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2017 (10) TMI 686 - AT - Income TaxComputation of long term capital gain on sale of a property at Koramangala, Bangalore by the assessee - determination of FMV as on 01.04.1981 - Held that:- We find lot of loose ends in the statement given by the approved valuer before the AO. In this regard the Assessee has in her submissions dated 30.9.2013 specifically pointed out that the AO did not afford opportunity of cross-examination of the Registered Valuer and therefore the evidence in the form of statement of the Registered valuer has to be ignored. In arriving at the value on the basis of statement of Registered Valuer, the AO has not taken cognizance of the existence of the building and the cost to be attributed to the value of building as on 1.4.1981. Keeping these facts in mind and also taking note of the fact that the AO has not chosen to make a reference to the valuation officer u/s. 55A of the Act and also keeping in mind the fact that estimation of FMV as on 01.04.1981, in the absence of a good comparative sale instance, would be only an approximation, we deem it proper to conclude that the FMV as on 01.04.1981 should be fixed at ₹ 75/sq.ft. We hold and direct accordingly. The relevant grounds of appeal of the revenue are accordingly dismissed while that of the assessee is partly allowed. Interpretation of Explanation (iii) to Sec.48 of the Act, which defines the expression “Indexed Cost of Acquisition” - Whether indexed cost of acquisition has to be computed by taking 1.4.1981 or the year 1994 when the Assessee succeeded to the property as legal heir of her deceased husband? - Held that:- As per the CBDT Circular No. 636 dt. 31st Aug., 1992 a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular further provides that the cost of acquisition and the cost of improvement have to be inflated to arrive at the indexed cost of acquisition and the indexed cost of improvement and then deduct the same from the sale consideration to arrive at the long-term capital gains. If indexation is linked to the period of holding the asset and in the case of an assessee covered under s. 49(1), the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee. The Hon’ble Court in the case of CIT Vs. Manjula J.Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] finally concluded that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, 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. In view of the aforesaid decision of the Hon’ble Bombay High Court, we are of the view that the CIT(A) was fully justified in allowing the benefit of indexation on FMV as on 1.4.1981 from 1.4.1981. We confirm the order of the CIT(A) and dismiss the relevant grounds of appeal of the Revenue.
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