Court rules indexed cost of acquisition for LTCG from property construction year, not ownership year

The High Court upheld the decision of the Income Tax Appellate Tribunal (ITAT) in favor of the assessee, ruling that the indexed cost of acquisition for Long Term Capital Gain should be calculated from the year of construction of the property, not the year of first ownership by the assessee. The Court dismissed the revenue's appeal, citing precedents and finding no error in the ITAT's decision. Consequently, the judgment emphasizes the significance of considering the year of construction in determining the indexed cost of acquisition for LTCG, ultimately supporting the assessee's position.

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Issues:
- Discrepancy in indexation cost calculation for Long Term Capital Gain.

Analysis:
The case involves a dispute over the indexation cost calculation for Long Term Capital Gain (LTCG) arising from the sale of a property. The Assessing Officer (AO) reworked the LTCG by decreasing the index cost based on the year the asset was first held by the assessee. The AO contended that the indexation benefit should be based on the year of first ownership by the assessee, not the previous owner. The assessee, however, argued that indexation should be allowed from the year of construction of the property, considering the co-ownership with her deceased husband. The Commissioner CIT (Appeals) ruled in favor of the assessee, allowing indexation from the year of construction. Subsequently, the revenue appealed to the Income Tax Appellate Tribunal (ITAT), citing precedents from Bombay High Court and Delhi High Court. The ITAT dismissed the appeal, upholding the indexation cost calculation by the CIT (Appeals).

In the High Court, the revenue challenged the ITAT's decision, questioning the adoption of indexed cost of acquisition from FY 1984-85 and the deletion of the addition made by the AO towards LTCG. The Court observed that the issue was settled by the Delhi High Court's decision in a similar case, which favored the assessee's position. Referring to previous judgments, including one by the Bombay High Court, the Court found no error in the ITAT's decision to adopt the indexed cost from the year of construction and not the year of first ownership by the assessee. Consequently, the Court dismissed the revenue's appeal, stating that no substantial question of law arose in the case.

Overall, the judgment resolves the dispute regarding the indexation cost calculation for LTCG, emphasizing the importance of considering the year of construction for determining the indexed cost of acquisition. The decision aligns with established legal precedents and upholds the assessee's position, leading to the dismissal of the revenue's appeal.

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