The Commissioner of Income Tax v. ADARSH KUMAR GOEL, J

from the year in which the asset was first held by the assessee and not by the previous owner?”

2. During the assessment, the Assessing Officer made addition to the declared income of the assessee on account of sale of property which the assessee had inherited in the year 1992-93. The addition was by indexing the cost as on the date of inheritance. The assessee objected to the addition on the ground that it is not the date of inheritance on which the cost of the property is to be seen but on the date of purchase by the previous owner, as increased by the cost of improvements, in forms of Section 49(1) read with Section 55(1)(b) of the Act. The CIT(A) affirmed the order of the Assessing Officer but the Tribunal upheld the plea of the assessee. The observations made by the Tribunal are as under:- “It was contended that the issue stands covered by the order of “E” Bench of Kolkata Tribunal in the case of Smt. Mina Deogun Vs. ITO (2008) 117 TTJ 121, in which it was pointed out that the property was purchased by the father in the year 1958 and, therefore, cost of acquisition of the property for computing the capital gains on transferring the same in the financial year 2003-04 was to be computed by applying cost inflation index of financial year 1981-82 and not financial year 1998-99. It may be pointed out that the finding was that it would be improper to apply only the cost inflation index with reference to previous owner when the property was actually acquired by previous to previous owner in the year 1958 and the I.T.A. No.633 of 2009 3 property passed by inheritance first to the wife of the purchaser and on her death to the daughter of the purchaser. In this case, the assessee acquired the property from her father by way of inheritance, who had purchased the property in the year 1965. Therefore, the fair market value of the property has to be ascertained on 1.4.1981 and then the indexed cost has to be found out in the year of sale by the assessee. In this view of the matter, ground nos.1 to 4 are allowed. The AO is directed to examine whether the whole of capital gains so computed become deducible because of investment made in the capital gains bonds, mentioned in section 54EC of the Act.”

4. We have heard learned counsel for the appellant. Contention raised on behalf of the appellant is that as per Explanation (iii) to Section 48 of the Act, “indexed cost of acquisition” is the amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or April 01, 1981, whichever is later. Therefore, date of inheritance could be relevant for the purpose of calculation of cost.

5. The argument raised cannot be accepted. Section 48 of the Act deals with computation of capital gains. Section 49(1) of the Act provides for cost with reference to certain modes of acquisition. It stipulates as under:-

49. (1) Where the capital asset became the property of the assessee— I.T.A. No.633 of 2009 4 (i) on any distribution of assets on the total or partial partition of a Hindu undivided family; (ii) (iii) under a gift or will; (a) by succession, inheritance or devolution, under a transfer to a revocable or an on any distribution of assets on the (b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or] (c) liquidation of a company, or (d) irrevocable trust, or (e) under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (vica) or clause (vicb) of section 47; (iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969, 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 assets incurred or borne by the previous owner or the assessee, as the case may be. Explanation attached to the aforesaid provision gives the meaning to the expression ‘previous owner of the property’ and it reads thus:- Explanation.—In this sub-section the expression “previous owner of the property” in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by I.T.A. No.633 of 2009 5 a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub-section.”

6. In the present case, the assessee had inherited the property from his father in the year 1992-93. The father of the assessee had purchased the property in the year 1965 which would be the date of acquisition in his hands, as the same was acquired by the previous owner by means other than those specified in clause (i) to (iv) of Section 49(1). After applying the provisions of Sections 48 and 49 of the Act, it shall be the fair market value of the property on 1.4.1981 and thereafter, the ‘indexed cost of acquisition’ will be determined. The Tribunal had, thus, rightly taken the date of acquisition by the assessee as

1.4.1981 and not of the year 1992-93. There is, thus, no infirmity in the view so taken.

8. No substantial question of law arises. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE September 20, 2010 ashwani ( AJAY KUMAR MITTAL ) JUDGE