IN THE ITAT MUMBAI BENCH ‘A’

Smt. Lata G. Rohra

v.

Deputy Commissioner of Income-tax, C.C. 39, Mumbai

R.K. Gupta, Judicial Member

and V.K. Gupta, Accountant Member

IT Appeal No. 1883 to 1885 (Mum.) of 2007

[Assessment year 2004-05]

February 8, 2008

Section 48, read with sections 263 and 2(14), of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 2004-05 - Whether under section 48 benefit of indexation should be given on basis of date of cost of acquisition of asset and not on basis of dates of actual payments made - Held, yes

Facts

The assessee vide unregistered agreement with a developer purchased a flat in 1993 which was constructed in the year 1997 and registered in the year 1998. During the relevant year, the assessee sold said flat and after claiming the indexed cost at Rs. 18.74 lakhs showed long-term capital gain at Rs. 39.42 lakhs. The Assessing Officer worked out indexed cost of acquisition on the basis of purchase price from 1993 and completed the assessment. However, the Commissioner was of the view that the assessee had not filed any evidence with respect to various payment made towards the purchase price and the indexed cost of acquisition worked out on the basis of financial year 1993 was incorrect and, hence, the assessment order was erroneous and prejudicial to the interest of revenue. Accordingly, he initiated revision proceedings under section 263. The Commissioner, however, set aside the order of Assessing Officer and directed the Assessing Officer to compute the correct long-term capital gain by adopting the indexed cost of acquisition on the basis of the date on which the property was held after registration of the conveyance deed. In instant appeal, the assessee contended that she was deemed to be owner for property from 7-8-1993 and, accordingly, the capital gain was to be worked out from that date as per Explanation (iii) to section 48, and since the asset had been held for the first time in 1993, cost inflation index of that year was to be applied on the total purchase consideration payable by the assessee as per agreement regardless of the dates of the actual amount paid by her.

Held

As per section 2(14), read with section 2(14)(vi), the rights in flat, acquired by the assessee on execution of purchase agreement on 7-8-1993, came within the purview of the term ‘capital asset’. From the perusal of language used in Explanation (iii) to section 48, which provides for manner of computation of indexed cost of acquisition, it is apparently clear that it refers only to date of cost of acquisition of the asset and not actual payments made by the assessee. Hence, there was no merit in the contention of the revenue that the benefit of indexation should be given on the basis of dates of actual payments made by the assessee. Thus, on merits, the issue was covered in favour of assessee. However, regarding jurisdiction for invoking the provisions of section 263, it was found that the assessee filed necessary details before the Assessing Officer and the Assessing Officer had passed assessment order after taking into consideration the same. Hence, merely for the reason that no specific findings had been given in the assessment order, the same could not be said have been passed without application of mind. In this view of the matter, the order under section 263 passed by the Commissioner was to be set aside. [Para 9]

In the result, the appeal filed by the assessee stood allowed. [Para 10]

Case review

Charanbir Singh Jolly v. 8th ITO [2006] 5 SOT 89 (Mum.) followed. (para 9)

Cases referred to

CIT v. Smt. R.R. Sood [1986] 161 ITR 92/24 Taxman 498 (Bom.) (para 5), Ravi Kumar Narula v. CIT [2001] 249 ITR 480/118 Taxman 641 (Delhi) (para 5), CIT v. Dr. D.A. Irani [1998] 234 ITR 850 (Bom.) (para 5), CIT v. Tata Services Ltd. [1980] 122 ITR 594/[1979] 1 Taxman 427 (Bom.) (para 6), CIT v. Sterling Investment Corpn. Ltd. [1980] 123 ITR 441/[1979] 1 Taxman 396 (Bom.) (para 6), ITO v. Smt. Kashmiraben M. Parikh [1993] 66 Taxman 31 (Ahd.) (Mag.) (para 6), Mrs. Manju Agarwal v. Asstt. CIT [IT Appeal No. 3923 (M) of 2002, dated 16-9-2004] (para 6), Jitendra Mohan v. ITO [2007] 11 SOT 594 (Delhi) (para 6), M. Syamala Rao v. CIT [1998] 234 ITR 140 (AP) (para 6), CIT v. Anilaben Uppendra Shah [2003] 262 ITR 657 (Guj.) (para 6), Charanbir Singh Jolly v. 8th ITO [2006] 5 SOT 89 (Mum.) (para 6), Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC) (para 6), Saw Pipes Ltd. v. Addl. CIT [2005] 3 SOT 237 (Delhi) (para 6), Jogadhri Electric Supply & Industrial Co. v. CIT [1987] 166 ITR 143/32 Taxman 23 (Punj. & Har.) (para 6), Venkata Krishna Rice Co. v. CIT [1987] 163 ITR 129/30 Taxman 528 (Mad.) (para 6), Nazarabad Plantation v. State of Karnataka [1984] 150 ITR 499 (Kar.) (para 6) and CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625/92 Taxman 541 (SC) (para 8).

R.R. Vora for the Appellant. U.K. Shukla for the Respondent.

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