Capital gain in case of asset purchased in installments

Tax queries 12814 views 14 replies

veny gupta

CA FINAL STUDENT

49 Points Joined August 2012

Hello,

I have a query, Please help me out

I got a case for filing of ITR For A.Y. 2012-13. and I am stuck in a Capital Gain Taxation Point:

According to the case:- A building is purchased from Huda in Installments.

It was purchased in 98-99 - Rs. 2.15 Lacs

Second INstallmet 99-2000 - Rs. 0.86 Lacs

Third Installment 2000-01 - Rs. 0.29 Lacs

Fourth Installment 2002-03 - Rs.0.10 Lacs

Last Installment 2003-04 - Rs. 0.57 Lacs

It was sold in June 2011 for Rs. 2734000-00

What will be Indexed Cost of aquisition.

Waiting for effective Replies..Kindly help me as soon as possible.

Thank You.

Replies (14)

CS,CA F,Numrologi TusharSampat

CS CA F Numerologist Astrologer Graph

85935 Points Joined May 2010

what was the date of purchase in agreement?

veny gupta

CA FINAL STUDENT

49 Points Joined August 2012

That is the same year of first payment 1998-99

CS,CA F,Numrologi TusharSampat

CS CA F Numerologist Astrologer Graph

85935 Points Joined May 2010

Then u need to take year of purchase as that year only and also take indexation fr that year...its always accrual or reciept whichever is earlier,

by first date it started accruing and just thepayments were defrred.

veny gupta

CA FINAL STUDENT

49 Points Joined August 2012

U mean for the whole Rs.3.97 Lacs, Indexation should be done by taking year 98-99, Coz in dat year only Rs.2.15 Lacs were paid.

No separate indexation for every Installmet??

Any payments made before allotment is to be provided indexation from the date of allotment and any payment made after is to be provided benefit of indexation from the date the payment is made.
.
Praveen Gupta vs. ACIT (2011) 52 DTR 334 (Delhi)(Trib.)

veny gupta

CA FINAL STUDENT

49 Points Joined August 2012

And what if the date of purchase in the agreement was of year of last installment, i.e., 2003-04??

veny gupta

CA FINAL STUDENT

49 Points Joined August 2012

@ Deepak Gupta- U mean for every Installment separate Indexation?

Deepak Gupta

CA Student

15927 Points Joined May 2011

Originally posted by : veny gupta
	@ Deepak Gupta- U mean for every Installment separate Indexation?

In the above mentioned case, the assessee computed the indexed cost of acquisition in the following manner and the Assessing Officer was directed to provide the benefit of indexation to the assessee in the manner in which the assessee has claimed:

1995-96

13,35,850*519/281

24,67,282

1996-97

*correction made

74,042*519/305

1,25,993

1997-98

15,20,000*519/331

23,83,323

1999-00

21,39,232*519/389

28,54,142

2001 -02

5,11,938*519/426

6,23,699

55,81,062

84,54,439

The flat was allotted to the assessee vide allotment letter dated 2^ndAugust, 1995 and agreement was executed on 27^th September, 1995. The assessee started making payment from 2^ndAugust, 1995 and was making payment till 28^th September, 2001. Conveyance deed was executed on 27^th December, 2001.

veny gupta

CA FINAL STUDENT

49 Points Joined August 2012

@ deepak- Thanks a lot for ur reply and effort,

But in 2nd payment in year 95-96 it should be divided by 281 instead of 305, right?

Deepak Gupta

CA Student

15927 Points Joined May 2011

Originally posted by : veny gupta
	@ deepak- Thanks a lot for ur reply and effort, But in 2nd payment in year 95-96 it should be divided by 281 instead of 305, right?

Inconvenience caused is regretted. 2nd payment F.Y will be 1996-97 instead of 1995-96. I have corrected it now. Thank you.

Pankhuri Gupta

Student CA Final

6 Points Joined September 2015

Please tell the section of income tax act depicting the provision told above.

parveen sharma

returns filling

32 Points Joined August 2012

I have a query, Please help me out I got a case for filing of ITR For A.Y. 2017-18. and I am stuck in a Capital Gain Taxation Point: According to the case:- A Flat is purchased from Parasvanath.

It was purchased in 2005 - Rs. 4.5 Lacs

Second Installment 2007 - Rs. 6.86 Lacs

Third Installment 2008 - Rs. 7.29 Lacs

Fourth Installment 2010 - Rs.8.10 Lacs

Last Installment 2011 - Rs. 6.57 Lacs

Possesion date is 23rd Nov 2011

What will be Indexed Cost of aquisition.

It was sold in 30th Oct 2016 for Rs. 41 lac

Rajat Chhabra

Consultant

22 Points Joined October 2011

Index cost of acquisition for residential flat allotted and payment made qua different instalments, to be computed from the date of each instalment

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

https://www.bkkhareco.com/newsletter/pages/2014/april-may/income-tax/it30.php

d c bhargava

50 Points Joined March 2014

This is a slightly similar case.

The Builder issued allotment letter, and Buyers Agreement also signed, in 2008. Actual possession given in 2014, with start of maintenance charges and electricty paymnet.

I propose to sell in 2019.

Kindly inform if I can claim indexation cost for each of the 7 installments/payments made from 2008 to 2014, (ofcourse in addition to the period upto 2019 sale date) .

THanks

DC Bhargava