Cost of Acquistion

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 February 2011 According to will, if the house is sold by sons after the father death, one seventh of the sale proceed will be given to his daughter. Is this 1/7th share given to her will be included in cost of acquistion in the hands of son... Please give your options

CA. Lohith Jagadeesh

CA. Lohith Jagadeesh (Expert)
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05 February 2011 Hi,
The concept about which u have posted is with regard to Diversion of Income by Overriding Title.

Facts & Analysis

When 1/7 th of Sale Consideration will be given to Daughter, that means she has a claim over the property, which also means to that extent of 1/7th Share the Son doesnt have any claim.

While Declaring the Sale Consideration (Assessment of Son) if u deduct 1/7th belonging to the Daughter, the Cost of Acquisition also needs to be deducted to the extent of 1/7th of the Cost and the the Indexation needs to be claimed on the remaining.

As per the provisions of IncomeTax Act 1961 w.r.t Capital Gains the Cost of Acquisition (in case of Gift/Will/ Inheritance etc) would be the Cost to the Previous Owner.
Here since the ownership is divided as 6/7th to the Previous owner & 1/7 th to the Daughter, the matter settles there itself.

However even the daughter becomes liable to Capital Gains Tax if any for her 1/7th Share received. Further she can claim 1/7th share of cost of the Property as Cost of Acquisition in her Computaion & File her Returns Accordingly.

Hope i have given a complete solution of the issue posted.

Incase of further issues please feel free to post the Issue. I shall provide u solutions to the best of my abilities.

Regards
CA. Lohith. J
B.Com,ACA,CS,(ICWA),ITF Hons,SAPM Hons
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