Indexed cost of acquisition - Definition / Legal Terminology - Income Tax

Explanation.(iii) -For the purposes of section 48 of the Income tax Act 1961,- Indexed cost of acquisition means- an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year begin ning on the [1st day of April, 2001] , whichever is later; Determination of indexed cost of acquisition for capital gains computation The Hon ble Bombay High Court in the case of CIT Vs. Manjula J.Shah - [ 2011 (10) TMI 406 - BOMBAY HIGH COURT] The Hon ble Court concluded that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition 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.