Property holding period runs from possession date, and maintenance security is excluded from acquisition cost.

By | May 21, 2026
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Property holding period runs from possession date, and maintenance security is excluded from acquisition cost.

Issue

Whether the period of holding for a capital asset should be calculated from the physical possession and full payment date (2013) rather than the official registration date (2016), and whether registration charges and interest-bearing maintenance security deposits can be factored into the indexed cost of acquisition.

Facts

  • The assessee sold a residential apartment on August 27, 2018, and claimed a long-term capital loss for the Assessment Year 2019-20.

  • The Assessing Officer (AO) treated the profit as a short-term capital gain, arguing the asset was held for less than two years based on the property registration date of November 25, 2016.

  • Evidence submitted during appeals showed the property was acquired via an agreement to sell on July 19, 2013, full payment was completed by September 5, 2013, and physical possession was handed over during the 2013-14 financial year.

  • The assessee included registration charges of Rs. 20.68 lakhs paid in the 2013-14 financial year and an Interest-Bearing Maintenance Security of Rs. 3.50 lakhs paid to the Belaire Condominium Association as part of the total cost of acquisition.

  • The Commissioner (Appeals) accepted the 2013-14 possession date for long-term classification, allowed indexation on the registration fees, but disallowed the maintenance security deposit.

  • The AO raised no adverse comments or contradictory material against these factual findings during the remand proceedings.

Decision

  • Possession Rules Asset Classification: Held, yes. Since full payment was cleared and physical possession was delivered in the financial year 2013-14, the holding period exceeded the required threshold by the sale date in 2018. The asset is long-term, and the base year for indexation must be the financial year 2013-14.

  • Registration Charges Allowed: Held, yes. Documented registration fees paid directly to the builder form an intrinsic part of the capital cost of acquiring the property and are eligible for indexation benefits.

  • Maintenance Security Disallowed: Held, yes. The payment made to the condominium association was an Interest-Bearing Maintenance Security meant for the daily upkeep of the complex. It does not qualify as a capital acquisition cost and must be excluded from the capital gains computation.

Key Takeaways

De Facto Ownership Trumps Registration: For capital gains purposes, the period of holding is determined by the date the buyer obtains clear rights, makes full payment, and takes physical possession of the property, not the formal date of execution of the registered sale deed.

Capital Cost vs. Operational Deposits: Expenses that directly secure title and ownership (like registration fees) increase the cost of acquisition. Conversely, refundable or interest-bearing security deposits for building maintenance are operational items and cannot be used to inflate the cost of the asset.

IN THE ITAT DELHI BENCH ‘D’
Assistant Commissioner of Income-tax
v.
Bina Batlivala*
Yogesh Kumar U.S., Judicial Member
and Sanjay Awasthi, Accountant Member
IT Appeal No. 4579 (Delhi) of 2025
[Assessment year 2019-20]
APRIL  27, 2026
Sanjay Chaudhary, Anil Chopra, FCAs and V.K. Garg, Adv. for the Appellant. Vikram Singh Sharma, Sr. DR for the Respondent.
ORDER
Yogesh Kumar, U.S. Judicial Member.- The present appeal is filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-42, New Delhi (‘Ld. CIT(A)’ for short), dated 28/05/2025 for the Assessment Year 2019-20.
2. The grounds of Appeal are as under: –
“(i) The Ld. CIT(A) erred in holding the impugned property as a LongTerm Capital Asset on the basis that full and final payment of Rs. 4,10,00,000/- allegedly made to Ms. Nishi Mallick on 05.09.2013. However, no concrete documentary evidence such as bank statements or payment receipts has been furnished by the assessee to substantiate this payment. In the absence of verifiable evidence of transfer of ownership or possession in FY 2013-14, it cannot be concluded that the holding period started from 05.09.2013.
(ii) In view of above, it is concluded that the said property was registered by the assessee only on 25.11.2016 as per the sale deed between DLF Utilities Ltd & the assessee at Rs 2,71 ,87,5001-. The holding period should be computed from this date, making it a ShortTerm Capital Asset as on the date of sale on 27.08.2018. The Ld. CIT(A)’s reliance on alleged earlier payment date is not supported by verifiable evidence and contrary to facts on record.
(iii) In agreement between Ms. Nishi Mallick and the assessee, submitted as additional evidence, it is mentioned that total consideration price of Rs 4,10,00,000/- includes basic sales price, parking spaces, preferred location charge, IBMS charge, electricity charge, govt taxes, service tax, stamp duty, possession charges, club membership charges and others. The Ld. CIT(A) accepted the cost of acquisition at Rs. 4,10,00,000/- without verifying its breakup. Further, the CIT(A) has allowed the indexation on Rs. 20,68,000/- as part of cost of acquisition towards registration charges based on the assessee’s claim. This leads to double deduction and artificially reducing taxable capital gain.
(iv) The agreement submitted between Ms. Nishi Mallick and the assessee clearly shows that Rs.4.10 crore includes composite charges such as IBMS, taxes, electricity, and membership fees. CIT(A), while disallowing the IBMS charges separately (Rs. 3,50,500), has not reduced the same from the total consideration of Rs. 4.10 crore. This again results in duplication and inconsistency in computing the indexed cost.”
3. Brief facts of the case as mentioned in the order of the Ld. CIT(A) are as under: –
“The appellant is a non-resident individual and a senior citizen. She filed her return of income for the AY 2019-20 under consideration on 20.06.2019 declaring taxable income of Rs. 6,25,800/- under the head income from house property and also declared Long Term Capital Loss from sale of property at Rs. 83,20,409/- The case was selected for scrutiny. Statutory notices u/s 143(2) & 142(1) were issued by the AO to the applicant from time to time to furnish requisite details along with supporting documents. In response to the notices, appellant filed part replies during the assessment proceedings. During the year under consideration, the appellant sold an immovable property for a total sale consideration of Rs.4,75,00,000/- and claimed long term capital loss on sale of this property amounting to Rs.83,20,409/- in her return of income. On perusal of the sale deed dated 27.08.2018 submitted by the appellant, it was observed by the AO that the property in question at apartment no. BLA 171-I, The Belaire, DLF Phase-v, Gurgaon was registered on 25.11.2016 at a cost of Rs. 2,71,87,500/- in the name of the appellant i.e. Bina Batlivala and, subsequently, the property was sold by the appellant for a consideration of Rs. 4,75,00,000/-plus stamp duty of Rs. 23,75,000/- on 27.08.2018. Thus, it was observed by the AO that the holding period of the property in the hands of the appellant comes out to less than two years and that, therefore, the gain arisen from the sale of the property i.e. sale consideration as on 27.08.2018 of Rs 4,75,00,000/- minus cost of acquisition as on 25.11.2016 of Rs. 2,71,87,500/-qualifies as shortterm capital gain of Rs. 2,03,12,500/- and not the Long-Term Capital Loss of Rs. 83,20,409 as claimed by the appellant in her return of Income for AY 2019-20. Accordingly, loss claimed by the appellant in her return of income of Rs. 83,20,409/- was disallowed by the AO and addition of Rs.2,03,12,500/- made to the returned income on account of ShortTerm Capital Gain.
3.1 Further the AO observed that as per Schedule AL of the ITR, the appellant had declared 1/3rd share in a property of Rs.1,00,00,000/- in assets whereas no corresponding income from House property was disclosed in the ITR. Appellant was asked to submit that as to why deemed rent should not be considered as income in respect of said inherited property. No reply was furnished by the appellant. On the basis of average market rent of the area involved, the AO estimated the monthly rent for the area HM Patil Marg, Shivaji Park Mumbai @ Rs. 60,000/- p.m. As the appellant holds 1/3 rd share in the property, accordingly, the deemed annual lettable value in the hands of the appellant was determined at Rs. 2,40,000 @ Rs. 20,000/- per month and after allowing 30% standard deduction u/s 24, net addition of Rs.1,68,000/- was made by AO to the returned income under the head Income from House Property as deemed rental income.”
4. Aggrieved by the assessment order dated 29/11/2021 passed under Section 143(3) r.w. Section 144C(3) of the Income Tax Act, 1961 (‘Act’ for short), Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 28/05/2025,partly allowed the Appeal of the Assessee. As against the order of the Ld. CIT(A) dated 28/05/2025, the Department preferred the captioned Appeal.
5. The Ld. Departmental Representative by relying on the order of the A.O., submitted that sought for allowing the appeal.
6. Per contra, the Ld. Assessee’s Representative submitted that the Ld. CIT(A) has elaborately discussed the Grounds of the Assessee and deleted the addition which requires no interference at the hands of the Tribunal. By relying on the order of the Ld. CIT(A) sought for dismissal of the Appeal.
7. We have heard both the parties and perused the material available on record. The Ground No. 1 & 2 are regarding addition of Rs. 2,03,12,500/- made on account of Short-Term Capital Gain. The Ld. A.O. observed that total holding period of the property is less than 2 year, therefore, the gain arisen from the sale of the said property has been termed as Short Term Capital Gain. The Ld. CIT(A) while deleting the additions made by the A.O. in following manners: –
“12.7 From the above discussion, it comes to the conclusion that Mrs. Nishi Mallik booked the said flat BLA-171, The BELAIRE ZONE-8, DLF CITY, Phase-V, Gurgaon on 19.03.2007 for consideration of Rs. 2,71,87,500 paid/payable to DLF Limited and subsequently Ms. Nishi Mallik sold the said property to Mrs. Bina Batlivala by way of an agreement to sell on 19.07.2013 for Rs. 4,10,00,000 and also payment of the entire total consideration of Rs.4,10,00,000/- was made by the appellant by 5th September, 2013 and possession was handed over to the appellant. However, the formal registration by builder (DLF Limited) by way of registered Conveyance Deed was done only on 25.11.2016 in favour of Mrs. Bina Batliwala. However, as the appellant had already obtained possession of the property as well as had paid full consideration to Ms Nishi Mallick during FY 2013-14 itself, she became de facto owner of the property and was enabled enjoyment of the property and hence transfer for the purpose of capital gains was completed during FY 2013-14 itself in terms of section 2(47)(v) and 2(47)(vi) of the Act which, in effect, provides that the transfer of property right is deemed complete when the owner’s rights are extinguished and the transferee is enabled to enjoy the property as owner. In the Agreement to Sell, it is made clear that after receiving the sale consideration amount of Rs. 4,10,00,000/- the vendee 1.e. the appellant Ms. Bina Baltliwala, shall have full right to nominate or assign this agreement to sell in favour of any person or persons, be it a firm, body corporate or association of person and the vendor shall have no objection to it. The fact that the entire agreed purchase price of Rs. 4,10,00,000 was paid by the appellant during FY 2013-14 itself also stands verified from the copies of the cheques/Demand Drafts as well as the certificate issued by the Bank as extracted at para 12.6 above. Hence, the date of acquisition of the property in the hands of the appellant will be the date of performance of the Agreement to Sell 1.e.05.09.2013 and not the date of registration of the property i.e. 25.11.2016 as the Agreement to Sell had the effect of transferring or enabling the enjoyment of the property in favour of the appellant. Further, the cost of acquisition in the hands of the appellant is also found to be correctly claimed to be Rs. 4,10,00,000 and not Rs. 2.71,82,500. This is further strengthened by the fact that the seller, Ms Nishi Mallick (PAN: AZCPM5994Q) has also declared capital gain income on sale of the property in question to the appellant in her ITR field for AY 2014-15 and the capital gain is calculated declaring the sale consideration to be Rs. 4,10,00,000.
12.8. It is further pertinent to mention that in the Remand Report too, the AO has acknowledged the fact that as per conveyance deed dated 25,11.2016 the said property was originally allotted to Nishi Mallick who has nominated Ms. Bina Batlivala as her nominee for said property and that for the said conveyance deed, the stamp duty of Rs. 20,50,000/- was paid on the value of Rs. 4,10,00,000 and not on the registered sale value of Rs. 2,71,87,500. Further, the AO in his Remand Report as well as the Addl. CIT in his forwarding of the Remand Report has not made any adverse comment on the merits of these additional evidences, rather, both have stated that as during the assessment proceedings the assessee had not submitted the said documents, the assessment was completed on the facts available at that time and that as now assessee has submitted the additional documents before CIT(A), the CIT (A) may decide the issue on merits/facts and documents available on record. It shows the AO does not rebutt the claim of the appellant on merits.
12.10. Following the above discussions, it is hereby held that the appellant acquired the property in question from Ms. Nishi Mallick during the FY 2013-14 for a consideration of Rs. 4,10,00,000. Hence, the holding period of the property (from 05.09.2013 i.e date of full and final payment of the property till 27.08.2018 i.e date of sale of the property by the appellant to Ms Sushma Shrivastava comes out to be more than 36 months and, hence, the property sold falls under the category of ‘Long Term Capital Asset’ in terms of section 2(29AA) r.w.s. 2(42A) and, thus, eligible for indexation benefit u/s 48 of the Act. Accordingly, the action of the AO in treating the property as short term capital asset and denying benefit of indexation of cost of acquisition is not found justified and, hence, the addition made by AO of Rs. 2,03,12,500/- on account of shortterm capital gain on sale of the property is hereby deleted. The AO is directed to recompute amount of Long term Capital gain/loss after allowing benefit of indexed cost of acquisition for the above said amount of Rs. 4,10,00,000 taking Cost Inflation Index for the FY 2013-14 as the base.
13. The appellant has further claimed following amounts as part of cost of acquisition of the property in addition to the amount of Rs. 4,10,00,000:
– Registration Charges paid to DLF Limited Rs. 20,68,000
– Amount paid to Belaire Condominium Association Rs. 3,50,500/-.
13. 1 In this regard, the appellant has explained that though the registered Conveyance Deed executed by DLF in favour of the appellant, on which Stamp duty of Rs.20,50,000 and registration fees of Rs. 15,000 was paid, is dated 25.11.2016, however, the appellant had already paid Registration charges of Rs. 20,68,000 to DLF Limited by way of demand draft dated 04.09.2013 itself i.e. at the time of purchase of property from Ms Nishi Mallick vide agreement to Sell dated 19.07.2013. Copy of the DD No.000023 dated 04.09.2013 and receipt dated 12.08.2013 issued by DLF Limited in this regard has also been furnished by the appellant. Further, this payment on 04.09.2013 also finds mention in the Full & Final Receipt dated 04.09.2013 issued by Ms. Nishi Mallick, notarised on 05.09.2013, as reproduced at para 12.3 above, as well as in the bank certificate issued by Standard Chartered Bank extracted at para 12.6 above. The AO has also not made any adverse comment in this regard in the Remand Report. Accordingly, on appreciation of the evidences furnished, the claim of the appellant is found acceptable and the registration charges of Rs. 20,68,000 form part of the cost of acquisition and eligible for indexation w.e. f. year of payment i.e. FY 201314. Accordingly, the AO is directed to allow benefit of deduction of the aforesaid amount of registration charges of Rs. 20,68,000 with indexation with Cost Inflation Index of FY 2013-14 as the base.
13. 2. Further, regarding the amount of Rs. 3,50,500 stated to be paid the appellant to the Belaire Condominium Association on 04.09.2013, the appellant has stated that the payment was on account of compulsory one time club membership fees and has claimed the same to be a part of Cost of acquisition. The appellant has, however, not furnished any document to substantiate the nature of this payment. However, on perusal of the Conveyance Deed, it is noted from page 4 thereof that the said payment of Rs. 3,50,500 is on account of InterestBearing Maintenance Security (IBMS) charged by the maintenance agency for the Maintenance and upkeep of the building complex @ Rs.100 per sq. ft for the total area of the flat being 3505 sq ft. This maintenance security deposit also bears simple yearly interest as per the applicable rates on Fixed deposits accepted by State Bank of India at the close of each financial year. Thus, this payment made towards maintenance deposit cannot be said to be part of capital cost of acquisition of the property for the purpose of computing capital gain. Accordingly, the claim of the appellant is rejected to the extent of Rs. 3,50,500. The AO is directed to disallow deduction of this amount of Rs. 3,50,500 as cost of acquisition while computing the amount of capital gain/loss.
14. The appellant, while computing the LTCL, has further claimed a deduction of Rs.5,60,500 statedly paid as brokerage to R C Jain & Co in connection with sale of the property in question to Smt. Sushma Shrivastava during the year under consideration. The claim is made as expenses incurred in connection with transfer as per the provision of section 48 of the Income Tax Act, 1961. The appellant has submitted copy of invoice dated 28.08.2018 issued by the broker charging brokerage of Rs. 4,75,000 (which comes out to be @ 1% of the sale price of Rs. 4,75,00,000) + GST @ 18%. However, the appellant has failed to furnish her bank statement, receipt for the brokerage payment, or any other evidence of actual payment of the same. Due to want of adequate documentary evidence to substantiate the payment, the claim of the appellant of Rs. 5,60,500 as having been incurred as expenditure in connection with the transfer of property is hereby rejected. The AO is directed to recompute the amount of LTCG accordingly.
15. With the findings given at para 12.10, 13.1, 13.2 & 14 above, grounds no. 3 to 7 stand partly allowed”
8. As could be seen from the order of the Ld. CIT(A), during the first appellate proceedings, Assessee produced additional evidence and the Ld. CIT(A) called for the Remand Report and the Ld. A.O. has not made any adverse comment. After obtaining the Remand Report and on adjudicating the issue the Ld. CIT(A) held that the Assessee acquired the property in question fromMs. Nishi Mallick during the FY 2013-14 for a consideration of Rs. 4,10,00,000/-. Hence, the holding period of the property from 05.09.2013 i.e date of full and final payment of the property till 27.08.2018 i.e date of sale of the property by the appellant to Ms Sushma Shrivastava comes out to be more than 36 months and, hence, the property sold falls under the category of ‘Long Term Capital Asset in terms of section 2(29AA) r.w.s. 2(424) and, thus, eligible for indexation benefit u/s 48 of the Act. Accordingly, the Ld. CIT(A) observed that the action of the AO in treating the property as short term capital asset and denying benefit of indexation of cost of acquisition is not found justified and ultimately deleted the addition of Rs. 2,03,12,500/- made on account of short-term capital gain on sale of the property. Further directed the A.O to recompute amount of Long term Capital gain/loss after allowing benefit of indexed cost of acquisition for the above said amount of Rs. 4,10,00,000 taking Cost Inflation Index for the FY 2013-14 as the base.
9. Considering the fact that the Revenue has not brought out any contrary material to contradict the above findings and the conclusion of the Ld. CIT(A), we find no error or infirmity in the order of the Ld. CIT(A). Accordingly, Ground No. 1 & 2 of the Revenue is dismissed as devoid of merits.
10. In Ground No. 3 & 4 the Revenue contended that the Ld. CIT(A) has erred in allowing the indexation of Rs. 20,68,000/- as part of acquisition towards registration charges and without appreciation on material on record. Thus, sought for allowing Ground No. 3 & 4 of the Revenue.
11. Per contra, the Ld. Assessee’s Representative relying on the order of the Ld. CIT(A) sought for dismissal of Ground No. 3 & 4 of the Revenue.
12. The Ld. CIT(A) while deleting the addition of Rs. 20,68,000/- and in directing to disallow deduction amount of Rs. 3,50,500/- observed as under:-
“13.1 In this regard, the appellant has explained that though the registered Conveyance Deed executed by DLF in favour of the appellant, on which Stamp duty of Rs.20,50,000 and registration fees of Rs. 15,000 was paid, is dated 25.11.2016, however, the appellant had already paid Registration charges of Rs. 20,68,000 to DLF Limited by way of demand draft dated 04.09.2013 itself i.e. at the time of purchase of property from Ms Nishi Mallick vide agreement to Sell dated 19.07.2013. Copy of the DD No.000023 dated 04.09.2013 and receipt dated 12.08.2013 issued by DLF Limited in this regard has also been furnished by the appellant. Further, this payment on 04.09.2013 also finds mention in the Full & Final Receipt dated 04.09.2013 issued by Ms. Nishi Mallick, notarised on 05.09.2013, as reproduced at para 12.3 above, as well as in the bank certificate issued by Standard Chartered Bank extracted at para 12.6 above. The AO has also not made any adverse comment in this regard in the Remand Report. Accordingly, on appreciation of the evidences furnished, the claim of the appellant is found acceptable and the registration charges of Rs. 20,68,000 form part of the cost of acquisition and eligible for indexation w.e.f. year of payment i.e. FY 2013-14. Accordingly, the AO is directed to allow benefit of deduction of the aforesaid amount of registration charges of Rs. 20,68,000 with indexation with Cost Inflation Index of FY 2013-14 as the base.
13.2. Further, regarding the amount of Rs. 3,50,500 stated to be paid the appellant to the Belaire Condominium Association on 04.09.2013, the appellant has stated that the payment was on account of compulsory one time club membership fees and has claimed the same to be a part of Cost of acquisition. The appellant has, however, not furnished any document to substantiate the nature of this payment. However, on perusal of the Conveyance Deed, it is noted from page 4 thereof that the said payment of Rs. 3,50,500 is on account of Interest-Bearing Maintenance Security (IBMS) charged by the maintenance agency for the Maintenance and upkeep of the building complex Rs.100 per sq. ft for the total area of the flat being 3505 sq ft. This maintenance security deposit also bears simple yearly interest as per the applicable rates on Fixed deposits accepted by State Bank of India at the close of each financial year. Thus, this payment made towards maintenance deposit cannot be said to be part of capital cost of acquisition of the property for the purpose of computing capital gain. Accordingly, the claim of the appellant is rejected to the extent of Rs. 3,50,500. The AO is directed to disallow deduction of this amount of Rs. 3,50,500 as cost of acquisition while computing the amount of capital gain/loss.”
13. As could be seen from the above, it was the case of the Assessee that though the registered Conveyance Deed executed by DLF in favour of the Assessee, on which Stamp duty of Rs.20,50,000 and registration fees of Rs. 15,000 was paid, is dated 25.11.2016, however, the Assessee had already paid Registration charges of Rs. 20,68,000 to DLF Limited by way of demand draft dated 04.09.2013 itself i.e. at the time of purchase of property from Ms. Nishi Mallick vide agreement to Sell dated 19.07.2013. The Assessee has also furnished the Copy of the DD No.000023 dated 04.09.2013 and receipt dated 12.08.2013 issued by DLF Limited before the Ld. CIT(A). Further, Ld. CIT(A) observed that the said payment made on 04.09.2013 also finds mention in the Full & Final Receipt dated 04.09.2013 issued by Ms. Nishi Mallick, notarised on 05.09.2013. Further, the Ld. AO has also not made any adverse comment in this regard in the Remand Report. Accordingly, the Ld. CIT(A) directed the A.O. to allow benefit of deduction of the aforesaid amount of registration charges of Rs. 20,68,000 with indexation with Cost Inflation Index of FY 2013-14 as the base. Considering the fact thatRevenue has not brought out any contrary material to contradict the above findings and the conclusion of the Ld. CIT(A), we find no error or infirmity in the order of the Ld. CIT(A). Accordingly, Ground No. 3 & 4 of the Revenue is dismissed as devoid of merits.
14. In the result, Appeal of the Revenue is dismissed.