On advice of some tax consultants regarding CoA for LTCG on sale of property, where the payments for purchase of under-construction flat were spread out over 10years due to inordinate delays in construction, the indexed cost of acquisition was arrived at by sum of indexed costs of instalments in respective financial years until handover in 10th year, soon followed by resale. No deductions against CG claimed and advance tax paid for LTCG tax liability calculated as per this.
Note that it is settled by multiple rulings by courts/tribunals that the date of acquisition would be the allotment/AoS date and such cases shall be LTCG and not STCG even though the property is sold within 2 years of possession/registration.
The justification for this method being, though this raises the tax liability on the CG since the indexation benefit of cost is taken only for the period from when the instalments were actually paid, but it is more prudent way of calculating tax liability to avoid issues and rejections of ITR filing.
The question is, since in ITR2 under Schedule CG there is no provision to calculate staggered indexed CoA in the manner suggested by tax experts, is it then acceptable to declare just the sale consideration paid to builder as cost-without-indexation and get benefit of indexation for 10 years, as if the entire consideration was paid in the FY of AoS?
(The acquisition date would obviously be the AoS date and the sale date would be the date of registration/transfer to the new buyer. Indexed cost of improvements cannot be used here to substitute instalments for improvements, as that would require proof of improvement expenses to be furnished, in case of scrutiny and may complicate the issue.)
Please provide your expert guidance in the matter if handled this situation, with a resolution that was acceptable to ITD.
Thanks in advance.
CAclubindia
