Case Law Details

Case Name : Deputy Director of Income Tax Vs. Ms. Banita Sawhney (ITAT Delhi)
Appeal Number : ITA No. 2976/Del/2011
Date of Judgement/Order : 19/12/2011
Related Assessment Year : 2006- 07
Courts : All ITAT (5515) ITAT Delhi (1251)

Base year for calculation of index cost of acquisition of the shares in terms of Explanation (iii) to Section 48 of the Act, acquired by the assessee by way of inheritance (one of the modes specified in Section 49(1) of the Act) should be  taken as financial year 1981-82 when such shares were acquired by the previous owner prior to 1st April, 1981. As decided by bobbay high court also  in the case of CIT vs. Manjula J. Shah.

 INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH

ITA No. 2976/Del/2011, Assessment Year: 2006- 07

Deputy Director of Income Tax

Vs.

Ms. Banita Sawhney

ORDER

PER I.P. BANSAL, JUDICIAL MEMBER

This is an appeal filed by the revenue. It is directed against the order passed by the CIT (A) dated 3rd February, 2011 for Assessment Year 2006-07. The grounds of appeal read as under:-

1. On the facts and circumstances of the case, learned CIT (A) has erred in holding that base year for calculating indexed cost of acquisition would be 1981-82.

2. On the facts and circumstances of the case, learned CIT (A) has erred in not appreciating that first year in which asset was held the assessee was the first year in which it was inherited by the assessee.

3. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of appeal.”

2. The assessee had inherited property on the death of her father on 5th December, 2001. The details of the property which comprise shares has been tabulated in the order of the CIT (A) and, for the sake of convenience, the same is reproduced below:-

Company

Paid up share capital

Book      value      of building  appearing

Market   value of            building  as

in             BalanceSheet

on 1.04.1981.

(Rs.)

Sawhney

5,00,000.00

5,16,821.10

11,36,720.00

Investments          Private

Limited

Baba      Properties

2,50,000.00

2,37,656.00

5,24,640.00

Private Limited

H.S.        Investments

2,50,000.00

2,37,656.00

5,24,640.00

Private Limited

Total

10,00,000.00

9,92,133.10

21,86,000.00

3. 50% of the equity shareholding of the above companies belonged to the assessee along with Shri Harpreet Sawhney, Shri Harmeet Sawhney and Mrs. Pratiba Sawhney and was sold for a consideration of ` 2,73,75,000/-. Long term capital gain was worked out by the assessee as under:-

PARTICULARS

AMOUNT (RS.)

SALE CONSIDERATION

68,43,750.00

Less: Cost of Acquisition

Fair Market Value as on 01.04.1981 = 2,73,250.00 (As per valuation report – Rs.21,86,000* 1/8thshare)

Indexed Cost of Acquisition

= Rs.2,73,250*497/100

(13,58,053.00)

Total Long term Capital gain

54,85,697.00

4. The Assessing Officer did not agree with the version of the assessee and has adopted the cost index with effect from financial year 2001-02 when the aforementioned shares fell on the assessee on the death of her father. By taking the cost indexation from financial year 2001- 02, the Assessing Officer made an addition of Rs. 10,39,259/- to the income of the assessee. Learned CIT (A) has decided the issue in favor of the assessee on the basis of various decisions rendered by the Tribunal in which it has been held that the base year for calculation of index cost of acquisition of the shares in terms of Explanation (iii) to Section 48 of the Act, acquired by the assessee by way of inheritance (one of the modes specified in Section 49(1) of the Act) should be  taken as financial year 1981-82 when such shares were acquired by the previous owner prior to 1st April, 1981. Based upon those decisions and the decision of Special Bench of Mumbai ITAT in the case of DCIT Vs. Manjula J. Shah dated 16th October, 2009, learned CIT (A) has decided the issue in favor of the assessee. The department is aggrieved, hence, in appeal.

5. The learned DR relied upon the order of Assessing Officer. As against that the learned AR of the assessee has produced before us copy of the aforementioned Special Bench decision and it was contended that the issue is covered in favour of the assessee.

6. We have heard both the parties and we find that the learned CIT (A) while deciding the issue in favour of the assessee has relied upon the aforementioned decision of the Special Bench in which it has been stated that in case of inheritance, if the assets were acquired by the previous owner before 1st April, 1981, then, cost index should be based on the index of financial year 1981-82. Therefore, after hearing both the parties, we find no substance in the departmental appeal and the same is dismissed.

7. In the result, the appeal is dismissed.

The order pronounced in the open court on 19.12.2011.

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