Indexation benefit available from date of ownership agreement or date of payment of first installment

Briefly the facts are, the assessee is a non-resident individual.

For the assessment year under dispute the assessee filed his return of income declaring income of Rs.2,16,680/-. In course of assessment proceedings, the Assessing Officer noticed that in the year under consideration the assessee had sold an immovable property i.e. a flat in Sector-78, Faridabad jointly owned with his wife and assessee declared 50% of the capital gain amounting to Rs.56,371/- as income. On examining the computation of capital gains the AO noticed that the assessee had made payment for purchase of the said flat in installments from financial year 2007-08 to 2014-15. Whereas, the assessee has taken indexation for each installment since 2007 as the cost of acquisition for the year in which the installment was paid. The Assessing Officer was of the view that as per the Explanation III to Section 48 of the Act, the cost inflation index would be the year in which the asset was held by the assessee.

Keeping in view such provision, the Assessing Officer called upon the assessee to furnish a copy of the registered deed of transfer issued by the builder to demonstrate the date on which the asset was possessed by the assessee. On going through the agreement dated 19.07.2010, the Assessing Officer was of the view that the date of agreement has to be treated as the date of acquisition of the asset both for the purpose of deciding whether the gain is long term or short term and for indexation benefit as well.

Thereafter, relying upon the decision of the Hon’ble Delhi High Court in case of Gulshan Malik vs. CIT (2014) 223 Taxman 243. The Assessing officer held that the date of acquisition for capital gain purposes will be the date of the agreement of transfer of ownership between the builder and the buyer and not the date of issue of the allotment letter.

Accordingly, he held that for all payments made prior to 19.07.2010, the cost inflation index for financial year 2010-11 will apply.

Observation of ITAT

6. As could be seen from the discussion of the departmental authorities in their respective orders, the assessee has claimed indexation benefit from the fast installment paid towards purchase of flat in pursuance to allotment letter issued by the builder. However, the agreement between the assessee and the builder for transfer of ownership rights was excluded on 19.07.2010 whereas, the assessee has claimed the indexation benefit from 2007. The departmental authorities have allowed indexation benefit from the date of transfer of ownership agreement by relying upon a decision of the Hon’ble Jurisdictional High Court in case of Gulshan Malik vs. CIT (supra). The assessee has failed to bring on record any material or legal proposition to controvert the finding of the departmental authorities or to demonstrate inapplicability of the ratio laid down in case of Gulshan Malik vs. CIT (supra). Thus, in absence of any rebuttal by the assessee, we do not find any reason to interfere with the decision of the Ld. Commissioner (Appeals) on the issue. Grounds raised are dismissed.

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