Harsha (Software professional) (214 Points)
21 February 2016Dear Experts,
My father got a plot way back in 1970's. He died in 2008 and the property got transferred to to my mother's name in 2010. Now she has also demised. So when we (right-holders) sell, what would be considered as initial cost?
Is it the government declared FMV of the property of 2010 or the cost of acquisition of 1970 + indentatation on 1981 basis?
Regards,
Harsha Vardhana R
Jayesh NP
(Tax Practitioner)
(175 Points)
Replied 21 February 2016
Cost of acquisition in your case is indexed cost of acquisition as on 1981. Sec 49(1) of the Income Tax Act is given below for your reference:-
Cost with reference to certain modes of acquisition.
49. (1) Where the capital asset became the property of the assessee—
(i) on any distribution of assets on the total or partial partition of a Hindu undivided family;
(ii) under a gift or will;
(iii) (a) by succession, inheritance or devolution, or
(b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or
(c) on any distribution of assets on the liquidation of a company, or
(d) under a transfer to a revocable or an irrevocable trust, or
(e) under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause (via) 98[or clause (viaa) or clause (vica) or clause (vicb)] or clause (xiii) or clause (xiiib) or clause (xiv) of section 47;
(iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969,
the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
Explanation.—In this sub-section the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub-section.
CA Prateek Garg
(CA in Practice)
(1447 Points)
Replied 21 February 2016
Cost of acquisition shall be any of the following at your option
-> Cost of acquisition in the hands of your father
-> FMV of property as on 1-4-1981
Indexation benefit shall be avilable in both cases.
Thanks & Regards
CA Prateek Garg
Mob: +91 87 4393 6809 | EMail: gargtaxcon @ gmail.com
Mukesh Kuriyal
(Advocate)
(2216 Points)
Replied 21 February 2016
Harsha
(Software professional)
(214 Points)
Replied 21 February 2016
Thank you experts - as my mother became the owner due to other copercerners' consent, she didn't become a 'new' owner. A kind of 'inheritance + gift' type of ownership. Now after her demise, we children have to to still consider our father as the 'previous' owner.
The property is a non-agricultural residential plot alloted by an official body.
I believe I can add indexed costs of house built in late 80's and a major addition of 2005 for the total cost of the property.
In India, we hardly get receipts for the construction costs etc. It is almost always a calculated guess. How does the IT department scrutinize it. Is it just the discretory power of the AO?
Regards,
Harsha Vardhana R
CAclubindia
