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2013 (7) TMI 413 - GUJARAT HIGH COURTComputation of capital gain - Mode of computation u/s 48 - cost of acquisition versus CII - receipt of property under gift or will - Whether on the facts and in the circumstances of the case, the Tribunal has erred substantially in law in not recognizing that the “cost of acquisition of an asset” and “cost inflation index” are two different legal concepts and are mutually exclusive – Whether the Appellate Tribunal erred in law in not applying the provisions of section 48, Explanation(iii) which clearly states that inflation index would apply for the first year when the asset was first held by the assesse. Held that:- Tribunal was right when stating that the indexed cost of acquisition shall have to be worked out with reference to 1.4.1981 - in the present case the asset was acquired by the previous owner of the property - an asset acquired prior to 1.4.1981 the indexed cost of acquisition would be the cost of acquisition multiplied by the ratio of the Cost Inflation Index in the year in which assessee’s asset is transferred to the Cost of Inflation Index for the year beginning on 1.4.1981 - by virtue of a deeming fiction provided in sub-section(1) of section 49, cost of acquisition in hands of the assessee would be the cost for which the previous owner of the property acquired it - It is for this purpose that we need to fall back on computation provision of section 48 - When we do so, we work out the cost of acquisition of the asset in the hands of previous owner. While doing so, we cannot transpose the assessee in explanation (iii) of section 48 - Doing so, would amount to falling short of giving full effect to the deeming fiction contained in sub-section(1) of section 49. The interpretation sought to be given by the Revenue would be unacceptable because there is no provision under which the cost of acquisition in the hands of the assessee in cases such as gift on the date of acquisition of the property can be made and found in the Act. A Serious road-block would be created if such property is acquired through Will and would therefore have no reference to its actual cost on the date of operation of the Will. - decided against the department.
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