Case Law Details
DCIT Vs Boyance Infrastructure Pvt. Ltd. (ITAT Bangalore)
Occupancy Certificate is NOT the Starting Point for Indexation- Bangalore ITAT Allows Indexation From Year Property Was Actually Put to Use
The Bangalore ITAT dismissed the Department’s appeal and held that indexation benefit for computing capital gains must be granted from FY 2008-09, being the year in which the township was actually constructed, let out to GMR, and rental income was offered to tax – and not from the later year in which the occupancy certificate was issued. The Tribunal observed that the property was already in existence and income-generating from 2008-09, and therefore the AO was incorrect in restricting indexation from FY 2010-11 merely because the occupancy certificate was issued on 30.07.2010.
The assessee had sold the township for ₹75.50 crore and claimed long-term capital loss after applying indexation from FY 2008-09. The AO converted the claim into short-term capital gain on the ground that the occupancy certificate was obtained only in FY 2010-11. However, the Tribunal noted that the township had already been leased to GMR from 15.11.2008 onwards and rental income had been assessed from that year itself.
The ITAT further held that the amalgamation of DOMUS with the assessee company was a tax-neutral transaction under Section 47(vi) and therefore the period of holding and indexation benefit had to be reckoned from the predecessor company’s holding period itself. Since the Revenue could not dispute that rental income from the township was assessed from FY 2008-09, the Tribunal upheld the CIT(A)’s order granting long-term capital loss and dismissed the Department’s appeal.
In the second issue, the ITAT also upheld deletion of disallowance relating to sale of AIF units by the assessee to its subsidiary. The AO had alleged that the transaction was a colourable device because the NAV of the units had sharply fallen within a few months, resulting in a short-term capital loss. However, the Tribunal found that both purchase and sale valuations were based on the same NAV methodology, supported by registered valuers’ reports, and the decline in value was explained by erosion in the fair value of underlying investments held by the SEBI-regulated AIF. Merely because the transaction was between related parties, it could not automatically be treated as sham or tax avoidance in the absence of contrary material.
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