The Income Tax Appellate Tribunal, Hyderabad Bench has held that when the property is acquired as a gift or will, the tax liability is calculated based on the cost of acquisition u/s 49(1) of the Income Tax Act,1961.
Shri C S Subrahmanyam appeared on behalf of the assessee and Shri Rohit Mujumdar appeared on behalf of the revenue.
The assessee is an individual who derives income under various heads viz., salary, capital gains, income from house property and income from other sources. The assessee filed his return of income declaring a total income of Rs. 52,57,120. The assessee had shown the cost of acquisition for flat No. 914 of SMR Vinay Symphony as Rs. 27,43,000/- whereas for flat No. 319 in the same apartment the cost of acquisition was shown as Rs. 6,50,000/-. The Assessing Officer noted that the assessee acquired flat No. 914 from his mother Smt. Saritha under a gift deed and the cost of acquisition was taken as the fair market value of such flat at the time of receipt of such flat by Smt. Saritha.
The Assessing Officer had taken the value of the land that was transferred for a joint development agreement as to the cost of acquisition in the hands of the mother of the assessee and the cost of acquisition for the assessee at Rs. 6.5 Lakhs are computed as the capital gains. The assessment was completed by determining the total income of the assessee at Rs. 82,83,760/- and made an addition of Rs. 30,26,635/- under the head ‘Long Term Capital Gains’.
The mother of the assessee, under the sale deed, purchased 116 square yards of land out of 216 square yards of land in Survey No. 79 for a total consideration of Rs. 4,79,660/-. The mother of the assessee received flat No. 914 in exchange for the land that was transferred by her under the joint development agreement.
The assessee contended that the mother of the assessee valued the flat at Rs. 27,23,000/- and offered to tax the capital gains arising therefrom and the assessee insisted that the cost of acquisition of plot No. 914 in the hands of the mother was not Rs. 5,25,660/- but was Rs. 27,23,000/-.
The Tribunal viewed that u/s 49(1) of the Income Tax Act,1961, when the capital asset becomes the property of the assessee, under a gift or will, 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 increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee. The provision didn’t mention the expression ‘fair market value’.
Shri Rama Kanta Panda, accountant member & Shri K Narasimha Chary, judicial member observed that merely because of some voluntary act of the mother of the assessee in valuing the property on the higher side at the time of receiving of the same is not valid and upheld the findings of the CIT(A). The appeal of the assessee was dismissed.
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