JUDGMENT subject matter of challenge in appeal is judgment and order dated August 3, 2007, passed by learned Income-tax Appellate Tribunal pertaining to assessment year 2004-05. Revenue has come up in appeal. following questions were formulated at time of admission of appeal: "(a) Whether, on facts and in circumstances of case, Income-tax Appellate Tribunal is correct in adopting value of share of assessee in property at 47, Archbishop Makarios Marg (Golf Links), New Delhi, as on April 1, 1981, at Rs. 18,40,244 in accordance with report of registered valuer instead of Rs. 15,02,907 being mean value between valuations made by registered approved valuer and Rs. 11,65,570 by District Valuation Officer, as determined by Commissioner of Income-tax (Appeals)? (b) Whether, on facts and in circumstances of case, Income-tax Appellate Tribunal is correct in applying cost inflation index with effect from April 1, 1981, instead of year 1999-2000, in which assessee inherited property, contrary to provisions of Explanation (iii) to section 48 of Income-tax Act, 1961, to effect that it would be applied with effect from first year in which assessee held property, or April 1, 1981, whichever is later, on ground that literal interpretation of provisions was to be discarded? (c) Whether, on facts and in circumstances of case, Income- tax Appellate Tribunal is correct in holding that rent from property at Panchasheel Park, New Delhi, was to be assessed under head'Income from house property' and not as'Income from other sources', though land stood in name of assessee's husband?" facts and circumstances of case are briefly stated as follows: residential house situate at premises No. 47, Golf Links, New Delhi, was purchased by Sardar Pratap Singh on April 16, 1958, at cost of Rs. 34,600. He died on June 29, 1968. aforesaid property devolved on her widow, Bhajan Pratap Singh. She died on September 16, 1999. assessee and her three sisters being daughters of deceased Bhajan Pratap Singh succeeded to property in equal shares. During financial year 2003-04 property was sold at sum of Rs. 12 crores. share of assessee in sale proceeds was sum of Rs. 3 crores. question numbers 1 and 2 indicated above are with regard to computation of capital gains payable by assessee consequent to sale of property situate at Golf Links. third question is in connection with another piece of land belonging to husband of assessee. building was, however, constructed on piece of land belonging to husband of assessee jointly by wife and husband. cost of construction was shared in ratio of one-third and two- thirds and income was proportionately distributed. third question pertains to income arising from this property. In so far as first question is concerned, property was valued by registered valuer as at April 1, 1981, at sum of Rs. 73,60,975. Therefore, share of assessee worked out to sum of Rs. 18,40,244. Assessing Officer, however, in exercise of power under section 55A referred matter to Departmental valuer who valued property at sum of Rs. 46,62,280 and, thus, share of assessee was worked out sum of Rs. 11,65,570. competence of Assessing Officer to refer matter to Departmental valuer under section 55A was under challenge. learned Tribunal held that reference made under section 55A was incompetent and, therefore, valuation provided by assessee on basis of valuation made by registered valuer valuing share of assessee at sum of Rs. 18,40,244 was accepted, which is under challenge in first question indicated above. Mr. Agarwal, learned advocate appearing for Revenue-appellant, has not disputed fact that under clause (a) of section 55A, as it stood at relevant point of time, Assessing Officer could have made reference provided he was of opinion that valuation made by registered valuer was less than fair market value of property. When valuation made by registered valuer was on higher side, there was no occasion for Assessing Officer to refer matter to valuation officer under section 55A. Therefore, valuation at sum of Rs. 18,40,244 as at April 1, 1981, was correctly accepted by learned Tribunal. first question is answered in positive and against Revenue. Mr. Agarwal, learned advocate appearing for Revenue, submitted that computation of capital gains has to be made in accordance with section 48 and in particular Explanation (iii), which provides as follows: "(iii)'indexed cost of acquisition' means amount which bears to cost of acquisition same proportion as cost inflation index for year in which asset is transferred bears to cost inflation index for first year in which asset was held by assessee or for year beginning on 1st day of April, 1981, whichever is later." Mr. Agarwal is correct when he submitted that benefit of cost inflation index going by clause (iii) of Explanation quoted above should be available to assessee from year 1999 when she inherited property which was in fact first year of her inheritance. That can certainly be one way of looking at it. But if harmonious construction is to be given then reference has to be made to other provisions contained in Act. Section 2(42A) defines "short- term capital asset". Clause (b) of Explanation 1 to section 2(42A) provides as follows: "(b) in case of capital asset which becomes property of assessee in circumstances mentioned in sub-section (1) of section 49, there shall be included period for which asset was held by previous owner referred to in said section." Section 49 referred to in aforesaid clause (b) of Explanation 1 provides for various circumstances including acquisition by succession, inheritance or devolution. Therefore, period for which asset was held by previous owner, namely, mother of assessee can also be included to period of holding of property by assessee. mother held property since 1968, as indicated above. Here is, as such, reason why assessee in case before us can be said to have held property since 1968. In order to ascertain cost of acquisition to assessee reference can also be made to section 55(2)(b)(ii) which reads as follows: "(ii) where capital asset became property of assessee by any of modes specified in sub-section (1) of section 49, and capital asset became property of previous owner before 1st day of April, 1981, means cost of capital asset to previous owner or fair market value of asset on 1st day of April, 1981, at option of assessee." Based on aforesaid provision cost of acquisition of capital asset at option of assessee is fair market value of asset on April 1, 1981. When that is permissible in law, indexation on fair market value as on April 1, 1981, until date of transfer has to be allowed. Any other interpretation will not only lead to absurd result but shall also cause immense prejudice to assessee. If previous owner, that is to say, mother, had not died and if she herself had sold property in year 2003, she would have got benefit of indexation on fair market value as at 1st April, 1981. We are supported in our view by judgment of Gujarat High Court in case of CIT v. Rajesh Vitthalbhai Patel reported in [2013] 37 Taxmann.com 439 wherein following views were expressed: "7. Under section 48 of Act, thus capital gain is computed by deducting from full value of consideration received or accruing as result of transfer, amounts of expenditure incurred wholly and exclusively in connection with such transfer, cost of acquisition of asset and cost of any improvement thereto. term'cost of acquisition of asset' is explained in Explanation (iii) to section 48. In terms of such Explanation, indexed cost of acquisition would be amount which bears to cost of acquisition same proportion as cost inflation index for year in which asset is transferred bears to cost inflation index for first year in which asset was held by assessee or for year beginning on 1st day of April, 1981, whichever is later. In simple words, therefore, for asset acquired prior to April 1, 1981, indexed cost of acquisition would be cost of acquisition multiplied by ratio of cost inflation index in year in which assessee's asset is transferred to cost of inflation index for year beginning on April 1, 1981. It was, therefore, that Tribunal in our opinion correctly held that indexed cost of acquisition shall have to be worked out with reference to April 1, 1981, since, in present case, asset was acquired by previous owner of property. Learned counsel for Revenue, however, submitted that such interpretation would fail to take into account expression'cost inflation index for first year in which asset was held by assessee'. In his opinion, 'assessee' referred to under such expression would be present assessee and not previous owner. In our opinion, such interpretation cannot be accepted. We say so for following reasons. Firstly, by virtue of deeming fiction provided in sub-section (1) of section 49, cost of acquisition in hands of assessee would be cost for which previous owner of property acquired it. It is for this purpose that we need to fall back on computation provision of section 48. When we do so, we work out cost of acquisition of asset in hands of previous owner. While doing so, we cannot transpose assessee in Explanation (iii) of section 48. Doing so, would amount to falling short of giving full effect to deeming fiction contained in sub-section (1) of section 49. To our opinion such deeming fiction must be allowed to have its full play. As is often stated, deeming fiction must be allowed its full application and should not be allowed to boggle. 8. Additionally we notice that in sub-section (1) of section 49, Legislature has provided that cost of acquisition of asset shall be deemed to be cost for which previous owner of property acquired it, as increased by any cost of improvement of assets incurred or borne by previous owner or assessee, as case may be. If interpretation of counsel for Revenue was correct, this later reference to cost of improvement borne by assessee would not have been necessary since section 48 itself would take care of any improvement on capital asset to be included for cost of acquisition. It is precisely because such improvement referred to in section 48 would have reference only to that made by previous owner that additional provision had to be made in deeming fiction provided in sub- section (1) of section 49. Further, interpretation sought to be given by Revenue would be unacceptable because there is no provision under which cost of acquisition in hands of assessee in cases such as gift on date of acquisition of property can be made and found in Act. serious road- block would be created if such property is acquired through Will and would, therefore, have no reference to its actual cost on date of operation of Will." Mr. Murarka has also relied upon judgment of CIT v. Manjula J. Shah reported in [2013] 355 ITR 474 (Bom) and referred to paragraphs 21 to 24 of judgment which are as under (page 482): "To accept contention of Revenue that words used in clause (iii) of Explanation to section 48 of Act has to be read by ignoring provisions contained in section 2 of Act runs counter to entire scheme of Act. Section 2 of Act expressly provides that unless context otherwise requires, provisions of Act have to be construed as provided under section 2 of Act. In section 48 of Act, expression'asset held by assessee' is not defined and, therefore, in absence of any intention to contrary expression'asset held by assessee' in clause (iii) of Explanation to section 48 of Act has to be construed in consonance with meaning given in section 2(42A) of Act. If meaning given in section 2(42A) is not adopted in construing words used in section 48 of Act, then gains arising on transfer of capital asset acquired under gift or will be outside purview of capital gains tax which is not intended by Legislature. Therefore, argument of Revenue which runs counter to legislative intent cannot be accepted. Apart from above, section 55(1)(b)(2)(ii) of Act provides that where capital asset became property of assessee by any of modes specified under section 49(1) of Act, not only cost of improvement incurred by assessee but also cost of improvement incurred by previous owner shall be deducted from total consideration received by assessee while computing capital gains under section 48 of Act. question of deducting cost of improvement incurred by previous owner in case of assessee covered under section 49(1) of Act would arise only if period for which asset was held by previous owner is included in determining period for which asset was held by assessee. Therefore, it is reasonable to hold that in case of assessee covered under section 49(1) of Act capital gains liability has to be computed by considering that assessee held said asset from date it was held by previous owner and same analogy has also to be applied in determining indexed cost of acquisition. object of giving relief to assessee by allowing indexation is with view to offset effect of inflation. As per CBDT Circular No. 636, dated August 31, 1992 (see [1992] 198 ITR (St.) 1) fair method of allowing relief by way of indexation is to link it to period of holding asset. said circular further provides that cost of acquisition and cost of improvement have to be inflated to arrive at indexed cost of acquisition and indexed cost of improvement and then deduct same from sale consideration to arrive at long-term capital gains. If indexation is linked to period of holding asset and in case of assessee covered under section 49(1) of Act, period of holding asset has to be determined by including period for which said asset was held by previous owner, then obviously in arriving at indexation, first year in which said asset was held by previous owner would be first year for which said asset was held by assessee. Since assessee, in present case, is held liable for long-term capital gains tax by treating period for which capital asset in question was held by previous owner as period for which said asset was held by assessee, indexed cost of acquisition has also to be determined on very same basis." For aforesaid reasons, second question is answered in affirmative and against Revenue. In so far as third question is concerned, Mr. Agarwal was not in position to draw our attention to any definition of expression "owner". Section 27 provides inclusive definition of expression "owner". inclusive definition is not exhaustive definition in law. We can imagine situation where person can be owner of land and another can be owner of structure. This is permissible in law because in joint ownership unity of title is not required. In case before us land admittedly belonged to husband. He has raised building with joint funds belonging to himself and his wife. Therefore, one inference which can be drawn is that land belonging to husband has been thrown into common stock of joint property between husband and wife. Both of them thus became joint owners by operation of doctrine of blending. They admittedly have borne cost of construction in ratio of one-third and two-thirds. Therefore, income arising out of property is in fact income arising out of house property which has to be taxed under section 22 rather than as income arising out of other sources under section 56. Therefore, third question is answered in affirmative and against Revenue. appeal is for aforesaid reasons dismissed. *** Commissioner of Income-tax v. Smt. Mina Deogun