Tribunal permits assessees to claim indexed cost from 1986

The Tribunal allowed the assessees' appeals, permitting them to claim the indexed cost of acquisition from 1986 onwards instead of 2003 as determined by the Assessing Officer. The Tribunal held that the assessees' rights to specific flats had accrued in 1986 itself, not in 2003. It was clarified that the modification agreement altered only the allocation of floors, not the assessees' rights, affirming their entitlement to the earlier year for calculating capital gains. Additionally, the Tribunal set aside the Commissioner of Income Tax's order under section 263 due to an incorrect determination of the year of acquisition for one of the assessees.

---

---

Issues:
Determining the year of acquisition of the capital asset transferred by the assessees for the Assessment Year 2007-08.

Analysis:
The appeals involved a common issue of deciding the year of acquisition of a capital asset transferred by the assessees to determine the indexed cost of acquisition. The assessees' father purchased a property in 1962, and after his death in 1980, the assessees, along with their mother, inherited the property. They entered into an agreement to sell their shares in the property in 1986. Subsequently, a modification agreement in 2003 changed the allocation of flats to the assessees. The dispute arose regarding the year from which the assessees' right to the property should be considered for calculating capital gains. The Assessing Officer (AO) considered the rights to the property to have accrued in 2003, while the assessees claimed it should be from 1986.

Upon review, the Tribunal observed that the assessees were entitled to specific flats as per the original agreement, and the modification agreement merely changed the allocation of floors. The Tribunal determined that the assessees' rights to the fourth and fifth-floor flats had accrued in 1986 itself, not in 2003 as contended by the AO. Therefore, the Tribunal allowed the assessees to claim the indexed cost of acquisition from 1986 onwards. The Tribunal also quashed the order passed by the Commissioner of Income Tax under section 263 regarding one of the assessees, as it was based on an incorrect determination of the year of acquisition.

In conclusion, the Tribunal allowed the appeals of the assessees, stating that they were entitled to claim the indexed cost of acquisition from 1986 onwards, rejecting the AO's assessment of 2003 as the year of acquisition. The judgment clarified that the modification agreement did not change the assessees' rights but only substituted the floors allocated to them, confirming their entitlement to the earlier year for calculating capital gains.

---