Indexation on cost of acquisition

[Rahul Gupta]

X booked a flat in year 1995 and paid the advance of Rs. 20,00,000/-. Registary deed made on 2001 of Rs. 40,45,000/-. property sold out in 2006. While calulating Capital Gain, Indexation on cost of acquisition should be done from 1995 or 2001?

[Surender Gupta]

when you book the flat and paid Rs. 20,00,000 you got the right to acquire the flat in 1995. But the year in which the flat was transferred to you, you got the right converted into immovable asset. Considering that you got the possession in 2001 and got the flat registered in 2001, your ownership starts from 2001 only. Therefore, you must calculate your capital gain by taking the cost of Indexation for 2001 and 2006 only.

[DEV KUMAR KOTHARI]

Date of booking 1995- not relevant. Date of possession ?? Date of registry 2001- amt. 40.45 lakh- whether it is full consideration or stamp authorituies valuation. 1995 or 2001 both may not be relevant. Cost and its CII will relate back to the date of possession, even if some amount was due, to be paid on registry, liability has accrued and credit facility is availed on day of possession . So consider actual cost, date of possession and relevant CII. Always full facts must be given withe own views.

[Rahul Gupta]

IN MY CASE ASSESSEE SIGNED BUYER'S AGREEMENT IN 1995 and got the possession in 2001. Also please refer to case Mrs. Shakuntala Devi VS DDIT-bangalore-TIOL-221-ITAT. INCOME TAX CASE-SEC 54-ASSESSEE SELLS HER FLAT -MAKES CAPITAL GAINS-SIGNS AN MOUWITH A SELLER OF A PROPERTY AND TRANSFERS SUNSTANTIAL PART OF TOTAL CONSIDERATION-CLAIMS EXEMPTION U/S 54-AO DISALLOWS EXEMPTION ON THE GROUND THAT THE ASSESSEE HAD NOT GOT OWNERSHIP OF THE PROPERTY WITHIN THE TIME-LIMIT OF 2 YEARS -ASSESSEE ARGUES THAT THE CAPITAL GAIN MADE HAD BEEN TRANSFERRED TO THE SELLER OF THE PROPERTY BEING PURCHASED AS PER MOU AND WAS ELIGIBLE FOR EXEMPTION- HELD, TRANSFER OF PROPERTY,POSESSION OR OWNERSHIP HAVE NOTHING TO DO WITH THE CASE AS LONG AS THE SUM OF CAPITAL GAINS STAND TRANSFERRED TO THE SELLER FOR PURCHASE OF A NEW FLAT AS THIS FULFILLS THE CONDITION OF SEC. 54-ASSESSEE'S APPEAL ALLOWED: BANGALORE ITAT Please Advice and Thanks for your lot of Concern. Regards

[ASHOK CHOUDHARY]

Capital Gain will be calculate from year 2001. As small right ( booking ) to acquire a flat merged into larger right (as registration of the flat in the year 2001). The small right ( booking flat ) upon a merger would loose its existance. In simple reply registration of flat is bigger than booking of flat so capital gain will be calulate from the date of registration

AI Summary

Indexation on cost of acquisition should be based on date of possession or registration, not initial booking.
Indexation of cost of acquisition for capital gains should be calculated from the date when the buyer's right becomes an immovable asset-generally the date of possession and/or registration-rather than the initial booking date. Booking creates a preliminary right that merges into a fuller proprietary right on registration/possession, and the actual cost and applicable Cost Inflation Index relate to the date of possession when computing indexed cost. Practical exceptions involving accrued liability or transfers for exemption purposes do not displace the possession/registration rule for indexation.