By Jagdish D. Shah
Jagdish T. Punjabi
Chartered Accountants
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17 Praveen Gupta v. ACIT
ITAT ‘F’ Bench, New Delhi
Before G. E. Veerabhadrappa (VP) and
I. P. Bansal (JM)
ITA No. 2558/Del./2010
A.Y. : 2007-2008. Decided
on : 13-8-2010
Counsel for assessee/revenue
: Ved Jain, Rano Jain & Venkatesh Chourasia/Banita Devi Naorem
(1) Section 48 of the Income-tax Act, 1961 — Cost of acquisition for computation of Capital gains — Whether the payments of charges towards firefighting, generator and processing fees to a builder would be part of cost of acquisition — Held, Yes.
(2) Explanation (iii) to Section 48 of the Income-tax Act, 1961 — Indexed cost of acquisition — Whether the year of acquisition should be the year when the assessee entered into an agreement to purchase or the year when the conveyance deed was executed — Held that it is the year when the assessee entered into an agreement to purchase the flat.
Per I. P. Bansal:
Facts:
The assessee had sold a
flat and the following issues had arisen with reference to capital gains tax :
1. Whether the following payments made by the assessee to the builder with reference to the flat could form part of its cost of acquisition/improvement:
- For firefighting charges Rs.0.35 lakh;
- For generator charges Rs.0.47 lakh; and
- For processing fees and other charges Rs.0.80 lakh.
2. Year from which the indexed cost of acquisition was to be computed. According to the assessee, the year should be 1995-1996 when he entered into an agreement with the builder. While as per the Revenue, the same should be the year when the conveyance deed was executed i.e., 2001-2002.
Held:
According to the Tribunal the different charges
paid by the assessee were in respect of the flat purchased and the same were
made to the builder who sold the flat to the assessee. Without making these
payments, the assessee could not have obtained the conveyance in his favour.
Therefore, it held that the AO was in error in taking the cost of acquisition as
the only the amount stated in the conveyance deed. Thus, it held that all these
charges would form part of cost of acquisition of the flat sold.
As regards the year of acquisition, according to
the Tribunal, the assessee by entering into an agreement to purchase a flat had
identified a particular property which he was intending to buy from the builder
and the builder was also bound to provide the applicant with that property.
Referring to the provisions of S. 2(14) defining the term ‘capital asset’, it
observed that it was not necessary that to constitute a capital asset, the
assessee must be the owner for computing the capital gain. According to it, the
assessee had acquired a right to get a particular flat from the builder and that
right itself was a capital asset of the assessee. Therefore, it held that the
benefit of indexation had to be granted to the assessee from the date he entered
into an agreement to purchase the flat.
