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TMI Blog2013 (1) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 148 and assessment was completed u/s. 147 with respect to 143 of Income Tax Act, 1961. During assessment proceedings, the AO observed that assessee had sold a property during the period and had claimed the indexation of financial year 1981-82 whereas the property was owned by her mother during that year and assessee had acquired the property only in FY 2000-01 through will of her mother. While calculating capital gains, the assessee had taken the index of 1981-82 whereas the AO was of the opinion that assessee should have taken index for the FY 2000-01. In this respect, the AO had relied upon Explanation 3 of section 48 of the Income Tax Act which provides as under:- 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 beginning on the 1st day of April 1981, whichever is later. When confronted to the assessee with the above provision, the assessee submitted that for determining whether the capital asset is a long-term or short term, the period for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute in question that the asset was held by assessee only from FY 1991-92 i.e. when the partition of HUF took place, therefore the period for which the asset was held by previous owner has to be added to decide as to whether the asset was a short-term capital asset or a long-term capital asset and since the asset was acquired in 1988, the asset was a long-term capital asset in view of explanation to section 2(42A) but in view of this specific provision of explanation (iii) of section 48, indexation has to be allowed from FY 1991-92 i.e. the year from which property was held by the assessee on partition of HUF. In view of the above, the AO re-calculated the amount of capital gain by taking the indexed cost for the FY 2000-01 i.e. when the assessee became owner through will and calculated total amount of capital gain at Rs. 1,04,58,870/-. 4. Dissatisfied with the order, the assessee filed appeal before CIT(A) and submitted as under:- i) That the AO has primarily relied upon the provisions of section (iii) of section 48 and AO has also relied on the decision of Mumbai, ITAT in the case of DCIT vs Kishore Kanung. ii) That as per explanation to section 49(1), the owner of a property, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very clear to treat the date as well as cost of acquisition of capital gain in terms of Section 48. This is the scheme of the Act as laid out in the relevant provisions and this is the context in which the same has to be understood and appreciated. As rightly contented by the ld. Counsel for the assessee, had it not been the intention of the legislature, the expression used in Explanation (iii) to section 48 would have been ............. For the first year in which the capital asset became the property of the assessee as used in Section 49(1). As already observed, the transaction of gift is not regarded as transfer and accordingly capital gain arising from such transfer is not made chargeable to tax u/s. 45. However, this capital gain by implication is brought to tax at second stage when capital asset becoming the property of the assessee under gift is subsequently transferred by him by adopting the date and cost of acquisition of the capital asset of the previous owner as the date and cost of acquisition of the assessee. This precisely is the scheme of the Act as laid out in the relevant provisions and if Explanation (iii) to section 48 is interpreted in the way sought by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be computed with reference to the year in which the previous owner first held the asset. Accordingly, we answer the question referred to us in favour of the assessee and uphold the impugned order of the learned CIT(A) on this issue. Ld. CIT(A), on the basis of decision of Special Bench, Mumbai in the above noted case decided in favour of assessee and deleted the addition made by the AO. 5. Aggrieved, the revenue has filed appeal before this Tribunal. At the outset, Ld. DR read from assessment order and argued that indexation should have been from the date when assessee became owner as the provisions of section 48, does not talk about the previous owner. In this respect, our attention was invited to Explanation (iii) in section 48 of the Income Tax Act, where indexed cost of acquisition has been explained. He further argued that word 'held' is not defined in the Income Tax Act and, therefore, dictionary meaning of word 'held' should be understood which means a definite right and controlling right and this right control is not absolute, the asset can not be said to the held without becoming owner. He further explained that assessee became owner of the property in 2 ..... 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