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2015 (8) TMI 1206 - AT - Income TaxComputation of capital gains - whether indexed cost of acquisition has to be computed with reference to the year in which the previous owner was held the assessee as held by CIT(A) or the year in which the assessee become owner by way of inheritance? - Held that:- The object of giving relief to an assessee by allowing indexation is with a view to offset the effect of inflation. As per the CBDT Circular No.636 dated 31/8/1992 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 Section 49(1) of the Act, 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. See CIT v. Manjula J. Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] The expression “held by the assessee” used in Explanation (iii) to Section 48 has to be understood in the context and harmoniously with other Sections. The cost of acquisition stipulated in Section 49 means the cost for which the previous owner had acquired the property. The term “held by the assessee” should be interpreted to include the period during which the property was held by the previous owner. See Arun Shungloo Trust v. CIT [2012 (2) TMI 259 - DELHI HIGH COURT ] - Decided in favour of assessee.
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