Section 54, 54F of Income  Tax Act, 1961—Capital gain computation—In the instant case, the point of first dispute is the fact that the assessee claimed indexation of the cost from financial year 1980-81 since the property was acquired by way of inheritance and the assessee’s father had acquired the same prior to 01/04/1981. However, the benefit of indexation, in the opinion of AO, was to be granted from financial year 2000-01, being the first year in which the asset was first held by the assessee. The second point of dispute is that the benefit of deduction u/s 54 was denied since the aforesaid deduction, in the opinion of  AO, was not available to acquire tenancy right in a rented property.

Held that— we conclude that the benefit of indexation would be available to the assessee from FY 1981-82 on fair market value as on 01/04/1981. The first ground of appeal stands allowed.

So far as the question of deduction u/s 54 is concerned, we find that the assessee has not acquired the ownership rights in the new property but merely acquired tenancy right which could not be equated with ownership rights. The conditions of Section 54 as well as Section 54F is that the assessee must purchase or construct the new property within the specified time. The acquisition of tenancy right, in our opinion, do not tantamount to purchase or construction of a new property, in any manner. Therefore, the assessee would not be eligible to claim the aforesaid deduction either u/s 54 or u/s 54F.[KAUSHIK D. MISTRY VERSUS INCOME TAX OFFICER-20 (2) (3) MUMBAI.] [2019] 12 ITCD Online (28) [ITAT MUMBAI]