Short Overview: The issue was squarely covered by the judgment of High Court rendered in CIT v. Manjula J. Shah (Dead) [Civil Appeal No(S). /2018 (Arising Out Of SLP (C) No(S). 19924/2012), Civil Appeal No(S). /2018 @ SLP(C) No. 8184/2014] that benefit of indexation would be available to assessee from financial year 1981-82 on fair market value as on 1-4-1981. Thus, appeal of assessee was allowed.

Assessee sold certain agricultural land. The said property was inherited by him from his father and he was one of the four legal heirs of the said property. The property was purchased by father prior to 1-4-1981. Assessee worked out Long Term Capital Gains against his share in the property and claimed deduction under section 54. It was disputed that assessee claimed indexation of cost from financial year 1980-81 since the property was acquired by way of inheritance and assessee’s father had acquired the same prior to 01-04-1981. However, the benefit of indexation, in the opinion of AO was to be granted from financial year 2000-01, being the first year in which the asset was first held by assessee.

It is held that capital gains liability has to be computed by considering that assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. This issue was squarely covered by the judgment of High Court rendered in CIT v. Manjula J. Shah (Dead) [Civil Appeal No(S). /2018 (Arising Out of SLP (C) No(S). 19924/2012), Civil Appeal No(S). /2018 @ SLP(C) No. 8184/2014] wherein it was held that benefit of indexation would be available to assessee from financial year 1981-82 on fair market value as on 1-4-1981. Thus, appeal of assessee was allowed.

Decision: In assessee’s favour