INCOME TAX ACT, 1961

Section 48

Capital gains - Indexation of cost of acquisition - Effective date whether date of allotment or possession of property -

The assessee was allotted a site bearing on 20-5-1986 with a condition that the consideration should be paid within 15 days from the date of receipt of that allotment letter. The assessee paid the consideration by way of two Demand Drafts, Pursuant to the payment made, the Mysuru Development Authority (MUDA) executed an agreement on 16-6-1998. In the agreement, a mention had been made about the allotment of the site to the assessee on 20-5-1986 and the same had been confirmed by the authority on 11-9-1986 had also been mentioned. A possession Certificate was issued on 23-6-1998. Later, the MUDA had executed a deed on 6-1-2004 conferring the title on the site to the assessee. The property held by the assessee from the date of allotment was sold by him on 9-5-2012 in favour of one PD. The assessee 'held' the property for all practical purposes on de facto basis from the date of letter of allotment and the payment of the total consideration, more particularly in view of the fact that the allotment letter identified the property and the entire consideration was also paid during the financial year 1986-87. The appellant justified his claim that he was entitled to cost inflation from the financial year 1986-87 as not getting possession certificate of the site in question at the time of allotment on 20-5-1986 did not detract from the ownership of the property in question. AO, on the other hand, had taken the date of grant of possession certificate, viz., 23-6-1998 and calculated the cost inflation from the financial year 1998-99 only. As a result of such adoption, the cost of acquisition was worked out at Rs. 8,11,497 by the AO, as against Rs. 20,34,539 adopted by the assessee, resulting in an addition of Rs. 12,23,042. CIT(A) confirmed the order of the AO. The issue was whether the date of allotment of site or date of issue of possession certificate to be considered to determine the cost of inflation indexation. Held: For computing the inflation cost of the asset, the date is to be reckoned from the date of allotment of the property to the assessee and not from the date on which possession certificate was issued to the assessee. There was no hesitation in reversing the finding of the Commissioner (Appeals) on this issue and the AO was directed to consider the date of allotment of property, i.e., 20-5-1986 for the purpose of determining the cost of inflation of the assets, while computing the cost of acquisition of property in terms of section 49. This ground of the assessee was, thus, allowed.

Relied:CIT v. A. Suresh Rao (2014) 223 Taxman 228 (Karn) : 2014 TaxPub(DT) 2130 (Karn-HC) and Bhatkal Ramarao Prakash v. ITO in ITA No. 2692/Bang/2018, dated 4-1-2019 : 2019 TaxPub(DT) 1041 (Bang-Trib).Distinguished:CIT v. Balbir Singh Maini in Civil Appeal No. 15619 of 2017 : 2017 TaxPub(DT) 4346 (SC).

REFERRED : Anita D. Kanjani v. ACIT (2017) 49 CCH 43 Mum Trib, Praveen Gupta v. ACIT ITAT, Delhi 'F' Bench (2011) 137 TTJ 307 (Del) : 2011 TaxPub(DT) 0399 (Del-Trib), CIT v. S.R. Jeyashankar High Court of Madras (2015) 373 ITR 120 (Mad) : 2015 TaxPub(DT) 0590 (Mad-HC), Madhu Kaul v. CIT and another High Court of Punjab & Haryana (2014) 363 ITR 54 (P&H) : 2014 TaxPub(DT) 1520 (P&H-HC), CIT-III v. A. Suresh Rao High Court of Karnataka (2014) 223 Taxman 228 (Karnataka) : 2014 TaxPub(DT) 2130 (Karn-HC), CIT v. Ved Prakash Rakhra High Court of Karnataka (2015) 370 ITR 762 (Karn) : 2012 TaxPub(DT) 3206 (Karn-HC), Vinod Kumar Jain v. CIT & Ors. High Court of Punjab & Haryana (2012) 344 ITR 501 (P&H) : 2010 TaxPub(DT) 2271 (P&H-HC), Pradeep Kar v. ACIT ITA 596/Bang/2014, dated 11-5-2016 : 2016 TaxPub(DT) 2454 (Bang-Trib), ITO v. R. Sathyanarayana High Court of Karnataka (ITA 25 of 2001, dated 17-12-2007), CIT v. B.K. Saroja (High Court of Karnataka) ITA No. 328 of 2003, dated 13-12-2007, Smt. Saroj Aggarwal v. CIT (1985) 156 ITR 497 (SC) : 1985 TaxPub(DT) 1361 (SC) ) and Richa Bagrodia in ITA No. 3601/Mum/2012, dated 22-4-2014 : 2019 TaxPub(DT) 1737 (Mum-Trib).

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