TaxTMI 
TaxTMI 
2008 (2) TMI 662
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....term capital gain by adopting the indexed cost of acquisition on the basis of the date on which the property was held after registration of the conveyance deed is ab initio void because of lack of jurisdiction on the part of the learned CIT inasmuch as the assessment order, is neither erroneous nor prejudicial to interest of revenue. The order under section 263 needs to be cancelled. 2. On the facts and circumstances of the case and in law, in arriving at the decision to set aside the assessment order, the learned CIT erred in holding that- (i )the unregistered purchase agreement entered into in 1993 does not give the right to purchase a property in totality to the assessee; (ii )the asset being the flat was constructed in the year 1997 cannot be considered to be held by the assessee prior to that date; (iii)case laws relied upon by the assessee is on different facts and decisions relied upon by him are applicable to the facts of the assessee's case; (iv)Even though the assessee may have acquired a right to purchase the property by part payment of the consideration and execution of an unregistered deed, the title to the property had been held by the assessee only aft....
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....ought to tax the actual capital gain. In response to this, the assessee submitted written submissions and had mainly contended that it had entered in to an unregistered agreement with the developer on 7-8-1993 for acquiring the flat with the condition that the developer will obtain prior consent of acquirer in respect of any modification or variation, if any, which may adversely affect the flat and allot a flat in the property at Ram Prakalp and the acquirer shall be held responsible for reimbursement to the developer any other statutory charges payable to the Municipality or State Govern-ment. The assessee further contended that the indexed cost had been correctly claimed and the Assessing Officer was not prejudicial and it was only a matter of different view and in support of its contention, the assessee relied on various judicial decisions. The ld. CIT after carefully perusing the documentary evidences, particularly the unregistered agreement and considering the judicial decisions cited by the assessee held that the property by virtue of the preliminary unregistered agreement entered into in the year 1993 was factually incorrect. In regard to the assessee's contention, the asses....
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....ndhra Pradesh High Court in the case of M. Syamala Rao v. CIT [1998] 234 ITR 140 to contend that registration of a document related back to the day on which the agreement of sale was executed, hence, when the builder executed the agreement of sale on 7-8-1993, the assessee was to be deemed to be owner of property from that date and, accordingly, the capital gain was to be worked out. The ld. counsel also placed reliance on the decision of Hon'ble Gujarat High Court in the case of CIT v. Anilaben Upendra Shah [2003] 262 ITR 657 wherein the Hon'ble Court held that assessee had held the shares and allotment of the flat in the Co-operative Housing Society for a period of more than 36 months, hence, the capital gain was to be treated as long-term capital gain. The ld. counsel also referred to the provisions of section 48 and Explanation (iii) thereto which defined the term 'indexed cost of acquisition' and contended that as per this Explanation the indexation had to be done from the first year in which the asset was held by the assessee and since in this case the asset had been held for the first time in 1993, hence, cost inflation index of that year was to be applied on the total purch....
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....essee, hence, the capital gain had to be worked out only thereafter. It was also contended that right was intangible asset whereas the house property was a physical/tangible asset, hence, both were to be treated differently. The ld. D.R. also contended that the date of acquisition of title by the assessee was to be considered for the purpose of indexation and not the date of agreement and since the Assessing Officer had allowed indexation on the basis of purchase consideration from 7-8-1993, hence, the order of Assessing Officer was both erroneous and prejudicial to the interests of the revenue. The ld. D.R. also contended that there was no application of mind by the Assessing Officer as evident from assessment order passed, hence, for this reason also the ld. CIT rightly invoked the provisions of section 263 of the Act. The ld. D.R. also referred to Explanation (iii) to section 48 of the Act wherein it was provided that cost of indexation had to be computed from the date of asset held by the assessee and in the present case the asset was held by the assessee since 1998 wherein the registration was done, hence, the assessee was entitled for indexation only thereafter. The ld. D.R. ....
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....t, the rights in flat, acquired by the assessee on execution of purchase agreement on 7-8-1993, come within the purview of the term 'capital asset'. From the perusal of language used in Explanation (iii) to section 48 of the Act, which provides for manner of computation of indexed cost of acquisition, it is apparently clear that it refers only to cost of acquisition and not actual payments made by the assessee, hence, there is no merit in the alternate contention of the revenue that the benefit of indexation should be given on the basis of dates of actual payments made by the assessee. We are further of the opinion that the asset is held by the assessee from 7-8-1993 because when the assessee sold the house property, it did not sell the same without any legal rights of the assessee as an owner thereof, and unless the rights of ownership are transferred, there cannot be any sale and, therefore, there is no merit in the contention of the assessee regarding right being intangible asset and house property being a physical asset. We also find that the issue of indexation, in such circumstances, is directly covered in favour of the assessee by the decision of the Tribunal in the case of ....