Inherited property indexation under capital gains law follows the previous owner's acquisition year, not the inheritance year.

For capital assets received by will, succession or inheritance, section 49(1) deems the previous owner's acquisition cost to be the assessee's cost, and section 48 read with Explanation (iii) governs indexation from the relevant statutory base year. Applied to property originally acquired by the father in 1945 and later devolved on the assessee, the indexed cost of acquisition was required to be computed with reference to the previous owner's acquisition, using 1981 as the base year rather than the year of inheritance. The text states that no substantial question of law arose and the appeal was dismissed.

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Issues: (i) Whether, in computing long-term capital gains on a property acquired by will and inherited from the previous owner, the indexed cost of acquisition had to be taken with reference to the year in which the previous owner acquired the property, or only from the year in which the assessee inherited it.

Analysis: Section 49(1) of the Income-tax Act, 1961 provides that where a capital asset becomes the property of the assessee under a gift or will, or by succession, inheritance or devolution, the cost of acquisition is deemed to be the cost for which the previous owner acquired the property. The Explanation to section 49(1) identifies the relevant previous owner, and section 48, Explanation (iii), requires indexed cost of acquisition to be computed with reference to the first year in which the asset was held by the assessee or the year beginning on 1 April 1981, whichever is later. Since the property had originally been acquired by the assessee's father in 1945 and devolved on the assessee under a will, the statutory scheme required the previous owner's acquisition cost to be taken as the basis for indexation.

Conclusion: The indexed cost of acquisition had to be computed by taking the year 1981 as the base year, and not the year in which the assessee inherited the property.

Final Conclusion: The appeal raised no substantial question of law and was dismissed, leaving the Tribunal's view in favour of the assessee undisturbed.

Ratio Decidendi: For capital assets acquired by succession, inheritance or under a will, the deemed cost of acquisition under section 49(1) governs indexation under section 48, and the base year for indexed cost is determined by the statutory rule applicable to the previous owner's acquisition.

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