Tribunal Upholds Indexed Cost Decision for Capital Gains

The Tribunal dismissed the Revenue's appeal, upholding the ld.CIT(A)'s decision on the indexed cost of acquisition for long term capital gain. The dispute centered on the calculation of capital gain using the "Cost Inflation Index" based on the year of acquisition. Relying on a Bombay High Court decision, the Tribunal determined that the cost of acquisition should be computed from the year the previous owner first held the asset, not when the assessee acquired it. Consequently, the assessee was entitled to index the cost of acquisition as of 1.4.1981, resulting in a favorable outcome for the assessee.

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Issues involved: Appeal filed by Revenue regarding indexed cost of acquisition for long term capital gain u/s 48 of the Income-tax Act for A.Y. 2006-07.

Summary:
The appeal was filed by the Revenue against the order of the ld.CIT(A)-II, Baroda regarding the indexed cost of acquisition for long term capital gain. The assessee inherited a property in 1998 and sold it in 2006. The dispute arose over the calculation of capital gain using the "Cost Inflation Index" based on the year of acquisition. The AO recalculated the capital gain based on the year of inheritance, resulting in a higher assessment. The ld.CIT(A) referred to a decision by the Hon'ble Bombay High Court and ruled in favor of the assessee, considering the year 1981 as the base year for indexing the cost of acquisition.

The Tribunal noted that the issue was settled by the Hon'ble Bombay High Court in a previous case, stating that the indexed cost of acquisition should be computed based on the year in which the previous owner first held the asset, not the year in which the assessee became the owner. As the property was inherited by the assessee, the cost of acquisition was deemed to be the cost for which the previous owner acquired it. Therefore, the assessee was entitled to the benefit of the "Cost Inflation Index" as on 1.4.1981. Citing a precedent from ITAT Delhi, the Tribunal upheld the decision of the ld.CIT(A) and dismissed the Revenue's appeal.

In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the decision of the ld.CIT(A) regarding the indexed cost of acquisition for long term capital gain.

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