SAUMYA ABHAY AGARWAL,MUMBAI vs. ADD/JT/DY/ASST COMM OF INCOME TAX OFFICER NATIONAL E-ASSESSMENT CENTRE, DELHI

Appellant/Assessee by : Sh. Rushabh Mehta, Ld. CA Respondent/Department by : Ms. Mini Vinod, DR Date of hearing : 31/05/2023 Date of pronouncement : 31/05/2023 ORDER N.K. CHOUDHRY, J.M: This Assessee/Appellant herein has preferred this appeal against the order dated 03.12.2022 impugned herein passed by National Faceless Appeal Centre, Delhi {in short „NFAC‟} u/s 250 of the Income Tax Act, 1961 (in short „the Act‟) for AY 2018-19.

9.1 The question involved in this case therefore relates to the determination, as to whether the Assessee has earned LTCG or STCG. 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 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.”

9.2 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. 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.”

9.3 The Hon‟ble Punjab & Haryana High Court has clearly held that the payment of balance instalments, 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.

9.4 On the aforesaid analyazation and the dictum laid down by the Hon‟ble High Courts, I do not have any hesitation to hold that for consideration of the holding period of the property or for determination of LTCG, the date of the allotment of property is paramount but not the payment of instalments/consideration, delivery of possession or date of the registration, which are infact consequential act in pursuance to allotment letter and/or originates from the date of allotment. Hence, the determination of the Ld. Commissioner in this case to the effect “that upto July 2011 and 23.05.2017, the Assessee had paid only Rs. 19,00,000/- and 52.71 lakhs only, which is less than 50% of the cost and in the sale-deed dated 01.06.2017, it is mentioned that the said building is almost ready for possession and individual units had not been handed over, therefore, the said property was purchased and sold without physical hand over of the property and therefore cannot be said that the property had been held for more than 36 months for claiming it as LTCG”, has no essence and therefore is un-sustainable .

9.5 Admittedly in the instant case, the Assessee had initially purchased the property on 02.07.2011 and sold the same on 01.06.2017, which clearly goes to show that the Assessee earned the LTCG and therefore would be entitled to LTCG but not the STCG as determined by the authorities below. Resultantly, the AO is directed to compute the capital gain of the Assessee, as LTCG.