RADHA SHELAT,,PUNE vs. INCOME-TAX OFFICER, WARD - 13(3),, PUNE

The assessee raised sole ground which is as under : “1) The learned CIT Appeals erred on facts and in law in denying indexation benefit from 1.4.1981, in case of property sold which was situated at Baroda. She failed to appreciate that in cases covered u/s. 49(1)(iii) it is the first previous owner and not the immediate previous owner that is relevant for ascertaining date of acquisition and consequent indexation benefits. She failed to appreciate settled legal precedent in this regard as well as the CBDT Circular directly on the issue which was binding on her.”

Heard both the parties and perused the material available on record. We note that the assessee sold a residential property bearing Plot No. A/2, Shreeji Hsg. Society, Sayajiguni, Vadodara for a total consideration of Rs.35,11,000/- on 28-09-2012 and according to ld. AR the said property was owned by her father in law and mother in law. We note that after their demise, the assessee‟s husband and his sister became legal heirs of said property having 50% share. The assessee stated the value of said property as on 01-04-1981 at Rs.2,12,220/- and claimed cost of acquisition on the basis of indexation as on 01-04-1981 at Rs.10,21,500/-. The AO did not agree with the same and observed that Shri Ajit Shelat, the husband of assessee died on 01-09-2010, held indexation for the said property should be F.Y. 2010-11. The assessee contended that her husband inherited said 50% from his father being the original purchaser (owner) and the index cost should be on the basis of year of purchase by the original owner in terms of section 49(1)(iii)(a) of the Act. The AO did not accept the same and proceeded to take the base year as F.Y. 2010-11. The CIT(A) in the impugned in Para No. 9 held that the late husband of the assessee is the previous owner who acquired 50% after the death of his mother and held indexation from the year of death of assessee‟s mother in law. In the absence of date of death of assessee‟s mother in law, the CIT(A) directed the AO to adopt the year of death of her mother in law as the base for

Coming to the provisions u/s. 49 of the Act under clause (iii)(a) of sub-section (1) where the capital asset became the property of the assessee by succession, inheritance or devolution the cost of acquisition of the said asset shall be deemed to be the cost for which the previous owner of the property acquired. The definition of “previous owner” is defined under explanation which reads the previous owner of the property” in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub- section (1) of section 49 of the Act. It means, the said property was inherited by the husband of the assessee on the demise of his mother and his mother also inherited such property on the demise of her husband. Therefore, the expression previous owner is to be construed in relation to the person who acquired the said property by mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub-section (1) of section 49 of the Act. Therefore, the AO and CIT(A) did not view the issue in right perspective as contemplated under the provisions of section 49 of the Act and thus, the order of CIT(A) in directing the AO to adopt the year of death of assessee‟s mother in law is not justified. Thereby, we hold the assessee rightly claimed indexation as on

In the result, the appeal of assessee is allowed.