Indexed cost of acquisition depends on ownership rights, not physical possession; indexation runs from the agreement date.

For indexed cost of acquisition under Section 48, the expression "held" was treated as referring to ownership rights, not physical possession. Because the assessee entered into the purchase agreement, obtained the Section 269UL(3) certificate, and acquired property rights from that earlier date, indexation had to run from the agreement date rather than the later date of physical possession. The later payment to the tenant for vacating the premises was treated as cost of improvement, not as the starting point for holding period computation. The authority based on possession was distinguished, and the assessee's claim for indexation from the agreement date succeeded.

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Issues: Whether, for computing indexed cost of acquisition under Section 48, the first year in which the asset was held was the date of the purchase agreement or the later date on which physical possession was obtained after settlement with the tenant.

Analysis: The expression "held" in the Explanation to Section 48 was treated as referring to ownership rights and not to physical possession. The assessee had entered into the purchase agreement, obtained the certificate under Section 269UL(3), and acquired the property rights from the earlier date, while the later payment to the tenant related to vacating the premises and was relevant as cost of improvement. On that basis, the reasoning applied to indexed cost of acquisition and the cited authority on possession-based reasoning was distinguished.

Conclusion: The assessee was held to have been holding the property from the date of the agreement, and indexation was required to be allowed from that date. The assessee's claim succeeded.

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