2014 (11) TMI 944

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....rty, 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. The assessee as one of the legal heirs was entitled to have 1/5th share in the property owned by Mr C. B. Devaiah. The assessee declared his capital gain on sale of the property in his returns of income filed for the assessment year 2005-06. In the computation of capital gains, the assessee 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 assessee while computing his cost of acquisition also claimed indexation on FMV as on 1.4.1981. ....

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....ay High Court in the case of CIT v. Manjula J. Shah reported in (2012) 68 DTR 269 (Bombay) held that the Commissioner was not justified in not following the decision of the Hon'ble Bombay High Court, as 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, the appeal was allowed. The order of the Appellate Authority was set-aside. The order of assessment ....

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.....4.1981, though the assessee 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 assessee held (the property after his death and that is the ratio decided by the Bambay High Court in the aforesaid Judgment and therefore, he submits that no case for interference is made out. 6. The appeal is admitted to consider the following 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 acquired by the assessee through succession, the indexed cost of acquisition has to be computed wi....

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....e asset was held by the assessee or for the year beginning on the 1st day of April 1981, whichever is later. 8. Section 49 deals with the cost with reference to certain modes of acquisition. One such mode is, if the assessee 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 assessee, as the case may be. Therefore, when an asset is acquired by way of inheritance, the cost of acquisition of the asset should be calculated on the basis of the cost of acquisition by the previous owner and ....