Indexed Cost Of Construction Must Be Allowed Where Building Details Form Part Of Sale Deed: ITAT Chennai

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has held that a taxpayer cannot be denied the benefit of indexation on the cost of construction where details relating to the building are already available in the registered sale deed and form part of the material on record.

A coram of Judicial Member Manu Kumar Giri and Accountant Member Gagan Goyal allowed an appeal filed by Ramatas Revathi.

"The benefit of indexation of cost is a statutory consequence flowing from section 48 of the Act. Where the material necessary for determining the cost of acquisition and cost of improvement is already available on record, such benefit cannot be denied on hyper-technical grounds. The plan approval and other supporting documents relied upon by the assessee merely corroborate the particulars already contained in the registered sale deed and its annexure," the tribunal held.

The dispute arose from the sale of an immovable property at Karaikudi for ₹1.05 crore.

In a return filed during reassessment proceedings, Ramatas Revathi declared a long-term capital loss of about ₹40.91 lakh after claiming the indexed cost of acquisition of the land and the indexed cost of construction of the building standing on it.

The Assessing Officer rejected the computation. The officer observed that Ramatas Revathi had neither provided the sale deed nor furnished documentary evidence supporting the claimed cost of acquisition and construction. The entire sale consideration of ₹1.05 crore was consequently treated as short-term capital gain.

On appeal, the Commissioner of Income Tax (Appeals) accepted that the sale deed and title documents were public documents and directed verification of the indexed cost of acquisition of land.

However, the appellate authority declined to consider the cost of construction. It held that details relating to the building constituted additional evidence and could not be admitted in the absence of compliance with Rule 46A.

Before the Tribunal, counsel for Ramatas Revathi argued that the Department itself had obtained the registered sale deed from the Sub-Registrar's office during proceedings under Section 148A.

Counsel pointed out that Annexure 1-A, which formed part of the registered sale deed, recorded that the property included a building that was about 12 years old and also specified the value attributable to the building at about ₹73.33 lakh.

It was argued that once the sale deed had been accepted as a public document, there was no justification for treating the building details contained in Annexure 1-A as additional evidence.

Accepting the contention, the Tribunal noted that Annexure 1-A formed an integral part of the registered sale deed already obtained by the Department.

"We further find that Annexure 1-A forms an integral part of the registered sale deed. The annexure contains particulars of the property transferred, including details relating to the building standing on the land. The annexure specifically mentions that the building was about 12 years old and also records the value attributable to the building. Therefore, the details regarding the existence, age and value of the building were already available in the public document obtained by the Department," the tribunal observed.

The Bench found that the appellate authority had adopted an inconsistent approach by accepting the sale deed as a public document while treating particulars contained in Annexure 1-A of the same document as additional evidence.

"Once Annexure 1-A forms part of the registered sale deed itself, the particulars contained therein cannot be segregated and treated as fresh evidence requiring admission under Rule 46A," the tribunal held.

The tribunal found that the property sold comprised both land and a building and that details regarding the building were already available in the registered sale deed itself.

Holding that the authorities below were not justified in denying the benefit of indexation on the cost of construction, the Tribunal directed the Assessing Officer to accept the indexed cost of acquisition and indexed cost of construction as supported by the registered sale deed and Annexure 1-A and recompute the capital gains accordingly.

The appeal was allowed.

For Appellant: Advocate T. Vasudevan,

For Respondent: M. Subashri,JCIT