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TMI Blog2016 (7) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... his father and thereby wrongly applying the cost of acquisition in terms of section 49(1)(iii)(a) of the Income-tax Act, 1961 and determining the capital gains on the sale of capital asset as short-term capital gains instead of long-term capital gains and refusing the exemption under section 54 of the Act. 3. The facts of the case are that the Assessing Officer received the information that the assessee had sold immovable property measuring an extent of three grounds and 858 square feet for Rs. 5,50,00,000 out of which one-sixth share of the assessee being Rs. 91,66,667. The assessee had not filed his return of income for the assessment year 2006-07. In order to verify whether the assessee had paid tax on the capital gains arising out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing the income of Rs. 48,88,895 by taking the cost of inflation index of 497 relevant for the financial year 2005-06 being the year of possession of the asset and thereby reworked the long-term capital gains and arrived at a tax demand of Rs. 11,71,780. Aggrieved, the assessee went in appeal before the Commissioner of Income-tax (Appeals). 4. On appeal, the Commissioner of Income-tax (Appeals) observed that the assessee's father got the said property after the demise of his father on June 24, 2001. The gift settlement deed does not mention whether the assessee's father has got this property through will or otherwise. The assessee's father got the property through will, whether the same will was probated after the demise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with his two sons jointly in the year 1971. After the demise of the assessee's grandfather on June 24, 2001, the assessee's father and his uncle became legal heirs of the said property. Thereafter, the assessee's father through a gift/ settlement deed, gifted to the assessee's share of property on November 20, 2005. The assessee sold his share in the said property on February 2, 2006, within a gap of two and half months from the date of the assessee became the owner of the property. The assessee's contention is that the cost of inflation index of the said property to be computed from April 1, 1981, and, thereafter, indexation cost to be done. On the other hand, the contention of the learned Departmental representative i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the previous owner of the assessee, as the case may be. For the purpose of computation of capital gains, the cost of asset should be revised upwards by applying the appropriate cost of inflation index. If the asset was acquired prior to April 1, 1981, the cost of inflation index relating to the financial year 1981-82 is required to be applied for the purpose of arriving at the index cost of asset. The Commissioner of Income-tax (Appeals) observed that the assessee became the owner of the property under consideration only on November 20, 2005, which was sold on February 2, 2006, within a gap of two and half months and it is resulted in short-term capital gains. According to the Commissioner of Income-tax (Appeals), the assessee became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from the year in which the assessee became the owner of the property. Contrary to this, the Vishakhapatnam Bench in the case of M. Siva Parvathi v. ITO [2011] 7 ITR (Trib) 468 (Visakhapatnam) held that the assessee having inheritant property purchased by the previous owner in the year 1974, the cost of acquisition for the purpose of computation of capital gains on the sale of such property had to be computed by applying the cost of inflation index by the financial year 1981-82 and not by the financial year 1989-90, i.e., the year of inheritance by the assessee. Thus, it is a settled proposition that when two views are possible, a view which is in favour of the assessee, has to be adopted. In this regard, we make a reference to the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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