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Facts and issue : The Taxpayer disclosed long term capital gains qua sale of flat for Rs. 19,00,000/-. The Taxpayer had purchased this flat for an amount of Rs. 4,80,440/-, qua which payments were made on various dates as under:
• Rs. 75,000/- on 30 September 1989
• Rs. 25,000/- on 18 October 1989
• Rs. 50,000/- on 21 September 1992.
• Rs. 1,50,000/- on 27 January 1995.
• Rs. 1,25,000/- on 7 July 1995.
• Rs. 55,440/- on 12 March 96.
The flat was allotted to the assessee under the scheme of draw of lots of flats which was held on 17 March1996 and the possession thereof was given on 1 August 1997. While computing the capital gains the Taxpayer in order to determine indexed cost of acquisition took the entire cost of flat and applied (the notified indexation from FY 1989-90).
The AO held that possession of flat having been given to assessee on 1 August 1997 the indexation of the cost, on acquisition of flat, was to be allowed in Financial Year 1997-98 i.e. the year of allotment. The long term capital gains were recomputed accordingly by AO.
Decision: The Tribunal held that the entire cost of the flat cannot be the date of first instalment. The meaning of the word ‘held’ cannot be extended to the part of payment which is even not paid by the Taxpayer. Thus, there is no case to allow the indexation on the entire cost of acquisition on the date of payment of first instalment i.e. FY 1989-90.
The payment of individual instalments made by the Taxpayer on these actual amounts to payment towards holding of an asset, deserves to be indexed from the date of actual payment of each instalment. The long term capital gains are to be worked out by applying the index cost of acquisition qua the actual payment of each instalments.
Our Comments: Mumbai Tribunal in the case of Mrs. Lata G. Rohravs DCIT Central Cir. 39, Mumbai (21 SOT 541) had held that long term capital gains on sale of property, were to be calculated considering indexation benefit from the year of acquisition i.e. date of allotment. However, the decision under consideration and M/s Asgard Properties Pvt. Vs. ITO 9(1)(1) (ITA No.3493/Mum/2011)(Mum. Tribunal) have reversed the said position.
Source: AnuradhaMathur vs. ACIT (Delhi Tribunal)(ITA No. 2297/Del/2011
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