IN INCOME TAX APPELLATE TRIBUNAL BENCH, CHENNAI, BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . I.T.A. No.39 Mds 2016 Assessment year : 2012-2013 Shri. V.P. Anandhan, Income Tax Officer, 38, 2nd Cross Street, Vs. International Taxation II(1) Ananda Nagar, Chennai. Thoraipakkam, Chennai 600 097 [PAN BCBPP 4731M] ( Appellant) ( Respondent) Appellant by : Shri. Shri. A.S. Sriraman, Advocate Respondent by : Shri. Shiva Srinivas, IRS, JCIT. Date of Hearing : 22-08-2016 Date of Pronouncement : 19-09-2016 ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: appeal filed by assessee is directed against order of Commissioner of Income-tax (Appeals)-16, Chennai in ITA No.61 A-16 2012-13, dated 06.11.2015 for assessment year 2012- 2013 passed u s.143(3) and 250 of Income Tax Act, 1961 (herein after referred to as Act ). :- 2 -: ITA No.39 Mds 2016 2. assessee has raised sole substantive ground that ld. Commissioner of Income Tax (Appeals) erred in confirming action of ld. Assessing Officer that Cost Inflation Indexation has to be allowed from year in which assessee has inherited property from father without considering fact that previous owner was holding property prior to 01.04.1981. 3. Brief facts of case are that assessee is Non Resident and having income from House Property, Capital Gains and other sources and filed Return of income on 14.07.2012 admitting total income of 2,00,11,857 -. Under scrutiny norms case was selected and notice u sec. 143(2) of Act and also notice u s.142(1) of Act were issued. In compliance to notices, ld. Authorised Representative of assessee appeared from time to time and submitted details. ld. Assessing Officer in assessment proceeding found that assessee while offering income from Long Term Capital Gains on sale of property has adopted Cost Inflation Indexation from 01.04.1981 for purpose of computation of Long Term Capital Gains whereas property was inherited after demise of his father on 30.12.2002. ld. Assessing Officer is of opinion that Index cost of acquisition has to be allowed from financial year 2002-03 as per Explanation (iii) to Sec. 48 of Act. Further dealt on provisions and calculated cost to previous owner but :- 3 -: ITA No.39 Mds 2016 benefit of cost of indexation has to be granted in year in which property was legally vested to assessee. Since assessee inherited property after demise of his father on 30.12.2002 benefit of cost of indexation was allowed from financial year 2002-03 and ld. Assessing Officer has worked out Long Terms Capital Gains and allowed deduction u se. 54 and 54EC and determined total income of 2,09,60,050 -. Aggrieved by order, assessee filed appeal before Commissioner of Income Tax (Appeals). 4. In appellate proceedings, ld. Authorised Representative of assessee argued grounds that ld. Assessing Officer has erred in allowing indexation from financial year 2002-03 instead of date of acquisition by assessee s father prior to 01.04.1981 and indexation from financial year 1981-82 in respect of purchase of land and construction of property. ld. Authorised Representative relied on provisions and Explanations u sec. 2(42A) of Act and Explanations 1(i)(b) for determining period of holding, whereas ld. Assessing Officer has allowed cost of acquisition under provisions as held by father but allowed cost inflation index from financial year 2002-03 and ld. Authorised Representative also supported his submissions with judicial decisions and prayed for allowing appeal. ld. Commissioner of Income Tax (Appeals) considered grounds, submissions and distinguished :- 4 -: ITA No.39 Mds 2016 decisions relied by assessee and also written submissions filed by assessee and dismissed appeal of assessee. Aggrieved by Commissioner of Income Tax (Appeals) order, assessee has assailed appeal before Tribunal. 5. Before us, ld.A.R reiterated submissions made in assessment and first appellate proceedings on provisions of inheritance, succession and gift. ld.A.R explained that property was devolved upon assessee on succession after death of assessee s father and index cost of acquisition has to be determined with reference to cost of inflation index of first year in which capital asset was held by previous owner. Ld.CIT(A) has erred in distinguishing decisions and observed that assessee inherited property after death of father on 30.12.2002 during financial year 2002-03 and indexed cost of acquisition has to be allowed in respect to year, were asset was first held by assessee. Further assessee s father was holding property as on 01.04.1981 and as per provisions of section 48 & 49(i) of Act, cost of previous owner and holding period has to be considered for indexation and supported with decision of Bombay High Court in case of CIT Vs. Manjula J.Shah 355 ITR 474 and prayed for deletion of capital gains. :- 5 -: ITA No.39 Mds 2016 6. Per contra, ld. Departmental Representative relied on order of Commissioner of Income Tax (Appeals) and vehemently opposed to submissions of ld. Authorised Representative. 7. We have heard rival submissions, perused material on record and judicial decision cited. ld.A.R has emphasized on disputed issue on holding period of assessee on whom property was devolved on death of assessee s father, provisions of Sections 48 & 49(i) (iii) of Act allow certain mode of transfer by succession and inheritance. action of Assessing Officer cannot be appreciated that property was acquired by assessee s father but inherited by assessee on demise father on 30.12.2002 whereas assessee became rightful owner as per Explanation 1(i)(b) to section 2(42A) of Act and in present case, assessee deemed to hold property from 1981 and indexed cost of acquisition has to be calculated from 01.04.1981 with base year as 100 and assessee has complied with conditions of previous owner and rightfully claimed cost inflation indexation from base year i.e. 01.04.1981 and arguments of ld.A.R are supported by decision of Bombay High Court in case of CIT Vs. Manjula J.Shah (supra) held that when assessee sells his immovable property which is acquired under gift or will, while computing capital gain index cost of acquisition has to be :- 6 -: ITA No.39 Mds 2016 computed with reference to year in which previous owner first held asset and not year in which assessee became owner of asset and Karnataka High Court in case of CIT vs. Smt. Kaveri Thimmaiah (2014) 369 ITR 0081 held that when asset is acquired by way of inheritance, cost of acquisition of asset should be calculated on basis of cost of acquisition by previous owner and said cost of acquisition of previous owner has to be calculated on basis of indexed cost of acquisition. ratio of these decisions are squarely applicable to facts of present case of assessee. 8. We rely on above judicial decisions and direct AO to allow cost inflation indexation to assessee from 01.04.1981 for computation of capital gains. 9. In result, appeal of assessee is allowed. Order pronounced on Monday, 19th day of September, 2016, at Chennai. Sd - Sd - (CHANDRA POOJARI) (G. PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai Dated:19.09.2016 KV Copy to: 1. Appellant 3. CIT(A) 5. DR 2. Respondent 4. CIT 6. GF V.P. Anandhan v. Income-tax Officer, International Taxation II(1) Chennai