TaxTMI 
TaxTMI 
2014 (10) TMI 101
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....als are individuals. They are the legal heirs of one Mr C B Devaiah. Mr C B Devaiah owned a property which had been acquired by him prior to 1.4.1981. Mr C B Devaiah died on 23.4.2000. His legal heirs sold the property owned by him during the previous year relevant to 2005-06 i.e., on 18.10.2004. These two assessees as legal heirs were entitled to 1/5th share each over the property owned by Mr C B Devaiah. They declared capital gains on the sale of the property in their returns of income filed for Assessment Year 2005-06. In the computation of capital gains, they adopted the fair market value (FMV) of the property as on 1.4.1981 as the cost of acquisition of the property. The revenue did not dispute this valuation. The assessees while compu....
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....tribunal. The tribunal after hearing both the parties and relying on a judgment of the Bombay High Court in the case of Commissioner of Income Tax vs ManjulaJ Shah reported in (2012) 68 DTR 269 (Bombay) held the Commissioner was not justified in not following the decision of the Hon'ble Bombay High Court, the ratio of the decision of the Bombay High Court rendered in the context of acquisition of property by way of gift will apply with greater force when property devolves by succession. The view taken by the assessing authority was correct and therefore, the Commissioner of Income Tax was not justified in exercising his jurisdiction under Section 263 of the Act and in interfering with the order passed by the Assessing Authority. Therefore, ....
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....ost of acquisition is to be computed as on the day the previous owner held the property on 1.4.1981, though the assessees acquired the said property by way of succession, indexed cost of acquisition is to be allowed from the day the property was owned by previous owner and not when the assessees held the property after his death and that is the ratio decided by the Bombay High Court in the aforesaid Judgment and therefore, he submits no case for interference is made out. 7. The appeals are admitted to consider the folio wing Substantial question of law: "Whether on the facts and in the circumstances of the case, the tribunal is right in law in concluding that while computing the capital gains arising on transfer of a capital asset acq....
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....which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessees or for the year beginning on the 1st day of April 1981 whichever is later. Section 49 deals with the cost with reference to certain modes of acquisition. One such mode is if the assessees acquires a capital asset by way of succession, inheritance or devolution, then the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessees, as the case may be. Therefore, when an asset is acquired by way of inheritance, the cost of acquisition of th....