TMI Blog2015 (2) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... be calculated on the basis of the indexed cost of acquisition as provided in Explanation (iii) to section 48. Though in the definition of "indexed cost of acquisition", the words used are, "in which the asset was held by the assessee", a harmonious reading of sections 48 and 49 makes it clear 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 corresponding to the market value is to be taken into consideration. Otherwise, take the cost of acquisition on the day the previous owner acquired it and apply the "indexed cost of acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 2004. The three assessees as legal heirs were entitled to one-fifth share each over the property owned by Mr. C. B. Devaiah. They declared capital gains on sale of the property in their returns of income filed for the assessment year 2005-06. In the computation of capital gains, they adopted the fair market value (FMV) of the property as on April 1, 1981, as the cost of acquisition of the property. The Revenue did not dispute this valuation. The assessees while computing their cost of acquisition also claimed indexation on fair market value as on April 1, 1981. The assessing authority while completing the assessment of the assessees, accepted the claim of the assessees in the order of assessment dated December 24, 2010, passed under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), held that the Commissioner was not justified in not following the decision of the hon'ble Bombay High Court, 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. The view taken by the assessing authority was correct and, therefore, the Commissioner of Income-tax was not justified in exercising his jurisdiction under section 263 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. 4. Aggrieved by the said order, the Revenue is in appeal. 5. Learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of acquisition is to be allowed from the day the property was owned by the previous owner and not when the assessees held the property after his death and that is the ratio decided by the Bombay High Court in the aforesaid judgment and, therefore, he submits no case for interference is made out. 7. The appeals are admitted to consider the following substantial question of law : Whether, on the facts and in the circumstances of the case, the Tribunal is right 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginning on the 1st day of April, 1981, whichever is later. Section 49 deals with the cost with reference to certain modes of acquisition. One such mode is if the assessees acquires a capital asset by way of succession, inheritance or devolution, then 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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