Advance payment for acquisition of property – Indexation from year of payment or year of registration of purchase deed?

Rajesh Sunderdas Vaswani Vs DCIT (ITAT Ahmedabad)

Advance payment made for acquisition of property – Indexation from year of payment or year of registration of purchase deed?

The issue  involved in this case is whether the benefit of indexation is available on ‘advance payment’ made for acquisition of property or whether the benefit of indexation is available from the year of registration of purchase deed.

Assessee had made advance payment of Rs. 50 lakhs for acquiring properties in financial year 2008- 09. The above properties were transferred in favour of the assessee by execution of conveyance deed in financial year 2009-10. Assessee claimed the benefit of indexation in respect of aforesaid advance payment from financial year 2008-09. AOr was of the view that “benefit of indexation” with respect to advance payment was available from financial year 2009-10 i.e. from year of execution of conveyance deed since that was the year in which the two immovable propertied can be said to be held by the assessee in view of section 48(iii) of the Act. The AO’s order was upheld by CIT(A)

Before the Tribunal,  assesses submitted that the advance of Rs. 50 lakhs in respect of the   properties was made by way of account payee cheques in financial year 2008-09. Further, the assessee entered into a registered  Agreement to Sell with the seller in financial year 2008-09 itself.

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