Booking-based flat rights, instalment-wise indexation, and a later garage were treated as separate capital assets for capital gains.

Rights in an identified flat acquired on booking or allotment were treated as a capital asset from the booking date, because the later formal agreement only crystallised an existing right; the transfer of those flat rights therefore gave rise to long-term capital gain. For indexed cost, where payments were made in instalments over different years, indexation had to be applied instalment-wise by reference to each actual year of payment rather than using the first booking year for the entire cost. The later-acquired garage was treated as a separate capital asset with its own holding period, so the gain from its transfer was short-term capital gain and required separate computation.

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Issues: (i) whether the assessee's rights in the flat, acquired on booking/allotment, constituted a capital asset held from the date of booking so that the gain on transfer was long-term capital gain; (ii) whether the indexed cost of acquisition was to be computed by applying the index of the year of each actual payment rather than by taking the first booking year for the entire cost; and (iii) whether the additional garage purchased later was a separate capital asset giving rise to short-term capital gain.

Issue (i): whether the assessee's rights in the flat, acquired on booking/allotment, constituted a capital asset held from the date of booking so that the gain on transfer was long-term capital gain.

Analysis: The assessee had acquired an identified right in the specific flat by booking in 2005 and made payments under a construction-linked schedule. The formal agreement executed later only improved or crystallised the existing right; it did not create a fresh and independent capital asset. The evidence also showed that possession had not been obtained before transfer, and what was sold was the bundle of rights already acquired on booking.

Conclusion: The holding period ran from 16.03.2005, and the gain on transfer of the flat was long-term capital gain in favour of the assessee.

Issue (ii): whether the indexed cost of acquisition was to be computed by applying the index of the year of each actual payment rather than by taking the first booking year for the entire cost.

Analysis: Indexed cost of acquisition under section 48, Explanation (iii), turns on the year in which the asset was first held, but the actual cost was discharged in instalments over several financial years. The correct method, therefore, was to index each instalment by reference to the financial year in which that instalment was actually paid, rather than to apply a single index to the full cost from the earliest booking year.

Conclusion: Indexation had to be allowed instalment-wise by reference to the respective years of payment, in favour of Revenue on this issue.

Issue (iii): whether the additional garage purchased later was a separate capital asset giving rise to short-term capital gain.

Analysis: The garage was acquired only in November 2009 and was separately capable of being transferred. It therefore stood on a different footing from the original flat rights and could not inherit the earlier holding period of the booked apartment rights.

Conclusion: The gain relatable to the garage was short-term capital gain and required separate computation, in favour of Revenue.

Final Conclusion: The assessee succeeded on the character of the gain from transfer of the flat rights, but the revenue succeeded on the method of indexation and on separate treatment of the later-acquired garage, resulting in a partial allowance of the revenue's appeal.

Ratio Decidendi: Rights in an identified immovable property acquired on booking or allotment are a capital asset whose holding period commences from that acquisition, while indexed cost for instalment-based payments must be computed with reference to the actual years of payment.

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