22/02/2019
Conversion cost of acquisition/improvement into indexed cost of acquisition/improvement :- Indexed cost of acquisition is calculated as follows :-
INDEXED COST OF ACQUISITION :- Indexed cost of acquisition shall be calculated as follows
* A General rule Generally, indexed cost of acquisition is calculated as follows :-
Cost of acquisition X Cost inflation index (CH) for the year in which the asset is transferred
CII for the year in which asset was first held by the assessee or 2001-02; whichever is later
* When the asset was acquired under the circumstances given by section 49(1) If an asset was acquired by gift or Will [or under any circumstances given by section 49(1)], indexed cost of acquisition at the time of its transfer shall be calculated as follows :-
Cost of acquisuion X Cost inflation index (CII) for the year in which the asset is transferred
CII for the year in which asset was first held by the previous owner or 2001-02;
whichever is later
The Bombay High Court in the case of C] T v. Manjula J. Shah [2012] 204 Taxman 691 has held that indexed cost of acquisition has to be computed with reference to year in which previous owner first held asset (and not year in which the assessee became owner of asset). A similar ruling is given by the Delhi High Court in the case of Arun Shungloo Trustv. CIT [2012].
* INDEXED COST OF IMPROVEMENT :- Indexed cost of improvement shall be calculated as follows
Cost of improvement X CII for the year in which the asset is transferred
CII for the year in which improvement took place
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