Renu Khurana vs. ACIT, Int.Tax 2(1)(2) on Deduction Claim for Indexed Cost of Acquisition (ITA No. 1368/DEL/2022)

Renu Khurana vs. ACIT, Int.Tax 2(1)(2), New Delhi (ITA No. 1368/DEL/2022)

Assessment Year: 2019-20

In the income tax appellate tribunal of Delhi, a notable judgment was made in the case between Ms. Renu Khurana and the ACIT, International Taxation -2(1)(2), New Delhi, concerning the dispute over the deduction claim on account of the indexed cost of acquisition for the purpose of computing long-term capital gain. This decision comes as a significant point of consideration for taxpayers, especially those involved in real estate transactions.

The case, cataloged under ITA No. 1368/Del/2022, was presided over by Shri G.S. Pannu, Honorable President, and Shri Saktijit Dey, Judicial Member. The bench delved into the complexities surrounding the calculation of indexed cost of acquisition, a pivotal factor in determining the taxable amount under the head of long-term capital gains.

The appellant, Ms. Renu Khurana, contested the assessment order dated 11.05.2022, which was passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961, for the assessment year 2019-20. The bone of contention lay in the method of calculating the indexed cost of acquisition related to a property sold by Khurana, which significantly affected the computation of long-term capital gains.

Background of the case highlights Khurana’s sale of a residential property in Gurgaon, Haryana, for a consideration of Rs.2,10,00,000. Upon deducting an amount towards indexed cost of acquisition as per section 48 of the Act, she offered a long-term capital gain of Rs.45,137 in her income tax return. However, the Assessing Officer’s calculation diverged, leading to a dispute culminating in this appeal.

The Tribunal, after careful analysis of the submissions and evidence presented, including details of payments made for the property acquisition, agreements, and deeds, favored the appellant’s perspective. It underlined the importance of determining the financial year in which the property was actually acquired to correctly apply the indexed cost of acquisition for tax purposes.

The decision underscored judicial precedence and the Central Board of Direct Taxes (CBDT) circulars relevant to the case, ultimately allowing the appeal and directing the Assessing Officer to allow the deduction based on the factual verification of payments made from the financial year 2005-06 onwards.

This judgment sheds light on crucial aspects of tax computation for real estate transactions, especially the need for clarity on the acquisition year for the purpose of indexation benefits. It reinforces the taxpayer’s right to a fair assessment and the judiciary’s role in adjudicating disputes arising out of complex tax laws.

The case concludes with the appellate tribunal allowing Ms. Renu Khurana’s appeal, marking a significant victory for the taxpayer and setting a precedent for similar cases in the realm of income tax assessments related to real estate transactions.

Dated: 17th February, 2023.

Renu Khurana vs. ACIT, Int.Tax 2(1)(2) on Deduction Claim for Indexed Cost of Acquisition (ITA No. 1368/DEL/2022)