GITA ADITYA RAVASIA,MAHARASHTRA vs. INCOME TAX OFFICER 21(1)(4), MUMBAI MAHARASHTRA

O R D E R Per N.K. Choudhry (JM):

This appeal has been preferred by the Assessee against the order dated 08/06/2023 impugned herein passed by the National Faceless Appeal Centre (NFAC) Delhi / Ld. Commissioner of Income Tax (Appeals) [in short, Ld. Commissioner] under section 250 of the Income-tax Act, 1961 (in short, the Act) for the A.Y. 2014-15.

2 ITA 2579/Mum/2023 Gita Aditya Ravasia 2. In the instant case, the Assessee along with Shri Aditya Pratap Singh, respectively in the ratio of 33:67 % purchased a property from M/s Macrotech Construction for a consideration of R.6,18,13,080/-. Subsequently, the Assessee jointly sold the said property on 30/04/2013 for a consideration of Rs. 8,17,37,500/- and claimed long term capital loss of Rs.61,57,119/- (33% of total long term capital gain) in the computation of income.

2.1 The Assessing Officer, in order to verify the long term capital loss as computed by the Assessee, issued a notice under section 133(6) of the Act on 07/09/2016 to the builder, M/s Macrotech Pvt Ltd having address at Lodha Exelus, Appollo Mills Compound, NM Joshi Marg, Mahalaxmi, Mumbai-400011 whereby the said company was asked to furnish the details of possession of the property under consideration.

2.2 In response, said company, vide letter dated 19/09/2016 submitted that the above flat/property was handed over to the assessed and Shri Aditya Pratap Singh only on 29/04/2011 and also enclosed a copy of the possession with acknowledgement letter dated 29th April, 2011 received from the Assessee and Shri Aditya Pratap Singh along with its reply.

2.3 Therefore the AO by considering the fact that possession of the property was taken by the Assessee and / or handing over by the 3 ITA 2579/Mum/2023 Gita Aditya Ravasia builder only on 29th April, 2011 and the Assessee sold the property on 30/04/2013, show caused the Assessee as to why the long term capital loss cannot be disallowed and the claim should be treated as short term capital gain. 2.4 In response, the Assessee filed its reply and also relied upon various judgments. However, the Assessing Officer, by analyzing the facts of the case and distinguishing the CBDT circular No. 471 dated 15/08/1996 and the judgments as relied upon by the Assessee, disallowed the claim of the Assessee by following the judgment of the co-ordinate bench of the Tribunal in the case of Bastimal K Jain vs ITO 15(1)(2), Mumbai (ITA No.2196/Mum/2014 decided on 08/06/2016 and consequently held that the Assessee had received the possession on 29/04/2011 and sold the property on 30/04/2013, therefore, the holding period of the property was less than 36 month and, therefore, the property is considered as short term capital asset and after transfer, the gain is treated as short term capital gain. Resultantly, the Assessing Officer computed the short term capital gain at Rs.46,74,683/-.

4 ITA 2579/Mum/2023 Gita Aditya Ravasia 4. The Assessee being aggrieved is in appeal before us.

5.1 The only controversy in this case involve is “whether the date of possession or the date of sale of property and / or allotment of property is required to be considered” for claiming the capital gain. It is not res-integra after the judgment of Jurisdictional High Court in the case of PCIT-3 Vs. Vembo Vaidyanathan (2019) 261 taxman 376 (Bom.) wherein the Hon‟ble Court dealt with the identical issue “ whether the date of acquisition of the property is required to be considered for determination of LTCG or the date of physical possession”. For ready reference, completeness and brevity, the concluding part of the said judgment is reproduced here-in-below:

“Issue raised by the revenue in its appeal before the Hon'ble High Court was, as to whether the Tribunal was justified in reckoning the acquisition of the property from the date of letter of allotment which 5 ITA 2579/Mum/2023 Gita Aditya Ravasia though did not lead to creation of any proper and effective right over the capital asset, and not from the date on which the agreement" which spelled out the exact terms and conditions for acquisition was executed. It was observed by the Hon'ble High Court, that the CBDT vide its Circular No. 471, dated 15.10.1996 had clarified that when an Assessee purchases a flat to be constructed by Delhi Development Authority (D.D.A) for which allotment letter is issued, date of such allotment would be the relevant date for the purpose of capital gain tax as the date of acquisition. Further, referring to the clarification issued by the CBDT, vide its Circular No. 672, dated 16.12.1993, it was observed by the Hon'ble High Court, that the Board had clarified that if the terms of the schemes of allotment and construction of flats/houses by the co-operative societies or other institutions were similar to the terms of allotment and construction by D.D.A, then on the same basis the acquisition of the property was to be related to the date on which the allotment letter was issued. On the basis of its aforesaid observations, the Hon'ble High Court had dismissed the appeal of the revenue. In the backdrop of our aforesaid deliberations, we are of the considered view that as no infirmity emerges from the order of the CIT(A), who we find had rightly concluded that the date of acquisition of the property under consideration was to be reckoned from the date of the allotment letter i.e. 03.12.1999, therefore, we uphold his order.”

5.2 The Hon’ble Jurisdictional High Court in the aforesaid case, also taken into consideration the judgment passed by the Hon‟ble Punjab & Haryana High Court, Chandigarh in the case of Ms. Madhu Kaul Vs. CIT, Chandigarh (ITA No. 89/1999 decided on 17.01.2014) wherein the Hon‟ble High Court while considering the question of Long Term Capital gain & Short Term Capital Gain, held as under: “13. On careful reading of the Circular issued by the Board, para 2 thereof describes the nature of right that an allottee acquires on allotment of flat under Self-Financing Scheme. According to it, the allottee gets title to the property on the issuance of an allotment letter and the payment of instalments is only a consequential action case.

6 ITA 2579/Mum/2023 Gita Aditya Ravasia Admittedly, the flat was allotted to the appellant on 07.06.1986, vide letter conveyed to the Assessee on 30.06.1986. The Assessee paid the first installment on 04.07.1986, thereby conferring a right upon the appellant to hold a flat, which was later identified and possession delivered on a later date. The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter. In view of what has been recorded hereinabove, we have no hesitation in holding that the Income Tax Appellate Tribunal has erred in holding that the transaction does not envisage a long term capital gain. Consequently, we allow the appeal, set aside order dated 15.02.1999 and answer the substantial questions of law in favour of the Assessee.”

5.3 The Hon’ble Punjab & Haryana High Court has clearly held that the payment of balance installments, identification of property, flat and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter. On the aforesaid analyzations and the dictum laid down by the Hon’ble High Courts, the determination by the Authorities below “that the Assessee had received the possession on 29/04/2011 and sold the property on 30/04/2013, therefore, the holding period of the property was less than 36 month and, therefore, the property is required to be considered as short term capital asset and after transfer, the gain is treated as short term capital gain,” therefore is un-sustainable, hence the orders passed by the Authorities below are set aside. Resultantly, the AO is accordingly directed to recompute the capital gain of the Assessee by considering the date of allotment.

7 ITA 2579/Mum/2023 Gita Aditya Ravasia

Order pronounced in the open court on 22/11/2023.