Capital gains indexation follows the date of property right acquisition under allotment arrangements, while unproved improvement costs are disallowed.

For capital gains computation under Section 48, where an apartment is acquired under an allotment or development arrangement, indexation of cost of acquisition runs from the date the assessee acquires the property right and starts making payments, not from the later date of registration of the conveyance. The claim for cost of improvement towards interiors was rejected because it was not supported by bills or vouchers, and mere assertions were insufficient to prove actual expenditure. The resulting computation therefore allowed earlier indexation but disallowed the unsubstantiated improvement claim.

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Issues: (i) Whether, for computing indexed cost of acquisition and capital gains on an apartment acquired under a development/allotment arrangement, the relevant date was the date of allotment and payment of consideration or the later date of registration of the sale deed; (ii) Whether the claim for cost of improvement towards interiors was allowable in the absence of supporting bills and vouchers.

Issue (i): Whether, for computing indexed cost of acquisition and capital gains on an apartment acquired under a development/allotment arrangement, the relevant date was the date of allotment and payment of consideration or the later date of registration of the sale deed.

Analysis: The computation of capital gains under Section 48 depends on the cost of acquisition and, in the case of a long-term capital asset, the indexed cost of acquisition. The material placed showed that the assessee had entered into the arrangement and made payments well before the registration of the conveyance. Following the settled principle applied in earlier decisions, the date on which the assessee acquired the right in the property and commenced payments was the proper reference point for indexation, and not the later formal registration date. The asset was therefore to be treated as held from the earlier allotment and payment stage for the limited purpose of indexation.

Conclusion: The assessee succeeded on this issue and the cost of acquisition had to be indexed from the earlier allotment and payment date, not from the date of registration.

Issue (ii): Whether the claim for cost of improvement towards interiors was allowable in the absence of supporting bills and vouchers.

Analysis: The claim for improvement expenditure was not substantiated by the requisite primary evidence. Mere particulars or assertions without bills and vouchers were insufficient to prove actual incurrence of the expenditure for capital gains computation.

Conclusion: The disallowance of the cost of improvement was upheld against the assessee.

Final Conclusion: The assessment was to be recomputed by allowing indexation from the earlier date of acquisition right, while the unproved improvement expenditure remained disallowed, resulting in a mixed outcome for the assessee.

Ratio Decidendi: For capital gains purposes, where property rights are acquired and consideration is paid under an allotment or development arrangement, the relevant date for indexation is the date of acquisition of the right in the asset and not the later date of registration; however, improvement expenditure must be strictly proved by documentary evidence.

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