Opinion Of Eminent Legal Luminaries On Controversial Issues

Capital gains – Computation -Cost for Indexation – S. 49(1), 55(2)(b)

QUERY: A person acquired inherited property before Independence. Thereafter, he had obtained, the court order for legal heirship in the Financial Year 1991/92, At that time stamp duty was paid amounting to Rs. 1,98,840/-. Can it be considered as cost for indexation?
ANSWER: Section 49(1) provides that where the capital asset acquired by an assessee by way of inheritance, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. In this case, the property was acquired by inheritance before Independence. It seems because of some dispute the assessee obtained the Court order for legal heirship in the Financial Year 1991/92. Therefore, this cannot be considered as cost of acquisition and no indexation is available on that value. However, as per section 55(2)(b) the fair value of the property as on April 01,1981 can be taken for indexation.
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