Indexation benefit is available to an inherited property from the date of acquisition by first owner: ITAT Mumbai

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Indexation benefit is available to an inherited property from the date of acquisition by first owner: ITAT Mumbai

ITO v. Sohrab Fali Mehta [TS-117-ITAT-2023(Mum)]

Facts:

  1. The Assessee, a US resident, earned income from long-term capital gains from the sale of shares in an immovable property located at Colaba in Mumbai. The property was received by the Assessee under his mother’s will in AY 2008-09.
  1. The leasehold right of the impugned property was first acquired by two individuals in 1907, and through various modes of transfer such as mortgage, settlement of trust, will, etc., the Assessee inherited 15% of the property.
  1. The Revenue held that the Assessee could only claim indexation benefit from the financial year 2007-08, as he received the property only in March 2008, upon his mother’s death. However, the CIT(A) granted the indexation benefit from the financial year 1981-82.

ITAT Mumbai held as below:

  1. The issue was squarely covered by the jurisdictional High Court ruling in Manjula J Shah (ITA No. 3378 of 2010), where it was held that the indexed cost of acquisition has to be computed with respect to the year in which the initial owner first held the asset and not in the year in which the Assessee became the owner of the asset by virtue of his mother’s death.
  1. Thus, the Assessee was entitled to the indexed cost of acquisition benefit from the financial year 1981-82.

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