Indexation Benefit Shall Be Given To Taxpayer Based On Cost Of Acquisition Of Property Sold By Him: Delhi ITAT

The Bench of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant Member) observed that “as on the date of the conveyance deed, the value of the property is more than Rs.45 lakhs. Moreover, there is direct evidence on record, which indicates that the assessee, in fact, had paid the consideration of Rs.45 lakhs to Mr. Rajan Chanana through cheques for purchasing the property. Therefore, the cost of acquisition, insofar as the assessee is concerned, has to be taken at Rs.45 lakhs and indexation benefit has to be given to the assessee based on the cost of acquisition of Rs.45 lakhs”. (Para 8)

Facts of the case:

The assessee, a non-resident individual, had filed his return declaring income of Rs.32,27,218/- and claiming refund of Rs.24,99,640/-. In the year under consideration, the assessee sold two immovable properties, one being a residential property for a total sale consideration of Rs.3,05,00,000/-. Whereas, the second property sold by the assessee was a commercial property for a total consideration of Rs.59,60,000/-. In the computation of income, after claiming indexation benefit, the assessee claimed long term capital loss in respect of both the properties sold.

The AO however noticed that as against the sale consideration of Rs.3,05,00,000/- received in respect of residential property, the assessee had acquired it for a consideration of Rs.3,81,02,159/-. Whereas, in respect of the commercial property, as against the sale consideration of Rs.59,60,000/-, the assessee has set off indexed cost of acquisition of Rs.69,46,598/- and claimed long term capital loss of Rs.9,86,598/-. After examining the registered sale deed relating to the sale of commercial property, the AO found that the cost of acquisition of the property by the assessee was Rs.21,65,280/- along with stamp duty of Rs.3,41,040/-. Therefore, he rejected the indexed cost of acquisition claimed by the assessee and re-computed the capital gain by taking the cost of acquisition at Rs. 21,65,280/- and allowing benefit of indexed cost of Rs.25,86,880/-. This resulted in net long term capital gain of Rs.33,73,120/- as against long term capital loss of Rs. 9,86,598/- shown by the assessee.

Observations of the Tribunal:

The Bench noted that the AO has taken the cost of acquisition of the commercial property at Rs.24,23948/-, including the stamp duty of Rs.3,41,040/- based on the conveyance deed executed between Baani Technology Services (P) Ltd. and the assessee.

However, the agreement to sale between the assessee and Rajan Chanana and the letter issued by Rajan Chanana to M/s. Baani Technology Services (P) Ltd. nominating assessee in his place, the undertaking of the assessee to M/s. Baani Technology Services (P) Ltd. clearly reveal that the assessee had paid an amount of Rs. 45 lakhs towards sale consideration of the property to Rajan Chanana, who was allotted the property by the developer, Baani Technology Services (P) Ltd., added the Bench.

The Bench observed discrepancy as Rajan Chanana was given allotment of the property by the developer on payment of sale consideration of Rs. 21,65,280/- along with stamp duty of Rs.3,41,040/-, whereas, the assessee has paid an amount of Rs.45 lakhs to Rajan Chanana towards sale consideration of the property.

In fact, the conveyance deed between the assessee and M/s. Baani Technology Services (P) Ltd. clearly indicates that the stamp duty authority has determined the value of the property for stamp duty purpose at Rs. 48,71,880/-, added the Bench.

The Bench observed that on the date of the conveyance deed, the value of the property is more than Rs.45 lakhs.

Moreover, the Bench pointed that there is direct evidence on record, which indicates that the assessee, in fact, had paid the consideration of Rs.45 lakhs to Rajan Chanana through cheques for purchasing the property.

Hence, the ITAT concluded that the cost of acquisition, insofar as the assessee is concerned, has to be taken at Rs.45 lakhs and indexation benefit has to be given to the assessee based on the cost of acquisition of Rs.45 lakhs.

Therefore, the ITAT deleted the addition of Rs.33,73,120/- made towards long term capital gain and allowed Assessee's appeal.

Counsel for Appellant/ Assessee: Lalit Mohan & Parth Singhal

Counsel for Respondent/ Revenue: Vijay B. Vasanta

Case Title: Shri Anurag Lakshman Pande verses DCIT

Case Number: ITA No.2046/Del/2023

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