2014 (1) TMI 434 - AT - Income Tax

Benefit of indexation To be given from the dates of payment of instalments or from the date of possession - Held that - To constitute a capital asset the assessee must not be the owner by way of a conveyance deed in respect of that asset for the purpose of computing capital gain - The assessee had acquired a right to get a particular flat from the builder and that right of the assessee itself is a capital asset - By making the payment to the builder and having received allotment letter, the assessee will be holding capital asset - The benefit of indexation has to be granted to the assessee on the basis of payments made by him for acquiring the said asset Following Praveen Gupta vs. ACIT 2010 (8) TMI 820 - ITAT DELHI Decided in favour of the assessee.

Summary

Issues:
Claim for deduction on account of indexed cost of acquisition while computing long term capital gain.

Analysis:
The appeal was filed against the order of learned CIT(Appeals) regarding the deduction claim for indexed cost of acquisition. The dispute revolved around whether the deduction should be calculated from the dates of agreements and payments or from the date of possession of the property. The AO computed the indexed cost of acquisition based on the possession date, resulting in a higher capital gain than declared by the assessee. The CIT(A) upheld this decision, stating that possession date was crucial for indexation. The assessee cited a similar case decided in their favor by a coordinate bench in Delhi. The Tribunal analyzed the case, emphasizing that the right over the property was established at the time of agreement, making it a capital asset. The Tribunal directed the AO to allow the deduction based on the dates of payments made by the assessee, in line with the earlier decision.

This judgment clarifies that the indexed cost of acquisition for computing capital gain can be based on the dates of agreements and payments rather than solely on the possession date. The Tribunal highlighted that acquiring a right over the property through an agreement constitutes holding a capital asset, allowing for indexation benefits. The decision aligns with the interpretation of relevant provisions and supports the assessee's claim for deduction. By following precedent and considering the legal definitions, the Tribunal ruled in favor of the assessee, emphasizing the importance of the agreement date in determining the indexed cost of acquisition.