indexation cost of acquisition
vivek
(Querist) 13 June 2010
This query is : Resolved
Hello freinds.
Kindly tell me that what will be the Cost of Acquisition in case of property, which is purchased in installment?
A property is booked with a builder when construction was going on. Several payments were made in installments which were as under:
1999 33568 Booking done
2000 50352
2001 41960
2002 41960
2002 84547
2003 41960
2003 125880
2003 43764 Possesion granted
Penalty payments
2008 2655
2009 550
2010 2140
No registration till now.
Asset to be sold in 2010 after registration. There will be some registration and stamp duty charges.
My question is :
1. What will be the cost of acquisition in this case? or Method of calculation of COA?
2. Should we take indexation? if yes, from which year?
3. Is there any improvement involved?
4. Will it be treated as transfer of right or actual transfer?
5. Any other issue involved in your opinion?
if we take indexation each year, the condition of 3 years which is necessary for applying indexation in Long term capital asset will not be satisfied.
I think indexation should not be on yearly basis with each payment.
Kindly suggest some other trearment.
Thanks in advance for all your help - Tax laws in India seem very complex! This seems to be a very helpful site.
Jagmohan Rawat
(Expert) 14 June 2010
As per the income tax law any capital asset held by an assessee for more than 36 months is considered long term capital asset. In your case as the possession of the property was obtained in year 2003 hence it is a capital asset. The indexation will be done from the first year when the asset was held by the assessee as per indexed cost of acquisition defined in section 48. Further penalty paid can not be taken as part of cost as these exps are made after the creation of the capital asset and moreover the same are not attributable to the acquisition of capital asset.
