Calculation of Capital Gain in case plot is alloted by Govt. and payment made in installments.

[Ankur Simghal]

The facts of the case are as Follows:

Assessee was alloted a plot on 15/06/1999

Initial money paid Rs.1400000

Installments Paid on different dates.

15/03/2000 : Rs. 750000

15/09/2000 : Rs 750000

15/03/2001 : Rs 750000

15/09/2001 : Rs750000

each installment includes the amount of interest amounting Rs 150000/-

Pls tell me the calculation of Capital GAin 

the assessee has sold the said plot for Rs.2.5 crore (Stamp Duty Value)

 

[CAGOPALJI AGRAWAL]

First determine the date of transfer the property from authority to allotte as per section 2(47) read with section 53A of the Transfer of property act. The total sum (principal amount) as on the date of transfer has to be taken in account. Instalments are just a mode of financing and would not change the transfer date. The indexed would be applied on total principal amount from the date of transfer.

[Ankur Simghal]

Sir,  CA GopalJi aggarwal

First of all thank you for ur reply. 

Do I have have to index COA in FY 1999-2000

Or

Indexation has to be done on payment date basis.( inclusive of interest or not)

[CAGOPALJI AGRAWAL]

from the date of possession.

[Ankur Simghal]

Thank you sir for your instant reply.

Sir, is there any corresponding supporting to it or it is in general practice..

[DEV KUMAR KOTHARI]

The date of possession is the date of acquisition so CII for that year wil be applicable on cost of acquisition.

On accepting posession, liability for entire cost of acquisition  that is full  amount , is incurred (includign instalments (principal and interest both). A credit is allowed to pay Rs.three lakh in four instalments. Therefore, entire cost of acquisition that is Rs. 14 + 3 = 17 lakh will be eligible for applicaiton of CII of  the year in which possession is taken. In such circumstances interest is part of cost of acquisition as per some of judgments of High Courts on section 55 as well as on section 43(1) in whcih it was held that amount payable including EMI is actual cost. In section43(1) an amendment ahs been made, however, for S. 55 the entire amount including interest can be considered as 'the cost of acquisition' for computing capital gains. Disputes may however arise.

AI Summary

Date of acquisition: possession date governs indexation and cost inclusion; instalments and interest treated as acquisition cost. The date of transfer/possession under section 2(47) and section 53A governs acquisition timing; instalment financing does not change that date. The full principal outstanding on that date is the cost base for indexation, with indexed cost computed from the year of possession. Interest and instalment-related amounts may be treated as part of the cost of acquisition under section 55 according to some High Court decisions, though disputes can arise; statutory limited credits for instalment payments may also apply.