- (1.) This appeal has been preferred by the asses-see under section 260A of the Income-tax Act, 1961 (in short, "the Act"), against the order dated May 15, 2013, annexure A-3, passed by the Income-tax Appellate Tribunal; Chandigarh Bench, Chandigarh in I.T.A. No. 172/Chd/2010 for the assessment year 2006-07, claiming the following substantial questions of law: "(i) Whether, in the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has fallen in error in applying the ratio of the judgment of the Hon'ble court in the case of CIT v. Raja Malwinder Singh, 2011 334 ITR 48(P&H) [FB] to the facts and circumstances of the present case? (ii) Whether, in facts and in the circumstances of the case, the Income-tax Appellate Tribunal has fallen in error in applying the provisions of section 55(3) of the Income-tax Act to compute the capital gain even though there was no cost of acquisition of the acquired land and thus no profits and gains could be computed on acquisition of the same?" A few facts relevant for the decision of the controversy involved, as narrated in the appeal may be noticed. Agricultural land measuring 146 kanals 19 marlas was situated within the municipal limits of Barnala which was acquired by the Improvement Trust, Barnala. Compensation of Rs. 2,77,51,294 was awarded as per the award dated November 28, 2005. Since the land was gifted to the appellant by the Maharaja of Patiala, the cost of acquisition of the land was the same as to the Maharaja of Patiala. Since the Maharaja did not incur any cost, the same was not chargeable to tax under section 45 of the Act. The Assessing Officer rejected the said plea of the appellant, vide order dated December 24, 2008, Annexure A.1 by holding that as per the provisions of section 55(3) of the Act, even in cases where the cost of acquisition to the previous owner could not be ascertained, the same had to be computed by taking into account the fair market value of the assets as on April 1, 1981. The Assessing Officer adopted the market value of the land as on April 1, 1981, and computed the capital gains in relation to the acquisition of land. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (CIT(A)). Vide order dated December 8, 2009, annexure A. 2, the Commissioner of Income-tax (Appeals) set aside the order passed by the Assessing Officer and deleted the addition on account of capital gains made by the Assessing Officer. Not satisfied with the order, the Revenue filed an appeal before the Tribunal on the ground that the Commissioner of Income-tax (Appeals) had erred in holding that the compensation received on account of acquisition of land of the assessee was not eligible to tax as neither the assessee nor the previous owner had incurred any cost to acquire the asset. Vide order dated May 15, 2013, annexure A. 3, the Tribunal accepted the appeal by placing reliance on the Full Bench decision of this court in Raja Malwinder Singh's case . Hence, the present appeal by the assessee.
(2.) We have heard the learned counsel for the appellant-assessee and perused the record.
(3.) Learned counsel for the assessee-appellant submitted that the cost of acquisition in the present case had to be taken as the cost to the previous owner under section 49 of the Act. The Explanation to section 49 specifically provides that the previous owner is one who has acquired the asset by a mode other than referred to in clauses 1, 2, 3 and 4 of this sub-section. It was further argued that the previous owner under the Act is a person who has acquired the asset by payment of money, i.e., the cost incurred for acquisition of the asset. In case the previous owner has not incurred any cost neither the provisions of section 55(2)(b) nor the provisions of section 55(3) of the Act would apply. Support was drawn from the judgment of the apex court in CIT v. B.C. Srinivasa Setty, 1981 128 ITR 294(SC) and the judgment of the Gujarat High Court in CIT v. Manoharsinhji P. Jadeja, 2006 281 ITR 19(Guj).;