Indexed cost of gifted assets has to be determined with reference to previous owner s. 55(1)(b)(2)(ii) provides that where the capital asset became the property of the assessee by any of the modes specified under s. 49(1), not only the cost of improvement incurred by the assessee but also the cost of improvement incurred by [...]

Section 50C was introduced in the Income-tax Act, 1961 by the Finance Act, 2002 with effect from 1-4-2003 for substituting valuation done for Stamp Valuation purposes as full value of consideration in place of apparent consideration shown by the transferor of capital asset, being land or building and, accordingly, calculating capital gains under Section 48.

 The Tribunal recorded that amount of Rs. 15, 00, 000/- paid by the assessee to the Bank cannot be stated to be incurred wholly and exclusively for the purpose of the sale. The Tribunal further recorded that the amount shown as compensation for termination of tenancy rights is in fact not related to the transaction [...]

When the bona fideof the transaction and the actual sale consideration received by the assessee has not been suspected, then for the purpose of computation of capital gains, the full value of consideration can not be substituted by market price or value of the capital asset as on the date of transfer.

It is a measure of inflation that finds application in tax law, when computing long-term capital gains on sale of assets. Section 48 of the Income-Tax Act defines the index as what is notified by the Central Government every year, having regard to 75 per cent of average rise in the consumer price index (CPI) for urban non-manual employees for the immediately preceding previous year.

S M Sundaram Vs. CIT (Madras High Court)- Under section 48(1), the deduction in respect of the full value of the consideration received or accrued regarding the expenditure incurred wholly, etc. and cost of acquisition of asset and the cost of improvement are granted. This deduction has admittedly been granted from the capital gain in the hands of the partnership firm.

Calculate Long term capital gain on sale of capital Assets other then shares with the help of Indexation.- We have given below the Cost Inflation (CII) Index calculator which automatically calculates Indexed cost of your asset. In the calculator You just have to fill the Year of Sale, Year of Purchase , Cost of Purchase/Acquisition/Improvement and Index if sale is made in financial year 2011-12 or later. Cost Inflation Index for financial Year 2011-12 is 785 and for financial year 2012-13 the Index will be announced somewhere in August 2012.

Asstt. Director of Income-tax Vs. Shri Ranjay Gulati (ITAT Delhi) – Under section 48 of the Income Tax Act, 1961 the income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following [...]

Jethiben K Patel Discretionary Trust Vs DCIT (ITAT Ahemdabad) – In the case of Mohanlal N. Shah (HUF) –vs- ACIT reported in [2008] 26 SOT 380 (Mum) wherein it was held that as per section 48, option is with the assessee to or not to avail of benefit of indexation for computation of capital gains [...]

Recently, the Authority for Advance Ruling (AAR) in the case of M/s Amiantit International Holding Ltd. [2010-TIOL-07-ARA-IT] held that the capital gains is taxable only when the applicant derive any profit or gain in the form of money or money’s worth or which is capable of being turned into money has accrued or arisen to the applicant.