Mr. Surinder furnishes the following particulars for the previous year ending 31.03.2024. He had a Residential House, inherited from his father in…

Computation of Taxable Capital Gains for A.Y.2024-25 Particulars ₹ Full Value of Consideration 75,00,000 Less: Expenditure in connection with transfer 50,000 Net Sales Consideration 74,50,000 Less: Indexed cost of acquisition [₹ 13,00,000 (higher of actual cost to the previous owner of 10lakhs and Fair market value as on 1.4.2001 of 13lakhs) x 348/100] 45,24,000 Less: Indexed cost of improvements [10lakhs x 348/220] 15,81,818 13,44,182 Less: Exemption u/s 54 – in respect of residential house purchased on 20.12.2023 12,00,000 Taxable Long Term Capital Gains 1,44,182 Note – The above answer is on the basis of the view expressed by Bombay High Court in CIT v. Manjula J. Shah 16 Taxman 42, wherein it was held that Indexed cost of acquisition in case of gifted asset has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. Alternative answer is possible on basis of the plain reading of the provisions of section 48 wherein the indexed cost of acquisition would be determined by taking the Cost Inflation Index (CII) for the year in which the asset is first held by the assessee i.e. F.Y.2009-10. In such a case, the Indexed cost of acquisition would - 30,56,757 (₹ 13,00,000 x 348/148) and taxable long term capital gains would be - 16,11,425.