Period of holding of inherited property to include duration of possession of asset by previous owner

IT : In computing long term capital gains on sale of inherited asset, indexed cost of acquisition is to be computed with reference to year first held by previous owne

HIGH COURT OF GUJARAT

Commissioner of Income-tax -I

v.

Gautam Manubhai Amin

Section 48, read with section 49, of the Income-tax Act, 1961 - Capital gains - Computation of [Inherited property] - Assessment year 2006-07 - Whether for purpose of computing long-term capital gains in hands of an assessee who has acquired an asset under inheritance, indexed cost of acquisition of such capital asset is to be computed with reference to year in which previous owner first held said asset - Held, yes [Para 7] [In favour of assessee]

FACTS

 

■		The assessee inherited property along with his brother on the demise of their father on 23-12-1998. The property was sold for a consideration of Rs. 3.35 crores. 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 passed an order of assessment considering "Cost Inflation Index" as per the Financial Year 1998-99 on the ground that property had been acquired by the assessee on 23-12-1998. On appeal, Commissioner (Appeals) held that the "Cost Inflation Index" was to be taken with reference to 1-4-1981.
■		On appeal, the Tribunal confirmed the order passed by the Commissioner (Appeals).
■		On Revenue's Appeal:

HELD

 

■		The issue involved is squarely covered by the decision of this Court in the case of B.N. Vyas v. CIT [1986] 159 ITR 141/25 Taxman 133 and the decision of the Bombay High Court in the case of CIT v. Manjula J. Shah [2012] 204 Taxman 691/16 taxmann.com 42 (Bom.) wherein it has been 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. [Para 7]
■		In view of the above, no error has been committed by the Tribunal in dismissing the appeal preferred by the revenue and confirming the order passed by Commissioner (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. [Para 8]

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