Tribunal allows indexation based on agreement dates for calculating capital gains

The Tribunal ruled in favor of the assessee, allowing the deduction for indexed cost of acquisition to be calculated based on the dates of agreements and payments rather than just the possession date. The decision emphasized that acquiring a right over the property through an agreement constitutes holding a capital asset eligible for indexation benefits. By considering legal definitions and precedent, the Tribunal supported the assessee's claim, highlighting the significance of the agreement date in determining the indexed cost of acquisition for computing capital gain.

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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.

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