Opinion Of Eminent Legal Luminaries On Controversial Issues

Capital gains- Date of acquisition – Amount paid in installments

QUERY: A flat booked in 2013 and paid the amount in installments since then. First payment and registration done in 2017. Possession given in 2017 on registration though almost full payment was given on allotment in 2013 and subsequent installments paid between 2013 & 2016. What will be the date of acquisition for taxation of capital gains & indexation of payment?
ANSWER: The Bombay High Court in CIT v. Mrs. Hill J. B. Wadia [216 ITR 376] has observed that “what we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the builders / society and whether he has made substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside. The material test in this connection is domain over the flat and investment in it”. So, on the basis of the fact that querist has invested substantial amount in 2013, though possession and registration was in 2017, the date of acquisition would be 2013 for taxation of capital gains.
Similarly the Punjab and Haryana High Court in Mrs. Madhu Kaul v. CIT [363 ITR 54] held that the flat was allotted to the assessee on June 7, 1986 by a letter conveyed to the assessee on June 30, 1986. The assessee paid the first installment on July 14, 1986 thereby confirming a right upon the assessee to hold a flat which was later identified and possession was delivered later did not detract from the fact that the allottee was conferred a right to hold on issuance of an allotment letter. The payment of the balance installments, identification of a particular flat and delivery of possession were consequential acts that related back to and arose from the right conferred by allotment letter. So indexation of payment would be from the year in which the querist was holding flat i.e. the date of allotment.

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