How to apply indexation for the purpose of capital gains?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2015 If a house property is purchased in installments (i.e. construction linked plan), then as per various judgments the date of acquisition shall be reckoned from the date of allotment.

If the period of holding of such asset is more than 36 months, then indexation shall be applied.

My query is -

How can we apply the indexation in the given case?

Option 1: On the whole agreed amount from the date of acquisition of property (i.e. date of allotment).

OR

Option 2: On each installment as per the date of payment.

Thanks!!

Amol S Joglekar

Amol S Joglekar (Expert)
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05 June 2015 on the whole of the amount of the property.

The additions if any in subsequent years may be calculated on the additional amount. But for the house property, the whole amount should be considered to compute capital gain.

Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2015 Thank you for your reply.

Could you please cite any case law through which this view can be substantiated ?

Amol S Joglekar

Amol S Joglekar (Expert)
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08 June 2015 Since there is no ambiguity in the
provision, a separate case law is not needed.

What we buy is a capital asset and not its pieces, payment wise. Hence whatever piece meal payment is made, it is made to buy a capital asset. So every and all payment made till date of transfer/acquisition/possession (as applicable) shall constitute the cost of acquisition of the said capital asset.

The expenses incurred subsequent to the acquisition( e.g. tiles, grills, windows, fixed fittings etc.), can be considered as "improvements"

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