Tribunal allows indexation from 01.04.1981 for fair capital gains computation

The Tribunal allowed the appeal, directing the Assessing Officer to permit indexation from 01.04.1981 for computing capital gains. This decision aligned with legal provisions and previous judicial rulings, ensuring fair computation of capital gains for properties acquired through inheritance and purchase.

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Issues:
1. Denial of indexation for property devolved on the assessee.
2. Calculation of long term capital gains for properties acquired through inheritance and purchase.

Analysis:
1. The appeal was filed against the order confirming the denial of indexation by the Commissioner of Income Tax. The Assessing Officer calculated long term capital gains based on the property's acquisition year by the previous owner, not allowing indexation from the period of holding by the previous owner. The Assessee argued for indexation from the year 1981, as per certain modes of acquisition under section 49(1) of the Act.

2. The first property, acquired by the father in 1964-65, was devolved on the assessee in 1995-96. The Assessing Officer adopted the Cost Inflation Index of 1995-96, resulting in higher capital gains. The second property in Cuddalore was purchased by the father in 1965 and devolved on the assessee in 1995-96. The AO calculated indexation from 1995-96, affecting the exemption claimed under section 54F. The CIT(A) upheld the AO's decision, stating that the property was purchased, not inherited, and denied indexation from 1981.

3. The Assessee argued that the property devolved through succession, entitling indexation from 1981. The Tribunal agreed, citing provisions of sections 48 & 49(i) of the Act, allowing special modes of transfer like succession. The Tribunal referred to the decision in CIT Vs. Manjula J.Shah, emphasizing indexation from the year the previous owner first held the asset. Relying on the Co-ordinate Bench's decision, the Tribunal directed indexation from 01.04.1981 for computing capital gains.

4. The Tribunal allowed the appeal, emphasizing the Assessee's right to indexation from 1981 based on the property's acquisition year by the previous owner. The decision aligned with legal provisions and previous judicial rulings, ensuring fair computation of capital gains.

Conclusion:
The Tribunal's decision favored the Assessee, directing the Assessing Officer to allow indexation from 01.04.1981 for computing capital gains, in line with legal provisions and relevant judicial precedents.

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