indexation

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kalpana (Querist)
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10 February 2010 X booked a flat in year 1995 and paid the advance of Rs. 20,00,000/-. registary deed made on 2001 of Rs. 40,45,000/-. property sold out in 2006.

indexation on cost of acquisition should be done from 1995 or 2001??

Rahul Gupta

Rahul Gupta (Expert)
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11 February 2010 Indexation will be done form the date on which Mr.X get the ownership rights i.e 2001.

kalpana

kalpana (Querist)
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11 February 2010 i m not satisfied with ur ans. give reference with case law if u can.

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Rahul Gupta

Rahul Gupta (Expert)
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11 February 2010 Section 48 On mode of cumpution defines Indexed Cost of Acquisdition as the year in which the asset is transferred.
In the Given case, In 1995 the amount paid is just an advance amount for the asset to be transfeerd to the purchaser in future. The Risk and ownership tranfers on the registry of the Sale Deed. So My opinion says for the Indexation year to be 2001.

Section 48 Explanation (iii) >
Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the ""year in which the asset is transferred"" bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later;

kalpana

kalpana (Querist)
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12 February 2010 refer to case Mrs. Shakuntala Devi VS DDIT-bangalore-TIOL-221-ITAT.

INCOME TAX CASE-SEC 54-ASSESSEE SELLS HER FLAT -MAKES CAPITAL GAINS-SIGNS AN MOUWITH A SELLER OF A PROPERTY AND TRANSFERS SUNSTANTIAL PART OF TOTAL CONSIDERATION-CLAIMS EXEMPTION U/S 54-AO DISALLOWS EXEMPTION ON THE GROUND THAT THE ASSESSEE HAD NOT GOT OWNERSHIP OF THE PROPERTY WITHIN THE TIME-LIMIT OF 2 YEARS -ASSESSEE ARGUES THAT THE CAPITAL GAIN MADE HAD BEEN TRANSFERRED TO THE SELLER OF THE PROPERTY BEING PURCHASED AS PER MOU AND WAS ELIGIBLE FOR EXEMPTION- HELD, TRANSFER OF PROPERTY,POSESSION OR OWNERSHIP HAVE NOTHING TO DO WITH THE CASE AS LONG AS THE SUM OF CAPITAL GAINS STAND TRANSFERRED TO THE SELLER FOR PURCHASE OF A NEW FLAT AS THIS FULFILLS THE CONDITION OF SEC. 54-ASSESSEE'S APPEAL ALLOWED: BANGALORE ITAT

SO, IN MY CASE ASSESSEE SIGNED BUYER'S AGREEMENT IN 1995.

Rahul Gupta

Rahul Gupta (Expert)
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13 February 2010 Could u please also clarify the date of Possession? Also if possible, please provide me some details about the agreement in 1995 saying about the risk and the possession of the house. It will provide more clarification about the case.

My opinion and interpretation of law says that when you book the flat and paid Rs. 20,00,000 you got the right to acquire the flat in 1995. But the year in which the flat was transferred to you, you got the right converted into immovable asset. Considering that you got the possession in 2001 and got the flat registered in 2001, your ownership starts from 2001 only. Therefore, you must calculate your capital gain by taking the cost of Indexation for 2001 and 2006 only.

The given case lays more emphasis on the exemption u/s 54 on account of capital gain re investment. It is not concerned with the acquisition or possession of the flat. Also, as stated in the case, that transfer of ownership and possession is concerned and is applicable in accordance with what is written while signing the MOU.