Commissioner of Income Tax-I vs Gautam Manubhai Amin

M.R. Shah, J.—Present Tax Appeal is preferred by the Revenue challenging the impugned judgment and order passed by the learned ITAT dated 7.12.2012 passed in I.T.A. No. 2194/Ahd/2012 with respect to Assessment Year 2006-07 with the following proposed substantial question of law:--

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal substantially erred in law in not distinguishing the mandate given in Explanation (iii) to section 48 and section 49(1)(iii) and not appreciating that while provisions of section 49(i)(iii) is only for determining the cost of acquisition, and in the case of the assessee provisions of both the sections would apply?

The assessee in his individual capacity inherited the property i.e. Bungalow situated near Grid Sub-Station, village Gotri, Vadodara along with his brother on the demise of their father late Shri Manubhai G. Amin on 23.12.1998. The property was sold for a consideration of Rs. 3.35 crores. Thus, the assessee calculated his share of capital gain at Rs. 21,24,438/- taking the benefit of "Cost Inflation Index" as per the base year 1981-82. The Assessing Officer was of the opinion that "Cost Inflation Index" should be as per the Financial Year 1998-99, as the property was acquired by the assessee on 23.12.1998. Consequently, the capital gain was recomputed by the Assessing Officer and the assessee''s 50% share was assessed at Rs. 1,25,76,878/-.

Feeling aggrieved by and dissatisfied with the order of assessment passed by the Assessing Officer considering "Cost Inflation Index" as per the Financial Year 1998-99 on the ground that property has been acquired by the assessee on 23.12.1998, the assessee preferred appeal before the CIT(Appeals). The CIT(Appeals) relying upon the decision of the learned appellate Tribunal in the case of (2010) 35 SOT 105 which was later on affirmed by the Bombay High Court in the case The Commissioner of Income Tax-12, Aayakar Bhavan, M.K. Road, Mumbai Vs. Manjula J. Shah 309, Marine Chambers, 11 New Marine Lines, Mumbai-400 020, and held that the "Cost Inflation Index" was to be given as on 1.4.1981.

Feeling aggrieved by and dissatisfied with the order passed by the learned CIT(Appeals), the Revenue preferred appeal before learned ITAT and by impugned judgment and order the learned ITAT had dismissed the said appeal confirming the order passed by CIT(Appeals).

Feeling aggrieved by and dissatisfied with the impugned judgment and order passed by the learned ITAT, Revenue is before this Court with aforesaid proposed question of law.

Heard Shri K.M. Parikh, learned advocate appearing on behalf of the Revenue and considering the material on record and the impugned order passed by the learned ITAT as well as the order passed by the CIT(Appeals), the question which is posed for consideration is whether for considering the long term capital gain "Cost Inflation Index" is required to be considered at the date on which the property was inherited in the name of the assessee or as per the previous cost of acquisition at which previous owner had acquired the capital asset. The issue involved is squarely covered by the decision of this Court in the case of B.N. Vyas (Guardian of Minor, B.B. Vyas) Vs. Commissioner of Income Tax, and the decision of the Bombay High Court in the case of Manjula J. Shah (supra).

In the aforesaid decisions, it is held that for the purpose of computation of long term capital gain, 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 became the owner of the asset. In the aforesaid decisions, it was a case of gift. However, same analogy would be applied with respect to the property of inheritance.

In view of the above, no error has been committed by the learned ITAT in dismissing the appeal preferred by the Revenue and confirming the order passed by CIT(Appeals) allowing the indexed cost of acquisition from the base year i.e., from 1.4.1981 and thereby deleting the addition of Rs. 1,00,76,878/- on account of long term capital gain. No substantial question of law arise and hence present appeal deserves to be dismissed and is accordingly dismissed. In the facts and circumstances of the case, there shall no order as to costs.