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TMI Blog2021 (8) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... med to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be - when an asset is acquired by way of inheritance, the cost of acquisition of the asset should be calculated on the basis of the cost of acquisition by the previous owner and the said cost of acquisition of the previous owner has to be calculated on the basis of indexed cost of acquisition as provided in explanation (3) to Section 48. Though in the definition of 'indexed cost of acquisition', the word used are, in which the asset was held by the assessee a harmonious reading of Sections 48 and 49 makes it clear that, for the purpose of 'Indexed Cost of Acquisition', it has to be understood as the first year in which the previous owner held the said property. Otherwise, if the date of inheritance is taken into consideration, then the cost of acquisition of the asset on that date corresponding to the market value is to be taken into consideration. Otherwise, take the cost of acquisition on the day the previous owner acquired it and apply the Indexed Cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty stood registered. 5) The learned CIT(A) ought to have appreciated that the apartment was deemed to have been held by the Appellant from the date of execution of Joint Development Agreement (JDA) which has been honored and the payment schedule has been made accordingly without default and consequently the apartment is deemed to have been held by the Appellant from 09.06.2006 and the Cost Inflation Index as computed by the Appellant was correct and complete and the impugned disallowance as made by the CIT(A) is opposed to law and liable to be deleted. 6) The learned CIT(A) ought to have appreciated that there are judicial precedence supporting the claim of the Appellant and he ought to have accepted the explanation and refrained from disallowing the claim of the Appellant. 7) The learned CIT(A) ought to have allowed the cost of improvement of ₹ 5,72,000/- claimed by the Appellant. 8) The learned CIT(A) ought to have appreciated that though bills were not provided, the Appellant had given corroborative evidence and the cost of improvement claimed was also in accordance with the fair market value and no inflation could be contemplated to justify the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provided. Further the AO determined the inflated cost only from the date of registration of sale deed i.e., 17.05.2010 and consequently arrived at capital gain at ₹ 83,37,613 which caused an addition of ₹ 42,28,768 to the returned income. 5. Before the CIT(Appeals), the assessee submitted that that the agreement to sell the undivided share and also the agreement for determination of value of the property were executed on 09.06.2006 and the Appellant had constructive possession of the land from that date as contemplated under Section 53A of the Transfer of Property Act read with Section 2(47)(v) of the IT Act. The construction of the apartment was for and on behalf of the Appellant for which the cost was incurred from time to time as per the scheme of payment provided in the agreement and accordingly the Appellant had rightly computed the Cost Inflation Index while computing the capital gain. Further it was not a case of purchase when the property stood registered. The apartment was deemed to have held by the Appellant from the date of execution of Joint Development Agreement (JDA) which has been honoured and the payment schedule has been made accordingly without de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellant was correct and the impugned disallowance is liable to be deleted. Further, reliance was placed on the order of the Tribunal in the case of L. Vivekananda in ITA No.1087/Bang/2018 dated 18.11.2020. 8. The ld. DR relied on the orders of lower authorities. 9. We have heard both the parties and perused the material on record. The contention of the assessee is that for the purpose of computation of capital gain, indexation of cost of acquisition is to be made from the date of incurring various payments for the purpose of acquisition of capital asset which is subject matter of charging of capital gain. However, the lower authorities considered the date of registration of the property in favour of assessee i.e., 17.5.2010 and determined the capital gain. In our opinion, as decided by the Tribunal in the case of L. Vivekananda (supra) , the cost of acquisition of assessee has to be considered from the date of incurring the expenditure to acquire the capital asset. The observations of the Tribunal in that case are as follows:- 10. `We have heard the rival submissions and perused the materials available on record and gone through the orders of the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enabling the enjoyment of any immovable property, also constitutes transfer and the assessee is said to hold the said property for the purpose of the definition of 'short-term capital gain'. In fact, the Circular No.495 makes it clear that transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are common mode of acquiring flats particularly in multistoried constructions in big cities. The aforesaid new subclauses (v) and (vi) have been inserted in Section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. A person holding the Power of Attorney is authorized the powers of owner, including that of making construction though the legal ownership in such cases continues to be with the transferor. The intention of legislature is to treat even such transactions as transfers and the capital gain arising out of such transactions are brought to tax. Further, the Circular No.4 71 goes to the extent of clarifying that for the purpose of Income-tax Act, the allott ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle deed, the assessee holds that property and therefore, it is the point of time at which he holds the property, which is to be taken into consideration in determining the period between the date of acquisition and date of transfer of such capital gain in order to decide whether it is a shortterm capital gain or a long term capital gain. 10.1 Further, in the case of Richa Bagrodia in ITA No.3601/Mum/2012 dated 22.4.2014, the Tribunal considered similar issue and observed as under: 4. We heard both the parties and perused the orders of the Revenue Authorities as well as the judgments of the Hon'ble High Court and the decisions of the Tribunal cited by learned representatives of both the parties. The only issue that is to be decided is whether the date of allotment of the flat or the date of possession of the flat by the assessee should be considered as the date for computing the holding period of 36 months. On perusal of the cited orders of the Tribunal (supra), we find that an identical issue came up for adjudication before the Tribunal in the case of Meena A Hemnani (supra), order dated 17th January, 2014 wherein one of us (AM) is a party and the issue was decided in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id judgment was decided considering the judgment of the Gujarat High Court in the case of CIT vs. Anilaben Upendra Shah (2003) 262 ITR 657 (Guj) apart from other decisions of the Tribunal in the case of Jitendra Mohan vs. ITO (2007) 11 SOT 594 (Del) and also another decision of the ITA T in the case of Pravin Gupta vs. ACIT and the relevant propositions are extracted in para 7 of the Tribunal's order dated 7.11.2012. The said paras 7 and 8 from the order of the Tribunal in the case of Smt Vandana Rana Roy read as under: 7. We have heard both the parties, perused the cited decisions and we find that there is no dispute on the facts The only issue that is to be decided is whether date of allotment of the flat or the date of possession of the fiat by the assessee should be considered as date of holding for computing the holding period of 36 moths. In alternative, the date of registration should be the relevant date. On perusal of the said decisions relied upon by the Ld Counsel, we find that the decisions are relevant and applicable to the facts of the present case. The conclusion of the Hon ble Gujarat High Court judgement in the case of CIT Vs. Jindas Panchand Gandhi reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Gains. Therefore, in our opinion, order of the CIT (A) does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed. 4. Considering the above settled nature of this issue, we are of the opinion that the assessee must succeed on this issue. Accordingly, the relevant grounds of appeal are allowed. 7. From the above settled position of the issue, it can be safely concluded that the date of allotment should be reckoned as the date for computing the holding period for the purpose of capital gains. In the instant case, the date of allotment is 11.04.2003 (FY 2003-2004) and the date of sale of the property is 14.10.2007 , therefore the holding period is more than 36 months. Therefore, the capital gains earned by the assessee on the sale of the flat have to be treated as 'long term capital gains'. The assesee paid the first installment on 11.4.2003, thereby conferring a right to hold a flat, which was later identified and possession delivered on later date. The Hon'ble Punjab Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT vide Income Tax Appeal No.89 of 1999, dated 17th January, 2014 held that the mere fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the tribunal is right in law in concluding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee through succession, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee actually became the owner of the asset through succession? 7. Section 45 of the Act provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head Capital gains . Capital Gains is of two types. Short-term capital gains and long term capital gains. Depending upon the nature of capital gains the liability of the tax is determined. The mode and manner of computing the capital gains is provided under Section 48 of the Act. The income chargeable under the head capital gain shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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