Indexation from date of acquisition by previous owner available in case of transfer of asset under will

Income Tax Officer Vs Sohrab Fali Mehta (ITAT Mumbai)

ITAT Mumbai held that while computing capital gains arising of transfer of capital asset acquired by the assessee under the will, the indexed cost of acquisition has to be computed with respect to the year in which the previous owner first held the asset.

Facts- In A.Y. 2016-2017, the assesse earned long-term capital gain from sale of assessee’s share in the immovable property inherited by assessee from his mother in A.Y. 2008-2009.

Notably, AO agreed with the assessee that the cost of acquisition should be the cost in the hands of the previous owner. AO however, did not agree with the plea of the assessee that assessee is entitled for indexation benefit from 01/04/1981. The main plea of the AO is that the mother of the assessee died on 09/03/2008 and therefore, the assessee became entitled to share in the property through the will of the mother and hence, the assessee can be allowed indexation only from F.Y.2007-08 and not from F.Y.1981-82.

Conclusion- Hon’ble Jurisdictional High Court after due consideration of CBDT Circular No.636 had held that while computing capital gains arising of transfer of capital asset acquired by the assessee under the will, the indexed cost of acquisition has to be computed with respect to the year in which the previous owner first held the asset and not in the year in which assessee became the owner of the asset.

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