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2020 (11) TMI 207 - AT - Income TaxRectification of mistake u/s 154 - exemption u/s. 54 - benefit of indexation in a case where property is acquired by way of gift - Tribunal suffers from a mistake apparent on the face of record inasmuch it proceeded on the basis that consequent to allowing deduction u/s. 54, there would be no long term capital gain that would remain for taxation - Not granting indexation benefit from the year in which property was acquired by the previous owner as the assessee got the property way of gift - HELD THAT:- Issue of allowing benefit of indexation property which was subject matter of transfer was purchased by the father and mother of assessee under a Sale Deed dated 15.9.1980. The property was given by way of gift by the assessee on 15.3.2006 Plea of assessee that since property was acquired in the year 1980 and since as per the provisions of Explanation (1) to section 2(42A) and the provisions of section 49(1) of the Act, if the property is acquired by way of gift, then the period of holding as well as the date of acquisition of the property should be reckoned from the date on which the predecessor of the assessee acquired the property. These submissions are contained in of the CIT(A)’s order. Though the submissions have been extracted, the CIT(Appeals) has, however, not considered those submissions and has not rendered any finding on the above issue. The issue of allowing the benefit of indexation in a case where property is acquired by way of gift has been considered and decided in the case of CIT v. Manjula J. Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] as held that legislature by introducing deeming fiction seeks to tax gains arising on transfer of a capital asset acquired under a gift or will and, capital gain under section 48 has to be computed by applying deemed fiction and that fiction contained in Explanation 1(i)(b) to section 2(42A) has to be applied in determining indexed cost of acquisition under section 48 of Act also - while computing capital gains arising on transfer of a capital asset acquired by assessee under a gift or will, indexed cost of acquisition has to be computed with reference to year in which previous owner first held asset and not year in which assessee became owner of asset. Hon’ble High Court of Karnataka in the case of CIT v. Smt. Asha Machaiah [2014 (10) TMI 101 - HIGH COURT OF KARNATAKA] applied the same analogy to acquisition of property by way of inheritance holding that when an asset is acquired by way of inheritance, cost of acquisition of asset should be calculated on basis of cost of acquisition to previous owner and said cost of acquisition of previous owner has to be calculated on basis of indexed cost of acquisition as provided in Explanation (3) to section 48. Reasoning applicable when property is acquired by way of inheritance and when the same is acquired by way of gift, cannot be different. We are, therefore, of the view that the assessee should be allowed the benefit of indexation from AY 198-81. We hold and direct accordingly and allow the relevant grounds of appeal.
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