TaxTMI 
TaxTMI 
2026 (9) TMI 116
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.... these payments and the circumstances in which they were made to the builder, the aforesaid amounts can legitimately form part of the cost of acquisition of the property for the purposes of computation of capital gain under section 48 of the Act. 2. The material facts relevant for adjudication are that the assessee is a non-resident individual who had originally filed his return of income for the year under consideration on 23.07.2022 and thereafter filed a revised return on 25.07.2022 declaring total income of Rs.22,58,730/-. During the relevant previous year, the assessee sold residential Flat No.1605, Tower-C, 16th Floor, Esquire, Goregaon East, Mumbai, for a total consideration of Rs.4,41,00,000/- under an agreement for sale dated 08.12.2021. Against the aforesaid consideration, the assessee claimed indexed cost of acquisition of Rs.4,27,28,649/- and consequently offered long-term capital gain of Rs.13,71,351/-. The working furnished by the assessee showed that the cost had been incurred in different financial years and indexation had accordingly been applied with reference to the respective years of payment. The assessee had also placed on record the relevant extracts of th....
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....ingly, these payments were excluded while recomputing the indexed cost and the long-term capital gain was determined at Rs.40,43,035/- as against Rs.13,71,351/- returned by the assessee, resulting in an addition of Rs.26,71,684/-. Since the assessee was a non-resident and an eligible assessee within the meaning of section 144C, a draft assessment order dated 25.03.2024 was passed. The assessee filed objections before the DRP and reiterated that the payments were made to the builder itself, were supported by receipts and bank statements, were incurred in connection with acquisition of the property and, therefore, constituted part of its acquisition cost. 5. The DRP, however, concurred with the Assessing Officer. According to the Panel, the expression "cost of acquisition" contemplated under section 48 was confined essentially to the original purchase price or consideration paid for acquiring ownership of the property. It held that ancillary payments such as club charges and corpus fund did not directly affect the acquisition of ownership and, therefore, could neither form part of the cost of acquisition nor could they be treated as cost of improvement. Municipal taxes were regard....
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.... parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature incidental to transfer of the immovable property. His submission was that the statutory recognition of such charges demonstrates that in transactions involving acquisition of property from a builder, the economic consideration is not necessarily confined to the amount described as the basic sale price in the agreement and may encompass other obligatory charges collected in connection with the property. The learned DR, on the other hand, strongly relied upon the reasoning given by the Assessing Officer and the DRP and submitted that these amounts did not constitute consideration for acquiring ownership of the flat and, therefore, were rightly excluded from the cost of acquisition. 8. We have heard the rival submissions and have carefully perused the material placed on record. At the outset, one aspect of the controversy stands substantially concluded on facts. There is no dispute that the three payments in question were actually made by the assessee. The receipts issued by Oberoi Realty Limited and the corresponding banking transactions were produced before the aut....
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....52/- are concerned, the payment is evidenced by a specific receipt issued by the builder and was made in connection with the residential project in which the assessee acquired the flat. A modern residential property in an organised development cannot always be viewed in isolation from the amenities and appurtenant rights with which it is marketed and acquired. Where an amount is collected by the developer as a one-time charge for a common amenity forming part of the residential project and the right to use such amenity accompanies the ownership or enjoyment of the flat, the payment has an evident nexus with the bundle of rights acquired by the purchaser. Such payment cannot be regarded as an independent personal expenditure merely because it has been separately described as "Club House Charges". It is equally relevant that there is nothing on record to show that the amount represented a recurring subscription or expenditure incurred subsequently for personal recreation. On the contrary, the material shows that it was collected by the builder in connection with acquisition of the property. Therefore, looking to its true nature and incidence, we are unable to subscribe to the view th....
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....stage, whereas the occupancy certificate was obtained only in June 2018. The payment was thus not shown to be an annual municipal levy subsequently incurred by the assessee in the ordinary course of ownership and enjoyment of an already acquired and occupied property. It was an amount collected by the builder during the acquisition phase and the corresponding receipt has been placed on record. The authorities below have not controverted these factual circumstances or demonstrated that the amount represented a recurring post-acquisition liability of the assessee. Therefore, merely describing the payment as "municipal taxes" and, on that basis alone, treating it as recurring maintenance expenditure does not adequately address its actual incidence. Once the payment was collected in connection with the property during the acquisition/construction stage and its genuineness and payment are undisputed, its character has to be determined from these attendant circumstances. On the facts obtaining before us, the payment bears a sufficiently proximate nexus with acquisition of the property and cannot be excluded merely on account of the nomenclature under which the builder collected it. 13....
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....quisition itself. The Club House Charges pertained to an amenity accompanying the residential property; the Corpus Fund represented a one-time contribution connected with the residential complex; and the Municipal Taxes, on the peculiar facts before us, were collected during the construction/acquisition stage before the occupancy certificate and have not been shown to represent the assessee's recurring municipal liability after occupation. These circumstances, considered together, establish a sufficiently direct and proximate nexus between the payments and acquisition of the capital asset. 15. ⁠Accordingly, we hold that the aforesaid three payments are liable to be included in determining the cost of acquisition of the property for the purposes of computation of capital gain under section 48 of the Act. The Assessing Officer is, therefore, directed to take into consideration the Club House Charges of Rs.3,12,552/-, Corpus Fund of Rs.2,20,020/- and Municipal Taxes of Rs.6,21,624/- as part of the cost of acquisition and recompute the capital gain after granting the consequential benefit in accordance with law. We may clarify that the addition of Rs.26,71,684/- made by the As....