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Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This Appeal by assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-3, Surat [in short “the ld. CIT(A)”] dated 03.02.2015, which in turn arises out of an order passed by assessing officer under section 143(3) dated 28.03.2013 for the Assessment Year (AY) 2010-11.
“1. The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs.73,37,140/- by treating the transaction of sale of land under Short Term Capital Gain on the basis of purchase deed dtd. 05.12.2006 instead of Stakhat-cum-Kabja Karat dtd. 29.09.2006 on which date possession of land was taken and entire payment was made. The transaction should be treated as Long Term Capital Gain and addition should therefore be deleted.
The learned CIT(A) has grievously erred in law and on facts in not giving deduction u/s.54F of the Act Rs.70,82,400/- for Investment in flat without appreciating the evidences showing the fulfillment of all the condition u/s. 54F of the Act. The deduction should be allowed.”
Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni 2. Brief facts of the case are that the assessee is an individual. For the year under consideration, the assessee filed his return of income of Rs. 31,81,012/- on 30.03.2011. The assessee is having the income from share in profit from firms, salary income and long term capital gain. The case was selected for scrutiny. During the assessment proceedings, the Assessing Officer noted that assessee has shown a long term capital gain of Rs.93,55,260/- and also claimed deduction of Rs.1,07,80,000/- for purchase of flat. The Assessing Officer noted that assessee purchased immoveable asset/ plot on 05.12.2006 for Rs.11,70,000/-, the asset was sold on 29.02.2009 for Rs.1,07,80,000/-. The assessee claimed that part of the capital gain was invested in purchase of residential unit and claimed deduction under section 54F. On the basis of aforesaid facts the assessing officer was of the view that the property was not held by assessee for more than three years to qualify the claim for long term capital gain. Accordingly, the Assessing Officer issued show cause notice as to why the long term capital gain be not denied to the assessee . The assesse filed its reply. In reply the assessee contended that the assessee entered into the agreement (Sadakhat) on 29.09.2006 with the seller and made payment of Rs.5,00,000/- on 04.09.2006 and Rs.5,82,000/- on 29.09.2006. The possession of property was also handed over to the assessee Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni on 29.09.2006. A copy of Sadakhat cum Kabja receipt was also furnished. On the basis of aforesaid explanation, the assessee contended that the holding period of property should be considered from 29.09.2006 to 29.10.2009, which is thirty seven months. The reply of assessee was not accepted by Assessing Officer, the Assessing Officer took his view that on perusal of Sadakhat Kabja Receipt. The Assessing Officer noted that stamp paper for executing the receipt/agreement was purchased on 31.03.2006, in the name of Shri D. M. Singhla, Advocate who is neither the Advocate of the assessee nor has any relationship to him. And that at page no.13, it is mentioned that possession of property would be handed over on the execution of purchase deed. On the aforesaid observation, the Assessing Officer held that Kabja Receipt/Sadakhat is nothing but afterthought and attempt to set right the wrong claim of long term capital gain of the assessee. The Assessing Officer disallowed the long term capital gain and repeated the said short term capital gain. Consequently upon, the deduction under section 54F was also disallowed. On further appeal before the ld. CIT(A), the action of Assessing Officer was upheld. Thus, further aggrieved the assessee has filed present appeal before us.
Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni 3. We have heard the submissions of the ld. AR of the assessee and ld. DR for the Revenue and perused the order of lower authorities. Ground No.1 relates to treatment of long term capital gain as short term capital gain. The ld. AR of the assessee submits that the assessee purchased a property by Sadakhat dated 29.09.2006 for his consideration of Rs.11,70,000/-. At the time of purchase of property on 29.09.2009 agreement (Sadakhat) was executed. Copy of said Sadakhat is placed on record. The assessee before execution on Sadakhat make payment of Rs.5,00,000/- on 04.09.2006 and Rs.5,82,000/- on 29.09.2006. The assessee, thus paid substantial consideration of Rs.10,82,000/- and also received the possession of the property. The payment of consideration of Rs.10,82,000/- and the fact that relating to taking the possession of asset/ plot is expressly mentioned on page no.4 on agreement (Sadakhat) on 29.09.2006. The ld. AR accordingly submits that substantial payments of Rs. 10,82,000/- out of total payment of Rs.11,70,000/- was paid on 29.09.2006 and ultimately the registration of sale deed of property was executed on 05.12.2006. The assessee sold the said asset/ land by agreement dated 29.10.2009 for a sale consideration of Rs.1.07 crore. The assessee clearly held the asset for more than thirty six months from the date of purchase on 29.09.2006 till Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni 29.10.2009 and that the assessee’s entitled for long term capital gain. The objection of Assessing Officer that is a stamp paper was purchased in the name of Advocate. The said advocate assisted the assessee in execution of Agreement/Sadakhat, though the stamp paper was purchased in the name of assessee. The said advocate merely collected the stamp paper from stamp vendor.
In support of his submission about the plea of qualifying period of long term capital gain, the ld. AR of the assessee relied upon the decision of Punjab & Haryana High Court in the case of CIT Vs Ved Prakash & Sons (HUF) [207 ITR 148 (P&H)], wherein it was held that when the assessee in that case purchased property under agreement dated 29.05.1970 on the installment basis and was put in possession and to tax thereon being beneficial owner, and sale of the property on 10.02.1973 on the date of final installment, gave rise to long term capital gain.
On the other hand, the ld. DR for the Revenue supported the order of the lower authorities. The ld. DR submits that the Assessing Officer examined the documentary evidences for the claim of long term capital gain minutely. The assessee purchased the said land as per agreement dated 05.12.2006 which was registered on 17.01.2007. As per agreement, first Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni payment of Rs.5,00,000/- was made on 04.09.2006 and remaining payment of Rs.5,82,000/- on 29.09.2006. The assessee paid remaining amount on 04.12.2006. Ultimately, the sale deed of the plot was executed dated 17.01.2007. Thus, apparently the last component of “Cost of Acquisition”, being registration charges, was paid on 17.01.2007. The assessee actually get his legal title in agreement dated 05.12.2006. The Sadakhat Kabja Receipt dated 29.09.2006 supports the findings of Assessing Officer that the Sadakhat Kabja Receipt dated 29.09.2006 is antedated document prepared for claiming possession of land from 29.09.2006. The ld. DR submits that the assessee has not held the asset for more than thirty six months from 05.12.2006 and the capital gain so earned, on sale of such asset is clearly a short term capital gain. In support of his submissions relied on the decision of Hon'ble Apex Court in Suraj lamp & industries (P) Ltd Vs State of Haryana ( SPL No. 13917 of 2009) dated 11.11.2011.
We have considered the rival submissions of both the parties and have gone through the orders of the authorities below. We have also seen the documentary furnished by assessee carefully. In our considered view only short question for our consideration in Ground No. 1 is “whether the capital gain, so earned by Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni assessee, is long term capital gain or short term capital gain”. The assessee before the Assessing Officer claimed that possession of the asset was acquired on 29.09.2006 on payment of substantial amount that is Rs.10,82,000/- out of total sale consideration of Rs.11,70,000/-. Further, we have noted that payment of Rs.5,00,000/- on 04.09.2006 and Rs.5,82,000/- on 29.09.2006 was made through cheques. This fact is duly recorded by ld. CIT(A) in para no.8 of his order. We have further noted that the assessee claimed that possession of asset was handed over to assessee on 29.09.2006. The assessing officer instead of making further verification either from the vendor or from the stamp paper agent or brining any adverse material, against the documentary evidence furnished by assessee, took adverse view that the document of Sadakat is antedated or prepared to make a claim of long term capital gain. We have further seen that substantial payment of consideration was paid through banking channel on or before 29.09.2006. Thus, this fact is strengthening the contention of the assessee that substantial payment was made before execution of Sadakhat Kabja Receipt. So far as objection of Assessing Officer that the stamp paper on which Sadakhat Kabja Receipt was executed is in the name of D. M. Singhla. No further enquiry was made by Assessing Officer either from the stamp vendor agency or from Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni D. M. Singhla, advocate. In absence of any adverse evidence against the documentary evidences furnished by the assessee, the suspicion of Assessing Officer that Sadakhat Kabja Receipt is entry dated is not sustainable.
Considering that substantial payment of consideration was paid on 29.09.2006 and that the property was ultimately transferred by agreement dated 29.09.2006. Thus, the property was clearly held for more than thirty six months. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Ved Prakash & Sons (HUF) (supra) held that when the assessee acquired the property under agreement dated 29.09.1970 on installment basis and was put in possession, the assessee was helped to be beneficial owner and on sale of said property on 10.02.1973 on payment of final installment, gave so rise was treated as long term capital gain. The Hon'ble High Court in para no.10 and its decision further held that “bare reading of s. 2(42A) of the Act, word ' owner' has designedly not been used by the Legislature. The word held' as per dictionary meaning means to possess, be the owner, holder or tenant of (property, stock, land.........). Thus, person can be said to be holding the property as an owner, as a lessee, as a mortgagee or on account of part performance of agreement, etc. Conversely, all such other persons who may be Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni termed as lessees, mortgagees with possession or persons in possession as part performance of the contract would not, in strict parlance, come within the purview of an 'owner'. As per Shorter Oxford Dictionary, Edition 1985, "owner' means one who owns or holds something; one who has the right to claim or title to a thing.”
On the basis of aforesaid factual and legal discussion, we are of the view that the assessee clearly held the property/asset from part of Block No.153B of Sarthana, Tal. Kamrej, Dist. Surat for more than thirty six months and clearly entitled for benefits of long term capital gain. The case law relied by Ld. DR for the revenue in Suraj Lamp Pvt Limited Vs State of Haryana (supra) is not helpful to her. In the said case, first there was not disputed with regard of the holding period of the property.
In the result, ground no.1 of the appeal is allowed.
Ground no.2 related to deduction under section 54F. We noted that the Assessing Officer after treating the capital gain as short term capital gain against long term capital gain as claimed by assessee, not examined the claim of deduction under section 54F. Considering the facts that we have reverse the treatment of short term capital gain as long term capital gain, therefore, the ground no.2 is restored back to the file of the Assessing Officer Assessment Year.2010-11 Himmatbhai Mohanbhai Kheni to examine the claim of assessee and passed the order in accordance with law after giving opportunity of hearing to assessee.
In the result, the appeal of the assessee is partly allowed.