Indexed cost on acquisition

Page no : 2

Arpit Pachisia (CA) (734 Points)
Replied 13 March 2014

Hello Vikas,

As I stated above, please read the above mentioned case of CIT vs Manjula J Shah where it is clearly stated that for determining the indexed cost of acquisition under Section 48, the assessee must be treated to have held the asset from the year the asset was first held by the previous owner and accordingly the CII for the year, the asset was first held by the previous owner would be considered for determining the indexed cost of acquisition.

Hence, the indexed cost of acquisition in case of gifted asset has to be computed with reference to the YEAR in which the previous owner first held the asset and not the YEAR in which the assessee became the owner of the asset.

So in above case, the YEAR in which previous owner first held the asset is 1986.

Hope this ends your and mine query.

Thanking you

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MOHIT BEDI (Working as Audit Assistant) (41 Points)
Replied 13 March 2014

Hi Arpit,

I would like to tell you that in your case the capital gains would be Rs.6,70,714 as calculated (by Prashant and Mihir), because as per Sec 49(1)(ii) the cost of acquisition in case of gift will be the cost to the previous owner.

And, as per Explanation to the said section, the expression "previous owner of the property" means the last previous owner of the capital asset who acquired it by a mode of acquisition "other than that referred to in clause (ii) of this sub-section", i.e other than by way of transfer, gift, will, partition of HUF, etc.