Indexation Benefit Allowable Based on Cost of Acquisition of Property Sold by Taxpayer: ITAT [Read Order]

The New Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) held that the indexation benefit is allowable based on the cost of acquisition of property sold by the taxpayer. It was held that the assessee is entitled to avail of the benefit of carrying forward of long-term capital loss on the sale of residential property.

Shri Anurag Lakshman Pande, the assessee is a non-resident individual who had filed his return declaring income of Rs.32,27,218/- and claiming refund of Rs.24,99,640/-. In the year under consideration, the assessee sold two immovable properties, one being a residential property for a total sale consideration of Rs.3,05,00,000/-. Whereas, the second property sold by the assessee was a commercial property for a total consideration of Rs.59,60,000/-. After claiming indexation benefit, the assessee claimed long term capital loss in respect of both the properties sold.

After examining the registered sale deed relating to the sale of commercial property, the AO found that the cost of acquisition of the property by the assessee was Rs.21,65,280/- along with stamp duty of Rs.3,41,040/-. The AO rejected the indexed cost of acquisition claimed by the assessee and re-computed the capital gain by taking the cost of acquisition at Rs. 21,65,280/- and allowing benefit of indexed cost of Rs.25,86,880/-.

The two member bench of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant Member) observed while completing the assessment, the Assessing Officer did not allow set off and carry forward of long term capital loss.   As the assessee raised objections on the issue, the DRP  directed the Assessing Officer to allow set off of long term capital loss as per law by passing a speaking order.

However, while passing the final assessment order, though, the Assessing Officer set off the long term capital gain computed on sale of commercial property against long term capital loss on sale of residential property, however, he did not allow carry forward of the long term capital loss remaining after set off. 

The ITAT held that the assessee is entitled to avail the benefit of carry forward of long term capital loss. Accordingly, the Assessing Officer is directed to verify the issue factually and allow carry forward of long term capital loss claimed by the assessee.

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