Indexation and cost of acquisition of an under-construction property

livemint.com:

₹1 crore was booked and allotted in 2008-09, and payment for the property was made in instalments of ₹20 lakh each year, over the period of five years from 2008-09 to 2012-13, in which year the property was built and transferred. If the property is being sold in the current year, the entire cost of acquisition of ₹1 crore should be indexed from 2008-09 till 2023-24.

Unfortunately, however, the issue has been the subject of litigation since tax authorities often seek to grant the benefit of indexation only from the year of completion of the property, or, at best, from the respective years in which the payments were made for acquisition of the property. While most tribunal decisions have taken the view that the indexation of the entire cost should be available from the year of booking or allotment of the property, a few tribunal decisions (and one high court) have taken a contrary view that indexation of cost would be allowable from each year in which the payment was made.

Many of these decisions were rendered at a time when the correct date of acquisition for determining the long-term or short-term nature of the capital gains was a disputed issue. Therefore, in a sense, as against the argument of the tax authorities that indexation would be available only from the year of completion of construction of the property (which according to them was the year of acquisition), the tribunals and court, in a sense, provided relief to the taxpayer by allowing indexation from the respective years of payment.