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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAWAN SINGH, JM &
(Assessment Year: 2013-14) Dungarshi Ramji Gala HUF ACIT-18(1), Room No. 202, 2nd Floor, C/o Dhanlal Brothers, 70 Pricess Street, Kalbadevi H.O, Shamaldas Gandhi Vs. Earnest House, Nariman Point, Marg, Mumbai-400002. Mumbai-400021. PAN: AAAHD3558C Appellant) : Respondent) Appellant /Assessee by : Shri Sanjay Parikh, CA Revenue / Respondent by : Shri Surendra Mohan, Sr. DR : 08.07.2025 Date of Hearing : 16.07.2025 Date of Pronouncement O R D E R Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)-1 Coimbatore [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 06.02.2025 for Assessment Year (AY) 2013-14. The assessee raised the following grounds of appeal:
“Based on the facts and circumstances of the case and in law, the Appellant respectfully submits that the Learned Commissioner of Income Tax (Appeals) erred in passing the order under section 250 of the Income-tax Act. 1961 (Act), on the following grounds, which may be considered without prejudice to one another:
Ground No. 1: Capital Gain Rs.29,01,400/- treated as Short Term Capital Gain 1. The Hon'ble CIT(A) erred in considering the Gain of Rs. 29,01,400/- as Short-Term Capital Gain as against our claim of Rs. 12,79,341/- as Long-Term Capital Gain on sale of flat during the year.
The Hon'ble CIT(A) erred in not allowing the indexation as claimed by the Appellant amounting to Rs. 16,21,970/-on account of sale of fiat.
Your Appellant prays that the addition made may please be deleted and the gain may please be considered Long Term Capital Gain. Ground No.2: General Grounds of appeal
1. Your Appellant craves leave to file additional evidences during the course of appeal proceedings in terms of Rule 46A r.w.s. 250.”
2. The assessee is an individual and filed the return of income for the AY 2013- 14 on 22.07.2013 declaring a total income of Rs. 26,95,950/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessee in the return of income has offered Long Term Capital Gain (LTCG) from sale of property to the tune of Rs. 12,79,431/-. The computation of Capital Gain offered by the assessee is as under:
Dungarshi Ramji Gala HUF 3. The assessee submitted copies of purchase and sale agreement, receipts, copy of allotment letter, etc. before the AO. After perusing the details furnished by the assessee, the AO was of the view that the asset has been held by the assessee for less than three years and therefore the income arising from the sale of property should be treated as Short Term Capital Gain (STCG). The assessee submitted before the AO that the impugned property was allotted to him vide letter dated 07.08.2007 (page 7 & 8 of PB) for a consideration of Rs. 29,69,120/- and that the assessee has paid a sum of Rs. 5,00,000/- at the time of allotment (page 8 & 9 of PB). The assessee further submitted that the balance consideration of Rs. 24,69,120/- was paid by the assessee on 03.05.2012 (page 10 of PB) and the purchase agreement was entered into with the builder in this regard. The assessee argued before the AO that the property was acquired by virtue of allotment letter dated 07.08.2007 and the period of holding should be reckoned from that date for the purpose of Capital Gains. The AO however did not accept the submission of the assessee and proceeded to treat the Capital Gain as Short Term by denying the indexation benefit to the assessee and by taxing the gain accordingly. On further appeal, the CIT(A) upheld the order of the AO.
We heard the parties and perused the material on record. We notice from the various details submitted by the assessee that a letter of allotment was issued to the assessee on 07.08.2007 mentioning that Flat No. 1602 in 16th Floor in the Building 'I' at Ravi Estate was sold to the assessee for a consideration of Rs. 29,69,120/- and that the assessee has made an advance payment of Rs. 5,00,000/- towards the same. We further notice that the Builder has issued a receipt acknowledging the payment of Rs. 5,00,000/- by cheque by the assessee (page 9 of PB). On perusal of the purchase agreement dated 14.05.2012 we notice that the consideration remained at Rs. 29,69,120/- and that the assessee was given possession of the same Flat as Dungarshi Ramji Gala HUF mentioned in the allotment letter. It is a settled legal position that for the purpose of computing the period of holding the date of allotment should be taken as the date from which the asset was held by the assessee. We notice that the Co-ordinate Bench in the case of M/s Suresh Brothers vs. ACIT (ITA No. 553 and 1320/Mum/2016 dated 18.10.2019) has considered a similar issue where it has been held that “9. We have given a thoughtful consideration to the issue before us in the backdrop of the facts available on record and the contentions advanced by the authorized representatives for both the parties. As regards the claim of the assessee, that the acquisition of the rights in the property was to be related to the year 1991 i.e the year when it had applied for allotment of office premises at Bharat Diamond Bourse along with payment of certain amount, we are afraid that the said claim of the assessee does not find favour with us. As rightly observed by the CIT(A), that as no premises were identified or allotted to the assessee in the year 1991, i.e when it had applied for allotment of office premises at Bharat Diamond Bourse, therefore, it is beyond comprehension as to on what basis it is claimed by the assessee that it had been holding the rights in the aforesaid office premises since the year 1991.
We shall now advert to the claim of the revenue that the date of acquisition of the occupancy rights in the property were to be reckoned from 02.08.2010 i.e the date on which occupation rights were vested with the assessee, vide a registered document. As is discernible from the records, the revenue in order to fortify its aforesaid claim, had observed, that as Bharat Diamond Bourse itself had acquired the leasehold rights from MMRDA on 31.03.2010, therefore, the date of acquisition of the occupancy rights in the aforesaid property could not be related to a date prior to the same. We are unable to accept the aforesaid misconceived view of the revenue. Although the „lease deed‟ between Bharat Diamond Bourse and MMRDA was formerly registered on 31.03.2010, but the construction of the property was in progress much before that date. On a perusal of the records, it stands revealed that Bharat Diamond Bourse had entered into two lease agreements in the months of March, 1993 and May, 1993 with MMRDA, on the basis of which it had acquired two pieces of the land on lease, on which construction was subsequently carried out. On the basis of the aforesaid facts, it can safely be concluded, that the A.O is not correct in observing that Bharat Diamond Bourse had acquired the leasehold rights of the land only on 31.10.2010. In the backdrop of the aforesaid facts, the claim of the A.O that Bharat Diamond Dungarshi Ramji Gala HUF Bourse had acquired the leasehold rights only on 31.10.2010 falls to ground. As regards the view of the A.O that as equity shares and occupancy rights in relation to the property were allotted in August 2010, therefore, the acquisition of rights in the property were bestowed on the assessee only from the said date, we are afraid does not find favour with us. In our considered view, for determining the holding period of the property, the date on which the valid title of the property was conferred upon the assessee would not be relevant. Admittedly, a valid title towards the aforesaid property was vested with the assessee on the basis of the registered document, dated 02.08.2010, however, the same would not be conclusive for determining the holding period of the property under consideration. On the basis of our aforesaid observations, we are unable to persuade ourselves to subscribe to the claim of the revenue that the acquisition of the property under consideration was to be reckoned from 02.08.2010 i.e. the date on which the valid title of the rights in the property got vested with the assessee on the basis of a registered document and equity shares were allotted in its favour.
As pursuant to the final and binding allotment carried out by lottery system, the assessee vide allotment letter dated 03.12.1999 was allotted the property under consideration i.e Office No. EE6011, Bharat Diamond Bourse (built up area of 5,750 sq. ft.), therefore, it can safely be concluded that a right towards the aforesaid property got vested with the assessee from the said date. Also, as is discernible from the records, the assessee as on the date of allotment had parted with substantial portion of consideration towards the cost of acquisition of the property under consideration. Our aforesaid view is further fortified from the observation of the CIT(A), wherein he had observed, that a transfer application dated 22.11.2000 filed by a different concern for transfer of its property was allowed by Bharat Diamond Bourse from the beginning. As such, the aforesaid fact in itself evidences that the said transferor concern on 22.11.2000 was vested with a right which could be transferred in favour of a third party. On the basis of our aforesaid deliberations, we are of the considered view that as the case of the assessee is no different from the aforesaid concern, therefore, it can safely be concluded that pursuant to the final and binding allotment of the office premises i.e EE6011, Bharat Diamond Bourse (built up area of 5,750 sq. ft.) on 03.12.1999, the assessee got vested with the ownership of the rights in respect of the property under consideration. Our aforesaid view is supported by the judgment of the Hon’ble High Court of Bombay in the case of PCIT-3, Vs. Vembo Vaidyanathan (2019) 261 taxman 376 (Bom). 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 Dungarshi Ramji Gala HUF „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.”
The ratio laid down in the above decision is that when the rights in the property gets vested in the hands of the assessee through the allotment letter, then for the purpose of computing capital gains, the period of holding should be reckoned from the date on which the property was allotted. In assessee's case on perusal of the allotment letter we notice that the right in the impugned flat got vested in the hands of the assessee on 07.08.2007, and therefore respectfully following the above decision of the Co-ordinate Bench, we direct the AO to treat the asset as a Long Term asset and compute the Capital Gain accordingly.
In result, appeal of the assessee is allowed.