Gaurav Dye House Vs ITO (ITAT Delhi)
Double Taxation of LTCG Not Permissible: ITAT Directs Proper Indexation from Actual Payment Dates and Gives Credit for Gain Already Declared
The Delhi Bench “E” of the ITAT, in Gaurav Dye House v. ITO (AY 2022-23), granted significant relief to the assessee by holding that long-term capital gains (LTCG) cannot be recomputed in a manner leading to double taxation, and that indexation must be allowed from the actual dates of payment of cost, not arbitrarily from the date of registration.
The assessee, a partnership firm, had sold an immovable property and already declared LTCG of ₹34.27 lakh in its return. During scrutiny, the AO recomputed LTCG at ₹1.38 crore, making an addition of ₹95.66 lakh, by (i) ignoring part of the cost of improvement, (ii) denying indexation of stamp duty and registration charges, (iii) allowing indexation only from the date of registration instead of the dates of actual payments, and (iv) failing to give credit for LTCG already offered to tax, resulting in clear double addition. The CIT(A) mechanically confirmed the action.
The Tribunal found serious infirmities in the approach of the lower authorities. It noted that:
- Payments towards cost and improvement were clearly reflected in the registered sale deed and acknowledged even in the AO’s show-cause notice;
- Indexation must be granted from the year in which each payment was actually made, and not from the date of registration without any legal basis;
- Stamp duty and registration expenses are part of the cost of acquisition and eligible for indexation; and
- Once the assessee had already included LTCG in its returned income, failure to give corresponding credit amounts to impermissible double taxation.
While accepting the assessee’s computation of LTCG in principle, the ITAT clarified that a separate unsupported claim of ₹6 lakh as land cost could not be allowed, since the entire purchase consideration was already reflected in the sale deed. The AO was therefore directed to verify individual payments and allow indexed cost from actual payment dates, and to grant full credit for LTCG already declared by the assessee.
Accordingly, the appeal was allowed for statistical purposes, with clear directions ensuring correct computation of LTCG and prevention of double taxation
FULL TEXT OF THE ORDER OF ITAT DELHI
