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TMI Blog2021 (9) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... t, there are different modes of acquisition. Where the capital asset became the property of the assessee, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it as per section 49 of the Income Tax Act, 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. In the present case, the assessees have acquired the property through settlement deed. The settlement deed duly executed becomes effective immediately during life time of all the parties. The period of holding by the assessee s grandfather, who was the previous owner of the said property, should be taken into account both for indexation and for long term capital asset. Both the assessees have acquired the property on 10.10.2005 and sold the property on 12.09.2012 and thus, both the assessees are eligible to avail the benefit under section 54 of the Act as the asset held by the assessees are long term capital asset Assessing Officer has to assess the long term capital gain by taking into consideration of the period of holding of the property by the previous owner i.e. grandfath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g influenced by the earlier Order dated 03.10.2016. 2.2 The action of the Commissioner of Income Tax(Appeals) in merely repeating the earlier order of the CIT(A), has completely invalidated the purpose for which this Hon'ble Tribunal remanded the matter back. 2.3 The Commissioner of Income Tax (Appeals) ought to have independently adjudicated the issues regarding indexation of cost and the exemptions u/ss. 54 and 54EC instead of merely agreeing with the conclusions of his predecessor. 3.1 The Commissioner of Income Tax (Appeals) erred in holding that what was transferred by the assessee is only a short-term capital asset. 3.2 The Commissioner of Income Tax (Appeals) failed to note that the property having been acquired by one of the modes covered under s. 49( 1) of the Act, the period of holding of the previous owner is also to be considered. 4.1 The Commissioner of Income Tax (Appeals) erred in withdrawing the benefit of indexation and deduction u/ss. 54F and 54EC of the Incometax Act, without considering the issues in light of s.46 of the Transfer of Property Act, 1882, despite the categorical directions of this Hon'ble Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Roshan David : ₹. 2.03 crores Deep David : ₹. 2.03 crores While computing the capital gains, the assessee took the benefit of cost of asset to the previous owner and indexed cost of asset to the previous owner and also claimed deduction under sections 54 54EC of the Act. The Assessing Officer examined the settlement deed and observed that the settlement deed dated 10.10.2005 was made by the Settlor JA David, assessee s grandfather, who was made a settlement in favour of his younger son Shri Roopan Rajnookant David, the settlee whereas his elder son Shri Charles Vinukant David will have no right over the property. The settler Shri J A David reserve his right saying that after the lifetime of the Settlor and his wife, Shri Roopan Rajnookant David can take possession of the said property and can enjoy the property during his lifetime without any power of alienation. Further after the lifetime of Shri Roopan Rajnookant David, the Settlee, Shri Deep David and Shri Roshan David (sons of Settlee and the grandsons of Settlor) can jointly take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be available. Thus, the asset is owned by Deep David and Roshan David which was acquired by them, not through inheritance without incurring any cost to the asset. Hence, in this case, the transfer of property will not be covered by section 49(1) of the Act. Therefore, the ld. CIT(A) has held that the assessee will not be eligible to cost of asset to that of the previous owner in view of Explanation 1, to section 2(42A)(b) of the Act. Further, according to ld. CIT(A), the property in question has been sold by the Shri Deep David and Shri Roshan David by taking consent of their father, the benefit of cost to the previous owner will be lost and for Shri Deep David and Shri Roshan David the cost of acquisition will be NIL. Moreover, as the provision of section 49(1) r.w.s. 2(42A) the period of only Shri Deep David and Shri Roshan David will be a short term period as the transfer of asset does not get the benefit of period of holding to that of previous owner in view of section 49(1) as the asset is not inherited to Shri Deep David and Shri Roshan David. Considering this factual aspect, father of Shri Deep David and Shri Roshan David had no right to alienate the property. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhancing the assessment by withdrawing the cost of indexation to the previous owner and exemption under section 54 of the Act. Further, it was the submissions of the ld. A.R. that the computation of capital gains as short term capital gains and also withdrawal of the exemption under section 54EC of the Act was not justified. However, ld. DR submitted that the assessee took a new plea with regard to applicability of section 46 of Transfer of Property Act, 1882, which was not raised before the lower authorities. Hence, it may be remitted to the file of the ld. CIT(A) for fresh consideration. 2.6 After considering the submissions of the both sides, the Coordinate Benches of the Tribunal has observed that the issue of applicability of section 46 of Transfer of Property Act, 1882 was raised before the Tribunal for the first time and it was not raised before the authorities below and accordingly remitted the matter back to the file of the ld. CIT(A) for de novo consideration and decide the issue after giving an opportunity of hearing to the assessee. 3. Upon the directions of the Tribunal in its order in I.T.A. Nos. 43 44/Mds/2017 dated 19.04.2017 and considering the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 that as the asset is treated as short term capital asset, deduction u/s 54EC of the Act will not be available to the assessee. Hence the AO is directed to withdraw the deduction granted to the assessee u/s.54EC of the Act. 5. In result the appeal of the assessee is dismissed. 4. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted the ld. CIT(A) has passed the appellate order erroneously by simply repeating the earlier appellate order and not independently considered the submissions of the assessee without influencing the previous order with respect to application of section 46 of the Transfer of Property Act,1882 as well as application of beneficial provision of section 54 of the Act. It was further submission that both the assessees have acquired the property in 2005 itself when the grandfather executed the settlement deed reserving right of residence for him and his spouse and enjoyment for his son. When life-interest was surrendered, that is also treated as a transfer, which can give rise to a gift tax assessment. The action of the Assessing Officer and the ld. CIT(A) in including the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, where such interests were of unequal value, proportionately to the value of their respective interests. In this case, the assessee s father got lifetime enjoyment right over the property. By virtue of extinguishing lifetime enjoyment right over the property, the assessee s father along with his two sons [both the assessees] sold the scheduled property and the sale consideration was shared without any dispute. As per section 2(47)(ii) of the Income Tax Act, the transfer , in relation to a capital asset, includes the extinguishment of any rights therein. Admittedly, the assessee s father has extinguished his lifetime enjoyment right over the property and if we conjointly read together the section 46 of the Transfer of Property Act as well as section 2(47)(ii) of the Income Tax Act, it would be clear that the assessee s father has lawfully extinguished his lifetime enjoyment right over the property. 5.1 The scheduled property was originally acquired by the grandfather of the assessees from the TNHB through allotment on 31.10.1969 and he had constructed a residential building with his own funds in 1985-86 and was under his possession. On 10.10.2005, Shri JA David [grandf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case also, out of total sale consideration, the share of 10.94% was legally and rightly given to the assessee s father, who held lifetime enjoyment right, which was relinquished and thereby both the assessees sold the said property. Thus, respectfully following the above decision of the Hon ble Madras High Court, the Assessing Officer is directed to compute the capital gains only for ₹.2.03 crores each in the hands of both the assessees and not the entire sale consideration. 6. So far as benefit of cost of indexation is concerned, both the assessees have acquired the scheduled property through settlement deed executed by the grandfather of the assessees . To determine the cost, there are different modes of acquisition. Where the capital asset became the property of the assessee, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it as per section 49 of the Income Tax Act, 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. In the present case, the assessees have acquired the property through settlement deed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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