contained in section 2 of the Act runs counter to the entire scheme of the Act. Section 2 of the Act expressly provides that unless the context otherwise requires, the provisions of the Act have to be construed as provided under section 2 of the Act. In section 48 of the Act, the expression asset held by the assessee is not defined and, therefore, in the absence of any intention to the contrary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49(1) of the Act, the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee. 24. Since the assessee, in the present case, is held liable for long-term capital gains tax by treating the period for which the capital asset in question was held by the previous owner as the period for which the said asset was held by the assessee, the indexed cost of acquisition has also to be determined on the very same basis. For the aforesaid reasons, the second question is answered in the affirmative and against the revenue. In so far as the third question is concerned, Mr. Agarwal was not in a position to draw our attention to any definition of the expression owner . Section 27 provides an inclusive definition of the expression owner . An inclusive definition is not an exhaustive definition in law. We can imagine a situation where a person can be the owner of the land and another can be the owner of the structure. This is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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