Property from ‘Will’ eligible for cost indexation from first owner’s acquisition date

Cause Title : Income Tax Officer vs Sohrab Fali Mehta, ITA No.55/Mum/2023, Income Tax Appellate Tribunal, Mumbai

Date of Judgment/Order : 15/03/2023

Corum : Shri M. Balaganesh, Accountant Member & Shri Sandeep Singh Karhail, Judicial Member

Citied: CIT us. Manjula J Shah (355 ITR 474), Bombay High Court

Background

This appeal was filed by the Dept. against the order of the Commissioner of Income Tax (Appeals) rejecting the assessment order of the Income Tax Officer.

The matter relates to indexation on capital application against sale of a property. The assessee claimed the benefit from the date of acquisition of the property by the previous owner (his mother) which was in 01/04/1981. 

The main plea of the ld. AO is that the mother of the assessee died on 09/03/2008 and therefore, the assessee became entitled to share in the property through the will of the mother and hence, the assessee can be allowed indexation only from F.Y.2007-08 and not from F.Y.1981-82. The ld. AO relied on the Circular No.636 issued by CBDT in this regard.

Judgment

Referring to the judgment in Manjula (supra), the Appellate Tribunal decided that the issue in dispute is squarely covered by the decision of the Hon’ble Jurisdictional High Court referred to supra wherein the Hon’ble Jurisdictional High Court after due consideration of CBDT Circular No.636 had held that while computing capital gains arising of transfer of capital asset acquired by the assessee under the will, the indexed cost of acquisition has to be computed with respect to the year in which the previous owner first held the asset and not in the year in which assessee became the owner of the asset.

The tribunal held that assessee would be entitled for indexed cost of acquisition benefit from F.Y.1981-82 on the cost of Rs.33,82,900/-.