diff --git a/fs/ext3/ialloc.c b/fs/ext3/ialloc.c
index 0d0e97ed3ff6029659837f1394a4827506eb1704..498021eb88fb46477a68518698ba71a236804def 100644
--- a/fs/ext3/ialloc.c
+++ b/fs/ext3/ialloc.c
@@ -538,16 +538,13 @@ struct inode *ext3_new_inode(handle_t *handle, struct inode * dir, int mode)
 	if (S_ISDIR(mode))
 		percpu_counter_inc(&sbi->s_dirs_counter);
 
-	inode->i_uid = current_fsuid();
-	if (test_opt (sb, GRPID))
-		inode->i_gid = dir->i_gid;
-	else if (dir->i_mode & S_ISGID) {
+
+	if (test_opt(sb, GRPID)) {
+		inode->i_mode = mode;
+		inode->i_uid = current_fsuid();
 		inode->i_gid = dir->i_gid;
-		if (S_ISDIR(mode))
-			mode |= S_ISGID;
 	} else
-		inode->i_gid = current_fsgid();
-	inode->i_mode = mode;
+		inode_init_owner(inode, dir, mode);
 
 	inode->i_ino = ino;
 	/* This is the optimal IO size (for stat), not the fs block size */