ITAT Directs Fresh Examination of Indexation Claim on CIDCO Land Rights

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has restored a capital gains dispute to the Assessing Officer for fresh computation after finding that the assessee’s claim for indexation benefit and cost of acquisition with reference to 2007 had not been properly examined.

A Bench comprising Judicial Member Anikesh Banerjee and Accountant Member Arun Khodpia held that the treatment accorded in the case of a co-owner arising from the same transaction could not be ignored and directed the Assessing Officer to reconsider the computation of long-term capital gains after examining the valuation report and relevant records.

The assessee, Suresh Anant Patil, had originally declared income of Rs.6.32 lakh for AY 2014-15. During scrutiny assessment, the Assessing Officer invoked Section 50D and computed long-term capital gains by adopting the stamp duty value as the full value of consideration, resulting in an addition of Rs.35.06 lakh.

The dispute arose from rights in a CIDCO plot allotted to the assessee and seven other co-owners pursuant to an Agreement to Lease executed in 2007. During the relevant year, the parties entered into a tripartite agreement involving a developer, which the department treated as a transfer giving rise to taxable capital gains.

Before the Tribunal, the assessee argued that the rights in the property had crystallized in 2007 and, therefore, the cost of acquisition and corresponding indexation benefit should be determined with reference to that year. It was also pointed out that in the assessment of a co-owner arising from the same transaction, the department had accepted the cost and indexation with reference to 2007.

The Tribunal noted that in the case of one of the co-owners, the Revenue had already considered the cost of acquisition with reference to the year 2007 and granted the corresponding indexation benefit.

The assessee further submitted a valuation report dated January 3, 2018, contending that it had not been adequately examined by the lower authorities.

The Bench observed that the principle of consistency in respect of co-owners arising from the same transaction deserved due consideration and that the valuation report filed by the assessee also required proper examination.

Accepting these submissions, the Tribunal restored the matter to the Assessing Officer for the limited purpose of recomputing the capital gains after considering the assessee’s claim regarding cost of acquisition, indexation benefit from 2007, the valuation report, and the computation accepted in the case of the co-owner.

Thus, the appeal was allowed for statistical purposes.

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