29 March 2012
A, along with his wife owned a residential property, which was acquired in 1975.Another floor was constructed in the year 1982. His wife expired in 1985, where upon their 3 children inherited her share of 50% in equal proportion. In the year 2011,A gifted his share to the three children in equal proportion. Thus children became owners of 1/3rd share each in the property. In 2012 they sold the house to a builder The value of house as on April 1981 was worked out as Rs.10 lakhs and value of second floor constructed was Rs. 5 lakhs. While calculating indexed cost for original cost of Rs 10 lakhs, the index applied to 50% share inherited from mother was taken from 1985 and for 50% received as gift was taken from 2011.(i.e from time the present owners - children-became owners). However for the portion of Second floor - cost of improvement -the index applied was from 1982. (from time when improvement was made) -sec 48. I invite attention to a recent case ITA No. 151/D/2012 (ACITvs Smt Sapna Dimri where it was held that "coming to the cost of indexation, in the case of previous owner, the cost of acquisition is to be as on 1.4.1981, it will be illogical to apply the cost indexation with reference to the date on which the assessee became the owner of the property. Therefore, cost of indexation has to be with effect from 1.4.1981, the date on which the cost of acquisition was taken in the hands of the previous owner. Our view is supported by the decision of Special Bench of ITAT in the case of DCIT Vs. Manjula J. Shah (supra)."
In view of above decision, can index be applied from date of acquisition by previous owner or 1 April 1981 whichever is later? Please advise your views.
29 March 2012
SINCE THE COST OF ACQUISITION IS TAKEN AS COST TO THE PREVIOUS OWNER, EVEN THE INDEXATION IS TO BE APPLIED FROM DATE OF ACQUSITION BY THE PREVIOUS OWNER OR 1ST APRIL 1981, WHICH EVER IS LATER.
30 March 2012
The denominator for indexation , as per law,should be determined according to the year in which the assessee became the owner of the property. However, there are decisions (see one, among others, cited below) which permits the assessee to take the denominator based on the date of acquisition of previous owner or 1/4/1981 which ever is later.
Mrs. Pushpa Sofat Vs ITO , decision dated 4 July, 2001 reported in (2004) 89 TTJ Chd 499.
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