2012 (9) TMI 359 - AT - Income Tax

Capital gains - sale of flat - adoption of lower indexed cost of acquisition, non-allowance of registration expenses and cost of improvement - indexed cost of acquisition taken at Rs 3,77,700/- against indexed cost of acquisition, registration and improvement taken by assessee at Rs 19,91,784/- Held that - It is observed that cost of acquisition was taken from registered sale deed executed on 04.06.2002 by the Vijaya Bank Employees Housing Cooperative Society in favour of the assessee wherein only a sum of Rs.3,06,410/- was mentioned. However no cognizance taken of confirmation letter issued by Society itself to assessee certifying payment of sum of Rs.7,75,305/- during the period from 30.04.1996 to 01.06.2000 by way of installment and also certificate from Engineer contractors certifying improvement cost of 3,10,000/- and other related expenses Even going by common sense it is clear that no flat in BTM Layout in 2002 was available at the rate of Rs.300/- adopted by AO. In view of adoption of aforesaid cost, CIT(A) rightly held that indexed cost of acquisition, improvement and registration far exceeds Rs.19.80 lakhs resulting in taxable LTCG at NIL - Decided against Revenue

Summary

Issues:
Determining long term capital gain based on cost of acquisition, registration expenses, and cost of improvement.

Analysis:
The appeal involved the assessment of long term capital gain for the assessment year 2008-09 concerning the sale of a flat in Bangalore by a nonresident individual. The appellant initially declared 'nil' long term capital gain after deducting brokerage and indexed cost of acquisition, registration, and improvement. However, the AO determined the long term capital gain at a higher amount due to discrepancies in the cost of acquisition and non-allowance of registration expenses and cost of improvement. The CIT(A) directed the AO to consider the long term capital gain as 'nil', which the Revenue appealed against.

The Revenue raised several grounds of appeal challenging the CIT(A)'s decision. They argued against adopting the cost of acquisition and improvement as claimed by the assessee, citing various reasons such as the guidance value for registration, payments made by the father of the assessee, and common sense regarding property costs. The Revenue contended that the cost of acquisition declared by the assessee was not justified and that the cost of improvement should not be allowed as it was incurred before the property acquisition.

During the hearing, the Departmental Representative reiterated the grounds of appeal, while the counsel for the assessee supported the CIT(A)'s order. The CIT(A) considered detailed submissions and assessment records, highlighting key facts such as the property's history, payments made towards construction and improvement, and the sale consideration. The CIT(A) directed the AO to treat the long term capital gains as 'nil' based on the evidence provided, including confirmation letters and self-certification regarding payments and improvements made by the assessee.

After reviewing the submissions and facts on record, the ITAT upheld the CIT(A)'s decision, noting that the evidence presented supported the assessee's claims regarding the cost of acquisition, improvement, and registration expenses. The ITAT found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal, affirming the treatment of long term capital gains as 'nil'.

In conclusion, the judgment addressed the issues related to determining long term capital gain based on the cost of acquisition, registration expenses, and cost of improvement, emphasizing the importance of supporting evidence and proper assessment of expenses to arrive at a fair and accurate calculation of capital gains.