Y acquired a house from his father by way of gift on 5th May 2005. On this day its Fair Market Value (FMV) was ₹4,20,000. His father had purchased the house in the year 2002-03 for ₹2,50,000. Y introduced the house as hi

Section 45(3) of the Income tax Act, 1961: The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. Further, if an asset is acquired as gift and subsequently transferred, period of holding will include the holding period of previous owner [Section 2(42A)] and Cost of acquisition of current owner will be cost of acquisition of previous owner [(Section 49(1))]. Computation of Capital Gains Particulars Amounts (₹) Consideration (Value recorded in the books of accounts of the firm) 16,00,000 Less: Indexed cost of acquisition ₹250000*280/105 (6,66,667) Period of Holding: 2002-03 to 2018-2019 Long Term Capital Gains 9,33,333 Indexation is done from the previous year of acquisition by Father i.e. PY 2002-2003 (As decided in the case of CIT V Manjula J. Shah - [2013] 355 ITR 474). If this case is not followed then Indexation shall be done from PY in which asset was held by the assessee i.e. PY 2005-06