08 June 2013
My grandfather acquired property and constructed residential house in 1959-60. My grandfather passed away on 31-12-1999. My father passed away on 03-07-2008. Both of them died intestate. I wish to sell the property now.
1. Can I take the fair market value as on 1st April 1981 as the cost of acquistion?
2. Can I apply indexation to cost of acquisition under Section 48 Explanation (iii)?
3. If I can apply indexation, which index will apply in relation to date of transfer - 1981-82, 1999-2000 (my grandfather's death) or 2008-2009 (my father's death which is when technically the property was inherited by me and therefore the first year in which the asset was held by me.)?
08 June 2013
1. Yes. 2. You can apply indexation. 3. Indexation application will be made by applying the Cost Inflation Index of the FY in which you will transfer the said property.
08 June 2013
Dear Mr. Bafna, thank you for this reply and for the reply to my other question regarding cost of acquisition. For the sake of complete clarity if I sell the property in 2013 can I substitute fair market value as on 1st April 1981 and take the indexation as 852 (CII for 2012-13)divided by 100 (CII for 1981-82) even though I came into title through inheritance only in 2008?
08 June 2013
yes, indexed cost of acquisition has to be computed with reference to year in which previous owner first held the asset and not from the year in which assesse became owner of asset
it is held in the case of CIT Vs Manjula J Shah.
Analysis of case was provided here with for your ready reference
09 June 2013
Mumbai High court decision in the case of Manjula J. Shah needs reconsideration since law is very clear (clause (iii) of explanation to section 48)wherein, in the instant case, denominator of the index need to be that of FY 2008-09. If the property is selling in FY 2013-14 , numerator of the index may be taken as 939 ( notification 40/2013 dated 6/6/2013).
09 June 2013
Dear Mr. Warrier, reconsideration by whom? Has CIT gone on appeal against the decision of the Mumbai High Court?
Delhi High Court in Arun Shungloo Trust V CIT has also come to the same decision and is " entirely in agreement with the findings/ ratio recorded by the Bombay High Court in the case of Manjula J. Shah"
There are also about six tribunal decisions in favour of the same interpretation and only one dissenting decision - Dy. CIT v. Kishore Kanungo [2006] 102 ITD 437