Capital gain

I think in this case the cost to the assesse will be deemed to be the cost to his / her grand mother i.e. 1970-71 or F.M.V. as on 01.04.1981 which ever is higher. and as you said the indexation will be done from the year of acquisation.

As the section explains that cost will be deemed cost to the previous owner, here the previous owner cost will be determined as 1970-71 or F.m.v. as on 01.04.1981 as per Income tAx

agreee with mr sanat

yes agreed 

cost of acq will be of 1981 and indexation will be done when it was first held by assessee

cheers

freinds , i have one doubt

jewellery is excluded from the definition of 2(14) of capital asset

as it is not capital asset why to worry about capital gains ?

Mr. Khanna,

The definition of capital asset excludes personal effects(not being jewellery, archaelogical collections, paintings, drawings, sculptures or any work of art) held by the assessee and hence jewellery is a capital asset. So when jewellery is sold it attracts Capital Gains tax. 

Mr.Jalpesh,

As per Explanation to Sec 49(1), the previous owner of the capital asset means the last previous owner who acquired it by a mode other than those referred to in Sec 49(1). And hence, the previous owner will be the maternal grandmother in this case. 

As per Sec 55(2), cost of acquisition in relation to the property which became the property of the assessee by any of the modes referred to in Sec 49(1) shall be the cost to the previous owner (maternal grandmother in this case) or FMV as on 1.4.1981 at the option of the assessee. (obviously whichever is higher).

As per Second proviso to Sec 48, where the capital gain arises from the transfer of a long term capital asset, cost of acquisition shall be substituted with Indexed Cost of Acquisition.

As per Explanation to Sec 48, Indexed Cost of Acquisition means the amount which bears to the cost of acquisition the same proportion as the 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 1.4.81, which ever is later.

Hence, the relevant cost inflation index is the index of the year in which the asset was first held by the assessee.

As per the decision laid down in the case of Special Bench Mumbai  Tribunal DCIT vs Manjula J Shah 318 ITR 417 the benefit of indexation can be availed from the date when the capital asset was held by the previous owner.

THANKS A LOT Sravan  I ONCE AGAIN GO THROUGH THE DEFINITION.

For computation of capital gain in this case, cost of acquisition would be cost to previous owner or FMV as on 1-4-81, at the option of the assessee (whichever is higher). The indexation would start from the date on which asset was first held by the assessee (thus, in this case FY 08-09)