1)When a property is received on inheritance it is not taxable for the receiver. When the inheritor of property, sells it, capital gains on the sale are taxable for the inheritor.
2) The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
3) Additionally, the year of acquisition of the previous owner ie 1935 is considered for the purpose of indexation of the cost of acquisition.
4) in your case the cost of calculating your gain would the cost of purcasing property in 1935 by grand father and cost shall be indexed as it is long term capital gain