Capital gains tax for sale of property prior to registration

Hi

The total payments shall be considered as cost of acquisition only. The various payments shall indexed with respect to the indices of respective years of payments.

Hi,

Cost of Acquisition will be indexed cost of all installments paid, it is amounting to Rs 6392198.83

Other CA is wrong in claiming that other installments will fall under cost of improvement category.

kindly find the link below which explains this well.

http://www.ahujaandahuja.in/benefit-of-indexation-based-on-payments-made-and-the-date-of-allotment-of-under-construction-builder-flat/

Hi

Hope you are doing well !

The cost of acquisition for the apartment will be total payments done in instalments and the period of holding should be calculated from the first year in which the asset was held by the assesses i.e.date of issue of allotment letter by the developer/Builder .

The total Indexed cost will be calculated as per section 48 of Income tax as explained in below para:

“Indexed cost of acquisition” means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later;

If you need any further clarification, please let me know.

Thanks & Regards,

Payal Chhajed

The total Indexed cost will be calculated as per section 48 of Income tax.

Thanks & Regards,

Payal Chhajed

Dear Sir,

Period of holding should be calculated from the date of allotment issued to you or possession if any. Indexation of all cost is to be done from the F.Y. 2012-13 only and not for each actual payment as per section 48.

Thanks

Hi,

I think the advice by the Cleartax CA is incorrect.

The total payments you made will be considered as cost of acquisition. Each instalment paid will be indexed based on the year in which it was paid. Hope that clarifies.

Regards,

Nikhil.

Hi,

View point 2 is seems more correct. However, there are many cases/decisions in favour of point 2 as well as against point 2.

I believe, you need to take year of purchase/date of allotment as that year (FY 2012-13) only and also take indexation for that year as it is your cost of acquisition not cost of improvement. It is always accrual or receipt whichever is earlier, by first date it started accruing and just the payments were deferred.

Please find below the reference for your better understanding:

https://www.business-standard.com/article/pf/taxation-use-date-of-allotment-to-calculate-capital-gains-[deleted]_1.html

http://www.bkkhareco.com/newsletter/pages/2014/april-may/income-tax/it30.php

http://www.sensystechnologies.com/blog/?p=1847

The tribunal said that Section 2(42A) of the I-Tax Act defines short term capital asset as an asset held by an individual for not more than 36 months immediately preceding the date of its transfer. The intention of the law in using the word “held” against words such as “acquired” or “purchased” or “owned” indicates that the absolute legal ownership of the asset is not a principle factor in the determination of holding period. The time from when the individual starts holding the asset is the real determining factor.

Thanks & Regards,

Payal Chhajed

It is a case of sale of right in property and you acquired right in property in the F.Y. 2012-13 through agreement. It became your property in 2012-13 with total cost payable Rs. 50,39,823/- even though it needs to be paid in different installments. It is cost of acquisition and not cost of improvement as you got the right in property against agreement value. You paid as per the agreement value which is cost of the apartment. Suppose you sale it after registration, What is the cost of acquisition, period of holding?.

The Learned ITAT Delhi Bench in Landmark judgement Praveen Gupta vs ACIT has held that the asset or right in asset is created when the builder issued an allotment letter to the assessee specifying the actual unit no of the property and any payments made before allotment is to be provided indexation from the date of allotment and any payment made after is to be provided benefit of indexation from the date the payment is made.

ITAT Karnataka bench decision is more relevant rather than ITAT Delhi bench. Please check any such decision in ITAT Karnataka bench.

Yes, i agree with Mr Vivek. We have more reliance on ITAT Karnataka bench decision.

Even, practically it is very difficult to calculate the indexation cost instalments wise.

It is not advisable and feasible too.

Thanks & Regards,

Payal Chhajed

Hi,

Instalments have to be indexed based on the year of payment, the link i have shared also says the same. it is based on various case laws.

In my opinion, Instalments will have to be indexed based on the year in which they are paid.

Hi,

It will not be your cost of improvement. It will be part of cost if acquisition.

With respect to the two views, there is nothing like correct and incorrect point of view. Because there is no clarity in the Act. However, based on experience with tax office and various rulings, view point 1 is generally accepted by the tax department and seems logical as well.

Section 48 of the income tax defines the cost of acquisition.

I would suggest View 1. This is because you have paid the amounts in installments and indexation will accrue based on the actual date of payment.

Hi,

Hope you are doing well !

Cost inflation index must be applied from the date when the asset was “first held by tax payer”, says Section 48 of the IT Act, 1961 as further concluded in below links:

http://www.lawyersclubindia.com/experts/indexation-cost-of-acquisition--93621.asp

http://www.dnaindia.com/personal-finance/report-indexation-benefit-available-from-date-of-agreement-not-from-date-of-possession-2560492

Thanks & Regards,

Payal Chhajed