Praveen Gupta Vs DCIT (Delhi High Court)
The Delhi High Court has ruled on a significant aspect of calculating Long Term Capital Gains (LTCG) for residential property sales, affirming that the benefit of cost indexation can be claimed only from the date of the formal Builder Buyer Agreement (BBA), and not from the date of initial payment or provisional allotment. The judgment was passed in the case of Praveen Gupta Vs Deputy Commissioner of Income Tax (DCIT), concerning the Assessment Year 2016-17.
The court dismissed the assessee’s appeal, which sought to overturn an addition of ₹4,12,812 made to his income on account of capital gains. This addition resulted directly from the tax authorities denying the benefit of indexation for the initial years of investment, a position that the High Court ultimately upheld by relying on a binding jurisdictional precedent.
Factual Background and Assessee’s Claim
The facts of the case revolved around the sale of an apartment originally booked by the appellant, Praveen Gupta, and subsequently sold during the relevant financial year. The chronology of the acquisition was the crucial point of contention:
1. Initial Booking and Provisional Allotment (2007): The assessee initiated the purchase in April 2007, making an initial payment of ₹6,69,375. This was followed by a provisional Letter of Allotment issued on September 21, 2007, for a flat in a Greater Noida project. The provisional letter itself explicitly stated that a detailed allotment letter containing the full terms and conditions would be executed soon.
2. Project Change and Agreement (2010): Subsequently, the appellant requested and executed a change of allotment, switching the booking from the Greater Noida project to a new project in Faridabad. This change was formalized through a Cancellation and Adjustment Document and a subsequent Builder Buyer Agreement (BBA), both executed on July 19, 2010.
When calculating the Long Term Capital Gain upon the sale of his half share in the property, the assessee claimed indexation benefit starting from the Financial Year (FY) 2007-08, arguing that the capital asset (the right to acquire the flat) was acquired when the initial payment was made and the provisional allotment letter was issued.
