TMI Blog2015 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... inning on the first day of April, 1981. The property in question was gifted on 01/02/2003 and the assessee sold the flat on 30/06/2003 for ₹ 1.10 crores. Applying the decision of the Hon’ble jurisdictional High Court pronounced in the case of Manjula J. Shah (2011 (10) TMI 406 - BOMBAY HIGH COURT), the capital gains liability has to be computed by considering that the assessee held the asset from the date it was held by the previous owner and the same analogue has to be applied in determining the indexed cost of acquisition. Since the property in question was acquired by way of gift/will by the assessee, the index cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset, consequently, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided in favour of assesse. - ITA NO.6564/Mum/2013 - - - Dated:- 8-4-2015 - Shri Joginder Singh And Shri N.K. Billaiya JJ. For the Appellant : Shri Pawan Kumar Beerla-DR For the Respondent : Shri None ORDER Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 06/08/2013, of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for hearing:- While computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, whether the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset or the year in which the assessee became the owner of the asset ? 3.3.1 The Hon'ble High Court examined the various provisions relating to the taxability of the capital gains and held that where the assessee acquired any capital asset under a gift or will without incurring any cost of acquisition, there would be no capital gains liability. However, sec. 49(1 )(ii) of the Act provided that in the case of an assessee acquiring an asset under. a gift or will , the cost of acquisition of the asset would be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of improvement of the asset incurred or borne by the previous owner or the assessee as the case may be. Thus, on account of the deeming fiction contained in see. 49(1)(ii) of the Act, gains arising on transfer of a capital asset acquired by the assessee under a gift or will would arise. In such a case, the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing on transfer of a capital asset acquired under a gift or will and the deemed fiction, it is not possible to accept the contention of revenue that the fiction contained in Explanation 1 (i)(b) to Section 2(42A) of the Act cannot be applied in determining the indexed cost of acquisition under Section 48 of the Act. 3.3.2 In Para 21 of their judgment, the Hon'ble High Court held as follows :- Therefore, it is reasonable to hold that in the case of an assesses covered under Section 49(1) of the Act, the capital gains liability has to be computed by considering that the assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. 3.3.3 In Para 22 of their judgment, the' Hon'ble High Shri Naraindas L. Sakraney 6 Court held as follows :- 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 firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition will be computed with reference to the year 1995-96 and not with reference to the year 1981-82 as done by the assessee. As regards the part of the assets which are claimed to have been gifted to the assessee by Subhash Sakraney on 30/08/2004 as claimed by the assessee (and which was held by the donor from 02/09/1968, the indexed cost of acquisition will be computed with reference to the year 1981-82 as done by the assessee. Subject to the above, this ground of appeal filed by the assessee is partly allowed. 4. In the result, the appeal filed by the assessee is partly allowed. 2.1. We have considered the submissions put-forth by the ld. DR and considered the material available on record. The facts, in brief, are that the assessee declared long term capital gains of ₹ 1,51,58,752/- on the sale of Arun Chamber (Unit no.707, 708 and 709) owned by the assessee. As per the Assessing Officer, the assessee became the owner of these units on 30/08/2004 as the property was gifted to the assessee by Subhash Sakraney. It was noted by the Assessing Officer that long term capital gains was calculated by the assessee on the basis of indexed valued having the base year 1981-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing capital gains arising on transfer of capital assets, acquired by the assessee under a gift, indexed cost of acquisition has to be computed with reference to the year in which previous owner, first held the asset and not the year in which assessee became the owner of the asset. Explanation (iii) provides index cost of acquisition means an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year, in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on the first day of April, 1981. The property in question was gifted on 01/02/2003 and the assessee sold the flat on 30/06/2003 for ₹ 1.10 crores. Applying the decision of the Hon ble jurisdictional High Court pronounced in the case of Manjula J. Shah (supra), the capital gains liability has to be computed by considering that the assessee held the asset from the date it was held by the previous owner and the same analogue has to be applied in determining the indexed cost of acquisition. Since the property in question was acquired by way of gift/will by the assessee, the index ..... X X X X Extracts X X X X X X X X Extracts X X X X
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