How to Calculate Indexed Cost of Acquisition for the Purpose of Computation of Long-Term Capital Gain

The assessee is an individual and has shown in his return of income, salary income, long-term capital gains (LTCG) from the sale of immovable property and income from other sources. In the computation of total income, the assessee had shown his share from the sale consideration at Rs. 1,79,50,00 i.e. 44.87% and after deducting the cost of indexation and other deductions i.e. deduction u/s 54B and 54F, the assessee had disclosed net long term capital gain (LTCG) at Rs. Nil. When sent to Valuation Officer, he submitted the fair market value of the entire land as on 01.04.21981 at Rs.5,08,750 i.e. at Rs.114.30 per sq. mtr. (Instead of the declared value by the approved valuer at Rs.36,72,000 at Rs.825 per sq.mtr.) The assessing officer, on the basis of the report of the Valuation Officer assessing officer, made the addition of taxable long-term capital gain to the tune of Rs 1,03,45,341.

The issue before the tribunal is that the ld. CIT(A) has erred in partly confirming the action of AO in making the addition of Rs. 55,99,666 on account of the cost of indexation claimed by the assessee by adopting the cost of indexation at Rs.200 per sq. mtr instead of Rs.825 per sq.mtr claimed by the assessee.

The tribunal relied on the judgment cited by the assessee passed by the Division Bench of this Tribunal in the assessee’s own case in ITA No.55/SRT/2018 for the Assessment Year 2013-14 whereby the issue of indexed cost of acquisition was discussed and adjudicated in favour of the assessee, saying that the dispute between the assessee and the AO is the rate of Rs. 825 per square meter, as fair market value as on 01.04.1981, whereas the DVO has estimated the fair market value at the rate of Rs. 114.30 per square meter. The tribunal in that case noticed that the DVO had himself stated in his report that the impugned land was situated at a more appropriate location as compared to sale instances considered by him. Therefore, considering the entirety of the facts and taking a holistic view the fair market value at Rs. 607 per square meter should be adopted to meet the end of justice. Accordingly, the AO was directed to apply the rate of Rs. 607 per sq. meter for the calculation of the indexed cost of acquisition for the purpose of computation of long-term capital gain in the hands of the assessee. The appeal of the assessee was allowed.

As the issue in the current case is similar and is squarely covered in favour of the assessee by the decision of the Coordinate Bench and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench. The tribunal found no reason to interfere in the said order of the Coordinate Bench and followed the binding judgment. Thus, the addition made by AO was deleted. Therefore, ground raised by the assessee was allowed to the extent indicated in the order of the assessee`s co-owner case.