TMI Blog2014 (11) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Commissioner was not justified in not following the decision of the Hon'ble Bombay High Court, as the ratio of the decision of the Bombay High Court rendered in the context of acquisition of property by way of gift will apply with greater force when property devolves by succession - though in the definition of 'indexed cost of acquisition', the word used are, "in which the asset was held by the assessee" a harmonious reading of Sections 48 and 49 makes it clear that, for the purpose of 'Indexed Cost of Acquisition', it has to be understood as the first year in which the previous owner held the said property - Otherwise, if the date of inheritance is taken into consideration, then the cost of acquisition of the asset on that date co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81 as the cost of acquisition of the property. The revenue did not dispute this valuation. The assessee while computing his cost of acquisition also claimed indexation on FMV as on 1.4.1981. The assessing authority while completing the assessment of the assessee, accepted the claim of the assessee in the order of assessment dated 30.11.2009 passed under Section 143(3) of the Act allowing the benefit of indexation from 1.4.1981. The Commissioner of Income Tax exercising his power under Section 263 of the Act was of the view that the Assessment Officer's order in the case of the assessee allowing the benefit of indexation from 1.4.1981 was erroneous and prejudicial to the interest of the revenue because, as per explanation (iii) to Sec.48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act and in interfering with the order passed by the Assessing Authority. Therefore, the appeal was allowed. The order of the Appellate Authority was set-aside. The order of assessment was restored. Aggrieved by the said order, the revenue is in appeal. 4. Learned counsel for the revenue assailing the impugned order contends that, as is clear from explanation (iii) to Section 48, the indexed cost of acquisition is to be allowed for the first year in which the asset was held by the assessee or in the year beginning on the first day of April, 1981, whichever is later. Therefore, the Tribunal was not justified in interfering with the order passed by the Commissioner of Income Tax. In fact, the revenue has preferred a Special Leave P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in law in concluding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee through succession, 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 actually became the owner of the asset through succession? 7. Section 45 of the Act provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head Capital gains . Capital Gains is of two types. Short-term capital gains and long term capital gains. Depending upon the nature of capital gains the liability of the tax is determined. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be. Therefore, when an asset is acquired by way of inheritance, the cost of acquisition of the asset should be calculated on the basis of the cost of acquisition by the previous owner and the said cost of acquisition of the previous owner has to be calculated on the basis of indexed cost of acquisition as provided in explanation (3) to Section 48 9. Though in the definition of 'indexed cost of acquisition', the word used are, in which the asset was held by the assessee a harmonious reading of Sections 48 and 49 makes it clear that, for the purpose of 'Indexed Cost of Acquisition', it has to be understood as the first year in which the previous owner held the said property. Otherwise, if the date of inhe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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