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2025 (4) TMI 588 - AT - Income TaxDenial of indexation from the year 2010 - HELD THAT - There are various decisions of this Tribunal that took view that the benefit of indexation is to be allowed from the date of allotment and on the basis of payment made to builders/ societies/ other institutions during the different financial years towards cost of acquisition of asset. In the present facts of the case the assessee was issued allotment letter on 3/12/2010 relevant to financial year 2010-11. It is noted that the assessee made full payment during the assessment year 2014-15 and the document was registered in favor of the assessee. Subsequently the said property was sold during the assessment year 2015-16. Since the date of acquisition of the property is to be reckoned from date of allotment letter benefit of indexed cost of acquisition should be available to assessee based on payments made beginning from financial year 2010-11. Accordingly Groungno.2 raised by the assessee stands allowed. Denial of brought forward Long term capital loss to be set off against long term capital gains earned by the assessee from sale of property - HELD THAT - The loss were not allowed to be set off merely because the Ld.AO was of the opinion that STT was not paid on these shares and that they were to be considered under section 10(38) of the Act. As submitted by the assessee that the assessee filed all relevant documents before the authorities below however the same was not considered. AR also submitted that application under section 154 on this issue is still pending against the assessment order. It is further noted that in the past assessment years AO did not deny the benefit on the basis that the claim is incorrect. No reason to deny the claim of the assessee Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered the following core legal issues: 1. Whether the assessee is entitled to indexation benefits from the year 2010 when the initial payment for the property was made, despite the property being registered in a later year. 2. Whether the assessee is entitled to set off brought forward long-term capital losses against the long-term capital gains earned from the sale of property, particularly when some shares were sold off-market without the payment of Securities Transaction Tax (STT). ISSUE-WISE DETAILED ANALYSIS Issue 1: Indexation Benefits from 2010 Relevant Legal Framework and Precedents: The Tribunal examined the definition of "indexed cost of acquisition" under Explanation (iii) to section 48 of the Income Tax Act, which determines indexation based on the year the asset was first held by the assessee. The Tribunal also considered CBDT Circular No. 471, which clarifies that the date of allotment is the relevant date for capital gains tax purposes. Court's Interpretation and Reasoning: The Tribunal reasoned that the assessee acquired rights to the property upon the issuance of the allotment letter on 03/12/2010, when the first installment was paid. Therefore, the Tribunal concluded that the indexation benefit should be calculated from the financial year 2010-11. Key Evidence and Findings: The allotment letter issued by the developer was a crucial piece of evidence indicating the date of acquisition. The Tribunal noted that the full payment and registration occurred in subsequent years, but the initial right in the property vested with the assessee in 2010. Application of Law to Facts: The Tribunal applied the provisions of section 48 and the CBDT circular to determine that the indexed cost of acquisition should consider the date of the allotment letter as the starting point. Treatment of Competing Arguments: The Department's argument that indexation should begin from the year of registration was rejected. The Tribunal emphasized the legal precedent and CBDT circular supporting the assessee's position. Conclusions: The Tribunal allowed the indexation benefit from 2010, aligning with the assessee's argument. Issue 2: Set Off of Brought Forward Long-term Capital Losses Relevant Legal Framework and Precedents: The Tribunal examined the provisions related to the set-off of long-term capital losses against gains, particularly focusing on transactions involving STT and non-STT paid shares. Court's Interpretation and Reasoning: The Tribunal noted that the assessee had incurred long-term capital losses in earlier years, some of which were from off-market transactions where no STT was paid. The Tribunal emphasized that the Revenue had not disputed the carry forward of these losses in previous assessments. Key Evidence and Findings: The Tribunal reviewed the returns and supporting documents from the relevant assessment years, confirming the existence and carry forward of long-term capital losses. Application of Law to Facts: The Tribunal applied the provisions allowing the set-off of capital losses and found that the assessee's claim was consistent with the law and past assessments. Treatment of Competing Arguments: The Department's stance that the losses could not be set off due to non-payment of STT was dismissed. The Tribunal highlighted that the assessee had provided all necessary documentation, and the set-off was valid under the law. Conclusions: The Tribunal directed the Revenue to allow the set-off of brought forward long-term capital losses against the gains from the property sale. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "The assessee is entitled to claim benefit of indexation from the assessee held the property i.e., the right in the property vests upon the assessee upon as on the date of allotment letter." Core Principles Established: The Tribunal reinforced the principle that the date of allotment, rather than registration, determines the start of the indexation period for capital gains tax purposes. It also upheld the right to set off long-term capital losses against gains, irrespective of STT payment, provided the losses were duly carried forward and undisputed in prior assessments. Final Determinations on Each Issue: The Tribunal allowed the indexation benefit from 2010 and directed the Revenue to permit the set-off of the assessee's brought forward long-term capital losses against the gains from the property sale.
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