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TMI Blog2012 (7) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... directing the A.O. to calculate the long term capital gain without appreciating that section 2(42A) of the Act explanation 1 only determines the holding period of an asset for the purpose of short term capital gains and has no application to long term capital gain for which the assessee gets the benefit of indexation ?" The cross-objections are admitted on the following substantial question of law :- "Whether, on the facts and in the circumstances of the case the Tribunal erred in holding that in respect of the 50% of the property inherited by the respondent from his mother the period of holding will start from 21.08.1988 and not from 01.04.1981 ? 3. In or about the year 1942, the respondent's father acquired the entire immovable propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal (ITAT). The ITAT held that the period for holding 50% of the property inherited by the respondent from his father would start from 1.4.1981, whereas in respect of 50% of the property inherited by the respondent from his mother, the period for holding would start from 21.8.1988, as she became the owner of her 50% share in the property only from that date. The Tribunal ordered accordingly. 7. The respondent's grievance is only with regard to the finding of the Tribunal that the period of holding in respect of 50% of the property inherited by him from his mother would start from 21.8.1988 and not from 1.4.1981. 8. Section 2(42A) of the Income Tax Act, 1961 reads as under :- "2. Definitions - In this Act, unless the context otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........... 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.-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 a mode of acquisition other than that referred to in clause ( i ) or clause ( i i ) or clause ( ii i ) or clause ( iv ) of this sub-section. " (emphasis supplied) 9. Two issues arise. Firstly the determination of the cost of acquisition. Secondly a computation of the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt's grand-father. It would in this case make no difference even whether or not the respondent's father had acquired the property in a mode referred to in clauses (i) to (iv) of section 49(1) for he admittedly acquired it prior to 1.4.1981 and indexation is granted at the earliest only from 1.4.1981. The respondent admittedly acquired the property under his father's will and therefore by a mode of acquisition referred to in clause (ii) of section 49(1). 12. Thus as far as the 50% portion of the property acquired by the respondent from his father is concerned, the cost of acquisition must be determined to be the cost at which the respondent's grandfather or in any event the respondent's father acquired the property and not the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 49(1), it is provided that there shall be included the period for which the asset was held by the "previous owner referred to in the said section". The said section is section 49(1). Thus the definition of "previous owner" in the Explanation to section 49(1) is incorporated in Explanation (1)(i)(b) to section 2(42A). If therefore a capital asset becomes the property of the assessee in the circumstances mentioned in section 49(1) and the period for which it is held as determined by section 49(1) read with section 2(42A) is more than the period stipulated in section 2(42A), the case would not fall within the ambit of a short term capital asset. 17. The last previous owner of the respondent's mother's 50% share in the property was therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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