RIMJHIM GUPTA,JAIPUR vs. ITO, JAIPUR

ORDER

PER RAMESH C. SHARMA, AM

508, Jawahar Enclave, Jawahar Nagar, Jaipur on 18-10-2005 on entering into a specific performance agreement by making an advance of Rs. 30,000/- in cash and Rs. 1,70,000/- by cheque no.878372 dated 18- 10-2005 of Standard Chartered Bank, M.I. Road, Jaipur. The said property was let out by the assessee on 13-01-2006 well before the execution of the purchase deed on a monthly rent of Rs. 5,100/- and the rental income was duly disclosed in her Income Tax Return for the A.Y. 2006-07. The registration of the said flat was got done in favour of the assessee on 6-02-2006 on payment of balance amount of Rs. 14.00 lacs.

The said flat was sold by the assessee on 23-01-2009 and treated the gain as long term capital gain on sale of said property eligible for exemption u/s 54 of the Act. The AO considered the date of purchase as 6-02-2006 being date of registration of ‘Sale Deed’ instead of 18-10-2005 being date of execution of ‘Sale Agreement’’ and date of sale as 23-01-2009. Thus the AO treated the gain as short term capital gains.

2.3 By impugned order, the ld. CIT(A) has confirmed the action of the AO against which the assessee is in further appeal before me.

2.4 I have considered the rival contentions and carefully gone through the orders of the authorities below. From the record, I found that the assessee sold the above flat on 23-01-2009 by entering into a sale entered on 18-10-2005. As the flat was owned by the assessee for more than 36 months, the assessee considered the gain of Rs. 12,47,461/- on sale of above property as long term capital gain and claimed the entire gain as exempted u/s 54 of the Act since the entire gain was invested in the new house property. However, the AO treated the date of purchase of said flat as 6-02-2006 in place of assessee's claim of 18-10-2005. There is no merit in the finding of the AO for considering the date of purchase of the said flat by the assessee as on 6-02-2006 instead of 18-10-2005, despite the fact that the assessee had got irrevocable right of purchase of the said property vide clause ‘5’ of the ‘’agreement to sell’’ by which the assessee had the specific right of execution of sale deed in her favour after payment of balance amount of consideration. Moreover, she had not only got the constructive possession of the property on 18-10-2005 but she had let out the said property vide ‘Rent Deed dated 13-01-2006 to one Shri Satya Narain that clearly proves that she had become the beneficiary owner of the said property on 18-10-2005. Part payment was also given by the assessee by account payee cheque on the very same date of execution of agreement to sell. Thus the AO is not correct in holding that asset sold by the assessee was short term capital assets by ignoring the provisions of section 2(47) of the Act which reads as under:-

(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or It is also note in dispute that very same agreement to sell entered on 18-10-2005 was got registered on 27-01-2006. The contention of the AO vide para 1.3 of the assessment order that the flat was got registered in the name of the seller on 27-01-2006 by the Avas Vikas Sansthan, as such she could not sell flat before 27-01-2006, is not a complete truth as the AO ignored the fact that the seller was allotted this flat on 13-01-1978 by Avas Vikas Sansthan and was handed over the possession thereof on 17- 01-1998 after depositing the balance demand. Thus on 18-10-2005 when the seller entered into the Sale Agreement with the assessee she had all the legal rights to sell that flat and was a legal owner of the same in terms of section 2(47) of the Act except that she was not the registered owner of that flat and this fact was very well disclosed in the Sale Agreement. The seller was given time of two months by the assessee for getting the flat registered in her name so that the same could be registered by her in the name of assessee, however, the process delayed beyond the control of the the registration of the sale deed of the flat to the assessee to avoid any dispute over that issue. In the case of Jasbir Singh Sarkaria, 294 ITR 196 (AAR-New Delhi), it is observed that ‘’to attract sub-clause (v) of section 2(47), it is not necessary that entire sale consideration upto the last instalment should be received by owner, it was also laid down that on a fair and reasonable interpretation and on adopting principle of purposive construction, it can be said that possession contemplated by sub-clause (v) of section 2(47) need not necessarily be sole and exclusive possession; once it is held that the transaction of the nature referred to in sub-clause (v) of section 2(47) has taken placed on a particular date, the actual date of taking physical possession need not be probed into; it is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise the acts of possession effectively. Further more, the Hon'ble Supreme Court in the case of Sanjeev Lal vs CIT [TS-397-SC- 2014) held that the assessee had acquired a right in the asset on the very day when he entered into a sale agreement, and that right is also treated as a capital asset, and counting of holding period of 36 months in respect of such asset starts from the day when the assessee had entered into the sale agreement instead of from the date of registration of the sale deed, also treated as transfer. ‘’ 2.4.1 In view of the above legal and factual position, we do not find any merit in the action of the lower authorities for treating the gain on sale of property as short term capital gains. We direct the AO to treat the same as long term capital gains. We direct accordingly.

3.0 In the result, the appeal of the assessee is allowed in terms indicated hereinabove.

Order pronounced in the open court on 07 /08/2019.

Sd/- ¼jes’k lh 'kekZ½ (Ramesh C. Sharma) ys[kk lnL;@ Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/08/ 2019 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Smt. Rimjhim Gupta, Jaipur 1. 2. izR;FkhZ@ The Respondent- The ITO, Ward- 6(1), Jaipur 3. vk;dj vk;qDr¼vihy ) @ CIT(A), vk;dj vk;qDr@ CIT, 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No.116/JP/2016) 6. vkns'kkuqlkj@ By order,

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