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Facts
The assessee claimed a Long Term Capital Loss of Rs 1,28,25,955/- on the sale of a flat. The dispute arises from the year of acquisition for indexation purposes, with the assessee claiming FY 2010-11 and the department allowing FY 2011-12.
Held
The Tribunal held that the rights in the property were vested in the assessee only upon the execution of the agreement dated 04.04.2011, not merely by making substantial payments. Therefore, indexation from FY 2011-12 was correctly applied.
Key Issues
The primary issue is determining the correct year of acquisition for capital gains indexation, specifically whether it should be the date of substantial payment or the date of the formal sale agreement.
Sections Cited
153A, 2(14), 48, 54, 54F
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PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeal), CIT(A)- 51, Mumbai [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 153A of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 15.04.2021 for the Assessment Year [A.Y.] 2018-19. P a g e | 2 A.Y. 2018-19 Phulchand Ramgopal Agarwal, L/H – Mr. Pradeep Agarwal, Mumbai
Grounds of appeal are as below:
Ld. CIT(A) erred in law & on facts in confirming assessment order adopting the year of acquisition as F.Y.2011-12 holding rights over property was acquired on the date of execution of purchase agreement as against year F.Y.2010-11 without appreciating the facts that rights in property were acquired when substantial payment was made to builder against booking of the flat.
Ld. CIT(A) erred in law and on facts in confirming assessment order computing indexation adopting year of acquisition F.Y.2011-12 instead of F.Y.2010-11 in computing long term capital loss without properly considering the facts of the case and law applicable.
Facts in brief are that the assessee claimed Long Term Capital loss of Rs 1,28,25,955/-in respect of a flat purchased for Rs 5,84,00,000/-and sold for Rs 8,22,92,608/- on 12.03.2018. For acquisition, payments were made in instalments staring from 27.09.2010 to 31.03.2012 with major part paid in FY 2011-12.The property was booked at Bangalore by making advance booking payments on 27.09.2010 of Rs.3,47,00,000/- and Rs. 79,00,000/- on 31.01.2011. Total payment prior to date of registration was Rs 4,26,00,000/-.The agreement for purchase was formalised on 04.04.2011 wherein the schedule in Purchase Agreement total payment of Rs 4,26,00,000/- was acknowledged. Total cost of the flat was Rs 6,28,48,800/-.The assessee claimed indexation of the cost from FY 2010-11 as substantial payment Rs 4,26,00,000/-was made in that year while the Department allowed indexation from the year of agreement FY 2011-12 year in which it was registered. Issue for consideration here is P a g e | 3 A.Y. 2018-19 Phulchand Ramgopal Agarwal, L/H – Mr. Pradeep Agarwal, Mumbai calculation of indexation with reference to year of agreement registered or from the year interest acquired in an immovable property which was sold by the assessee during the year resulting in long term capital loss. Ld. CIT(A) decided the issue holding that date of sale agreement or issue of allotment letter be relevant date and not date of payment. In the assessment order, the AO has noted that the as per ‘Agreement without possession’ dated 12.03.2018, the assessee transferred the interest in the said property. As per para 11 thereof, it is stated that second party will be entitled to all interest, title, claims and interest and shall be bound by all obligations and conditions under the agreement dated 04.04.2011.The AO therefore, concluded that all right etc. came to the assessee vide agreement date 04.04.2011 and the first payment of Rs 3,47,00,000/-was for advance being earnest money. Accordingly, the Long term capital loss recalculated at a reduced figure as against the claim of the assessee at a higher figure. In the subsequent appeal, the ld.CIT(A) upheld the action of by observing that the initial payment of Rs 3.47 cr was merely an Earnest Money. The main agreement dated 04.04.2011 only gave the necessary rights to the assessee and therefore, subsequent events payments made have been rightly considered for the purposes of working out the capital loss by the AO.
P a g e | 4 A.Y. 2018-19 Phulchand Ramgopal Agarwal, L/H – Mr. Pradeep Agarwal, Mumbai
Before us, the assessee reiterated the contentions as made before the lower authorities. It is further submitted that it acquired interest in said property on 27.09.2010 pertaining to the FY 2010-11, when substantial payment was made and the said property being under construction, there was no agreement/allotment letter of that date. In the written submission reliance is placed on Radha Kishan Kungwani vs. ITO in ITA No. 1106/Jp/2018, dt. 19th Aug., 2020,Dhanraj Dhadda & Sons (P) Under the law, there is no requirement that any agreement should be in a particular form or be on a stamp paper or registered. It is also argued that for purpose of capital gains, date of allotment be date of acquisition, for determination of LTCA/STCA or benefit of investment u/s 54, 54F as held in the case of Vimal Chandlal Gupta, 187 ITR 613,Richa Bagadia 175 ITD 552, Mum, Keyur Hemant Shah 199 TTJ 388 Mum. Reliance is also placed on Shri Praveen. Gupta 137 TTJ 0307 (Delhi).
The ld.DR has placed reliance on the orders of authorities below.
P a g e | 5 A.Y. 2018-19 Phulchand Ramgopal Agarwal, L/H – Mr. Pradeep Agarwal, Mumbai
We have carefully considered all the relevant facts of the case and find that although initial two payments aggregating to Rs 4.26 cr. were made in the FY 2010-11,the actual agreement was entered into only on 04.04.2011.Not even an allotment letter seems to have been issued to the assessee on making initial payments as evident from the contentions made and duly considered by the lower authorities. Therefore, there is no basis for claiming that the assessee became entitled to all interest, title, claims which shall be binding on the other party. It is only on execution of the agreement dated 04.04.2011 that such rights were vested in the assessee and not before it. The word “held” used in section 2(14) as well as Explanation to section 48 of the Act clearly depicts that assessee must have some right in the capital asset which is subject to transfer which is absolutely lacking in the instant case. We further find that none of the case laws relied upon lay down that only on the basis of payments without support of any allotment letter or agreement, the assessee would be become rightful owner in the said property. Accordingly, we do not find any reason to interfere in the matter and uphold the appellate order.
P a g e | 6 A.Y. 2018-19 Phulchand Ramgopal Agarwal, L/H – Mr. Pradeep Agarwal, Mumbai
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 06.08.2025. SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)
Place: म ुंबई/Mumbai ददनाुंक /Date 06.08.2025 Lubhna Shaikh / Steno
आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.
सत्यावपि प्रवि //// आदेशानुसार/ BY ORDER,
उि/सहायक िंजीकार (Dy./Asstt.