2011 (10) TMI 7 - HC - Income Tax

What is the cost of acquisition for the indexation purpose - Purchase of land on installment basis - CBDT circular No. 471 dated 15.10.1986 - it appears that the land in question was purchased from the Lucknow Development Authority on installments basis for which registration was made on 01.12.1982 by paying a sum of Rs.3000/- only and remaining payment on installment basis - Tribunal held that long term capital gain will have to apply in the assessee s case as per the payment chart - it also appears that the actual amount was paid from time to time after the date of issuance of allotment letter, which has to be considered for the purpose of indexation with reference to the date of payments.

Summary

Issues:
1. Interpretation of Section 48 of the Income Tax Act regarding indexation for long term capital gain.
2. Determination of cost of acquisition and indexation basis for long term capital gain calculation.

Analysis:
1. The appeal under Section 260-A of the Income Tax Act, 1961 was filed against the Income Tax Appellate Tribunal's order for the assessment year 2002-03. The substantial questions of law raised were related to the interpretation of Section 48 regarding indexation for long term capital gain. The appellant contended that the Tribunal had misinterpreted the proviso of Section 48 by not providing the full benefit of price indexation for long term capital gain. The appellant argued that the benefit of price indexation should be given with reference to the date of payment. On the other hand, the department's counsel relied on the lower authorities' orders. The High Court analyzed the case details and upheld the Tribunal's decision, stating that the long term capital gain should be calculated based on the payment schedule, as per the well-established legal position and CBDT Circular.

2. The case involved the determination of the cost of acquisition and the basis for indexation for the calculation of long term capital gain. The land in question was purchased on an installment basis from the Lucknow Development Authority, with the registration done in 1982 by paying a partial amount. The remaining payment was made in installments, and the allotment letter was received in 1985. The Court noted that the actual amount paid from time to time after the issuance of the allotment letter should be considered for indexation with reference to the date of payments. The Court referred to the definition of "cost of acquisition" in Section 55(2) of the Act and emphasized that the expression is exhaustive, and no additional meaning can be introduced. The Court also highlighted a previous case's ruling on the peremptory nature of the "cost of acquisition" expression.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's order in favor of the revenue and against the assessee. The Court declined to interfere with the Tribunal's decision as the long term capital gain had already been deposited as per the AO's computation. The judgment provided a detailed analysis of the issues related to the interpretation of Section 48 and the determination of the cost of acquisition for calculating long term capital gain in the case.