BRAJ KISHORE SINGH,ANDHERI EAST vs. ASSESSING OFFICER INT. TAX WARD 4(2)(1), INTERNATIONAL TAX, MUMBAI

Subsequently, notice u/s 142(1) of the Act dated 14.10.2022 was issued and served upon the assessee requesting to submit details as per notice. In response to the same assessee submitted on 14.11.2022 wherein he has submitted copy of account statement of Union Bank, copy of passport, acknowledgement of ITR filed in response to the notice u/s 148 along with computation of income, bank account statement of Corporation bank, reply letter, index-II of the property purchased in 2007. Further, notice u/s 142(1) of the Act dated 26.08.2023 was issued to the assessee requesting to submit details of property sold along with working of LTCG, details of property purchased, etc. In response to the same, the assessee submitted his reply dated 13.09.2023 alongwith all necessary documents as called for.

3. The reply of the assessee was not found tenable on the ground that assessee had made purchase agreement in January 2007, but the possession to the property was given in December 2010. Hence, the assessee was eligible to claim indexation from F.Y. 2010 only. Therefore, the LTCG on sale of immovable property was recomputed by the AO as under:-

Sale consideration of the property Rs.70,00,000 Cost of acquisition Rs.36,77,020 Indexed cost of acquisition 1024/711*36,77,020 Rs. 52,95,736 Long term capital gain Rs.17,04,264

4. In the draft assessment order, the AO concluded that the assessee has failed to furnish inaccurate particulars to conceal the income of Rs. 17,04,264/-, hence AO recommended for initiating penalty proceedings in this regard u/s 271(1)(c) of the Act and income of the assessee was computed as under:-

Sr. Particulars of income Amount Amount in No. in Rs. Rs. 1. House property income (-)11,778 as per statement 2. Long term capital gain as 17,04,264 discussed at para 4 3. Income from other sources 29,602 as per statement Gross total income 17,22,088 Less : Deduction under chapter 29,602

VIA as per statement Total income 16,92,486 Rounded off to 16,92,490

5. The draft assessment order framed u/s 144C(1) of the Act was forwarded to the assessee to exercise his option as provided in section 144C(2) of the Act.

7. In pursuance of the direction of Ld. DRP, the impugned assessment order was passed by the AO, against which the assessee in appeal before us and has raised the following grounds of appeal:-

2. On the facts and circumstances of the case and law, the capital gain has to be calculated from the date of payment and not from the date of possession/agreement. In appellant case, the first payment was made in FY 2006-07 and maximum payments were made till FY 2007-08 and registration was done on 16/11/2007. Final possession was given on 16/12/2010. In view of the facts and circumstances of the case and law, the indexation benefit must be allowed from the year of payment and not from the date of possession.

4. On the facts and circumstances of the case and law, the Ld. JAO order calculation of LTCG of Rs 17,04,264/- is incorrect on the facts and judicial pronouncement and liable for deletion.

6. On the facts and circumstances of the case and law, the Ld. JAO erred in confirming charging of interest under section 234A, 234B, 234C and 234D of Income Tax Act, 1961.

7. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming invocation of Penalty provision under Section 271(1)(c) of Income Tax Act, 1961.

8. Appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.

8. On perusal of the grounds, it is noticed that ground no. 2, 3 & 4 pertains to considering the date of acquisition for the purpose of computation of capital gain i.e. from the date of first payment in the FY 2006-07 or from the date of possession given on 16.12.2010. Accordingly, we proceed to decide the ground no. 2 to 4 jointly on merit which are the main grounds of the appeal.

9. We have heard the Ld. AR and Ld. DR and examined the record. Ld AR brought to our notice Paper book 1 filed by the assessee on 03.04.2025 containing 140 pages, Paper Book 2 filed by the assessee on 16.06.2025 and written submissions are filed by the assessee on 11.06.2025. Firstly, the Ld. AR argued that the directions issued by the Ld. DRP on 21.11.2024 computing the LTCG at Rs. 17,04,264/- is factually and legally unsustainable because the Ld. DRP has not considered the legal position as settled by various judicial precedents to the effect that the indexation must commenced from the date of acquisition or allotment /payment and not the date of the possession. Secondly, the Ld. AR argued that the Ld. AO and Ld. DRP erred in restricting the indexation benefit for the cost of acquisition from FY 2010-11 (year of possession) instead of FY 2007-08 (year of agreement). Thirdly, Ld. AR submitted that the direction of the Ld. DRP is contrary to the provisions of Section 48 Explanation (iii) of the Act. Fourthly, Ld. AR argued that the interpretation of the Ld. DRP linking the word ‘held’ to ‘possession’ as used in the Explanation (iii) of section 48 of the Act, in the context of ownership for house property income, is misplaced for capital gains computation. Fifthly, Ld. AR submitted that the assessee shall be construed to have held the asset for the purpose of acquisition and computation of LTCG from the date of agreement to sale when substantial payment were made and not from the date of possession of the asset. Sixthly, Ld. AR submitted that in order to acquire the said property, the assessee has made the following payments:-

Financial Year Amount Paid (Rs.) Description FY 2006-07 3,41,000 Booking amount to Purchase the Flat FY 2007-08 21,94,700 Purchase cost + Stamp Duty & Registration Fee FY 2008-09 10,38,000 Balance Purchase cost FY 2009-10 2,32,500 Expenses to make a home habitable FY 2010-11 1,04,000 Final Payment Total 39,10,200 Therefore, Ld. AR submitted that more than 50% i.e. 64.85% of total cost was paid till FY 2007-08. Seventhly, Ld. AR submitted that the assessee got right to hold the asset from the date of "Agreement to Sale" in January 2007 (FY 2007-08), therefore the indexation should commence from that year.

10. In support of his arguments, Ld. AR placed reliance on the judgment of the Hon'ble Supreme Court in the case of Sanjeev Lal vs. CIT [(2014) 365 ITR 389 (SC)], wherein the Hon'ble Court held as under:

24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th Dec., 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent Court, which they could not have violated.

11. Ld. AR further relied on the judgment of Hon’ble Punjab and Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT, Chandigarh (ITA No. 89 of 1999) dated 17.01.2014, the judgment of Hon’ble Allahabad High Court in the case of Nirmal Kumar Seth vs. CIT (2012) 17 taxmann.com 127 (Allahabad) and the decision of Coordinate Bench of ITAT in the case of Ms. Renu Khurana vs. ACIT in dated 17.02.2023.

12. Ld. AR referred page 7 of the paper book 2 which is agreement to sale and pointed out that Flat No. B-707 on 7th floor, is clearly mentioned in the agreement to sale and Ld. DRP has wrongly concluded that Flat No. B-707 was mentioned first time at the time of possession. He further referred point no. 3 of page 8 of the Paper book-2 showing schedule of payment of the amount to show that substantial payment was to be made during the FY 2007-08. Therefore, Ld. AR requested that the grounds no. 2 to 4 needs to be allowed in favour of the assessee and the impugned order be set aside.

13. On the other hand, Ld. DR supported the order of AO and the directions of Ld. DRP and prayed for dismissal of the appeal.

14. We have considered the rival submissions and examined the material on record. We notice that the similar issue has been decided by the judgment of the Coordinate Bench of ITAT, Mumbai in dated 04.06.2025 in which one of us was the Member of the Bench. For the sake of clarity, we proceed to extract para no. 11 to 17 of the said judgment as under:-

10. From the aforesaid letter, the ld. counsel submitted as under:- The Appellant has acquired the right to purchase the earmarked impugned flats subject to payment of consideration as per the agreed consideration schedule and other conditions. At para 2 of the allotment letter it is specifically mentioned that on fulfillment of the conditions by the Appellant i.e, making payment of the entire consideration, the developer will hand over the possession of the impugned flats to the assessee.

At Para 4 of the allotment letter the Developer had specifically identified and earmarked the impugned flats in the name of the Appellant along with the Flat No., area, total consideration, service tax and VAT payable thereon and the payment schedule as per the stated milestone of completion of the construction.

Thus, the Developer is bound to respect the same upon satisfying the conditions as laid down in the LOI. Accordingly, the letter dated 14-02-2011 is in essence the letter of allotment and not letter of intent.

11. He also drew our attention to various communication by the developer with the assessee requesting payment of money as agreed in the payment schedule on completion of the milestone as stated in the schedule of payment from the aforesaid communications, it is evident that the Developer had asked the assessee to make various payments on achieving milestones (as per the LOI). Also, such communications specifically mention the fact that these flats are earmarked. Further, the receipts along with the copies of the cheque were produced to evidence that the developer had received payment from the assessee towards the purchase of the impugned flats as mentioned in the respective receipts. In the aforesaid communication issued by the Developer there is a clause requesting the assessee to make the payments towards the amount mentioned in the said communication else the Developer has a right to cancel the earmarked flat. This means that if timely payment is made by the assessee the allotment made against the earmarked flats are ongoing and valid. Further, failure to make payment as mentioned in the communication would lead to cancellation of the allotment which means that there is a pre-existing right in the earmarked impugned flats created by the Developer in the favour of the assessee, Further, the total consideration as agreed in the LOI by the Appellant with the Developer in the year 2011 remained the same as evident in the agreement registered in the year 2017 Therefore, the Developer had always intended to sell the impugned flats to the assessee and accordingly, there was no hike in the price as agreed upon in the year 2011. In essence, the assessee had entered into a contractual arrangement to acquire an earmarked Immovable property at the agreed price and terms of payment with the developer. Merely different nomenclature used in the Letter dated 14-02-2011 would not e the substance of the transaction. The essence of the LOI

depends on the intention of the parties to the LOI and the substance of the LOI depends on the acts performed by the parties subsequent to the contract.

12. In the instant case, the Developer created a right in the earmarked impugned flats by issuing the letter of intent earmarking a specific and identified flat in favour of the assessee subject to payment of the consideration as agreed. Subsequently, the assessee acted upon the contract by making payment as and when the Developer completed the milestone as stated in the LOI and basis the communication made by the Developer. Ultimately, to understand the essence of the agreement and the intentions of the parties, the intention of the legislation or any precedent decision should not be considered but the private arrangement between the parties needs to be interpreted. The intention of the parties and above all the commercial decisions made between the parties determines the essence of the private agreement (in the instant case the LOI).

13. The assessee acquired the right to purchase the earmarked Kalpataru Properties in the initial stages of development of the Project. The LOI indicates that the completion of building is subject to the necessary approvals and obtaining the Occupation Certificate. Such clause is a standard industry norm and protects the interests of the assessee. The interpretation of the Learned AO that the builder as on the date of LOI is uncertain of these aspects is misplaced. He further submitted that, clause 3 and clause 8 of the LOI states that the amendment in the sanctioned layout is only to ensure optimal use of the space or if specifically required by any relevant authorities (including the MCGM). Further, it is also stated that the developer shall ensure that even where the number of floors in the building are increased, there is no variation in the areal position of the flat being earmarked to the assessee.

14. Reference to the clause 10 of the LOI was made wherein it was stated that upon entering into the LOI, the assessee had acquired the rights in the Kalpataru Properties to be constructed and these rights shall continue to vest so long as the assessee continues to comply with the conditions of the LOI. The said clause is in the interest of the Developer to ensure that the assessee does not claim his right in acquiring the Kalpataru Properties without payment of consideration. Reference to Clause 11 of the LOI was made wherein it was submitted that the assessee had acquired the right to purchase the specific earmarked impugned flats and payment of consideration as per the agreed milestones is merely a follow on condition which is required to comply with to continue to hold such right. Further, until 24 months prior to the date on which the assessee has transferred the earmarked impugned flats, 95% of the consideration as per the Purchase Agreement was already discharged by the assessee. The developer was entitled to terminate the LOI only on account of non-payment of dues as agreed in the in the LOI towards the property specifically earmarked. Considering that the assessee had already discharged the payments, the developer could not terminate the LOI at his discretion.

15. Clause 12 of the LOI as referred by the Learned AO discusses the rights and obligations of the Appellant qua the Kalpataru Properties and not the right to acquire such Kalpataru Properties. The 'right' in question at the time of LOI is the right to acquire the earmarked Kalpataru Properties subject to the satisfaction of prescribed conditions.

16. Thus, he submitted that right in the impugned flats was always with the assessee from the date of the letter of intent dated 14.02.2011 issued by the developer.

17. In support of various contention, the ld. counsel as cited various judgments on the proposition that the period of holding is to be reckoned on the basis of issuance of letter of allotment and not from the date of registration. He also relied on some of the judgments which are as under:-

In the case of Mrs. Madhu Kaul v. CIT (2014) 363 ITR 54. the Hon'ble Punjab & Haryana High Court held that on allotment of the flat and upon payment of the first installment, a right to hold the flat is conferred and mere fact that the 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.

In the case of PCIT v. Vembu Vaidyanathan (2019) 413 ITR 248 the Hon'ble Bombay High Court the issue involved was whether the capital asset needs to be classified as long term from the date of execution of an agreement spelling out all the exact terms and conditions for acquisition or from the date of LOA, Reliance was placed on CBDT circulars dated 15 October 1986 and 16 December 1993 wherein it was clarified that date of allotment would be relevant date for the purpose of determining taxability of capital gains considering that such allotment is final unless it is cancelled or the allottee withdraws from the scheme and that it may be cancelled only under exceptional circumstances.

Further, the Income Tax department had filed an SLP before the Hon'ble Supreme Court of India which is dismissed -Principal Commissioner of Income Tax-3, Mumbai v. Vembu Vaidyanathan [2019] 108 taxmann.com 339 (SC)

In the case of Praveen Gupta v. ACIT (2012) 137 TTJ 307 the Hon'ble Delhi Tribunal observed that Explanation (iii) to section 48 and section 2(42A) of the Act requires a capital asset to be 'held'. It is not necessary that to constitute a capital asset, the Appellant must be an owner of the Capital Asset through registration of the conveyance deed. By entering into an agreement to allot a flat, the Appellant has identified a particular property which he intended to buy from the builder and that right of the Appellant itself is a capital asset. The builder is also bound to provide the applicant with that property by accepting certain advance amount and upon Appellant satisfying the terms of payment. Indexation must be computed computed on the basis of the dates on which payment is made.

In the case of Anita D Kanjani v. ACIT being (page 143-153 of paperbook), the Hon'ble Mumbai Tribunal held that the word used by the legislature was held and not owned. Thus, the intention of the legislature is clear that for the purpose of determining the nature of capital gain, the legislature was concerned with the �ाय apparently not concerned with absolute legal ownership of period during which the asset was held by the assessee for all practical purposes on de facto basis. The legislature was asset for determining the holding period. Thus, one needs to decide the point of time from which it can be said that assessee started holding the asset on de facto basis.

In the case of Jitendra Mohan v. ITO (2017) 11 SOT 594 (page 154-463 of paperbook). the Hon'ble Delhi Tribunal held that the word 'property' used in this section is of the widest amplitude which means that any right which a person can be called to hold in a capital asset would be included in the word 'property' used and included in the definition of 'capital asset' in section 2(14) of the Act. Accordingly, allotment of a shed and upon payment towards the dues, the assessee was entitled for computing LTCG as per the payments made."

20. Before us the ld counsel during the course of hearing sought permission to file confirmation letter from the builder as to what was the date of allotment because the builder has clearly meant that impugned payment were to be allowed. Accordingly, he filed a letter dated 18.01.2023. Accordingly, the case was again put for clarification.

23 It is undisputed fact that the assessee had paid all the installments as per the schedule and according to the milestone laid down therein in pursuance of the said letter. If the said letter is not treated as allotment of flat and merely intent', ostensibly the said letter cannot be reckoned as date of acquisition of the rights of the flats. Though the letter mentions intent of both the parties, but the substance of the letter has to be examined and has to be seen in line of the various facts as brought out on the record. The said letter clearly earmarks the flats in the building and also specifies the consideration amount and also stated that the assessee has already deposited the sum of Rs. 10,00,000/-on the same date. The schedule of payment as incorporated above clearly specifies that the assessee has to make the payment on certain milestone which has been duly adhered to by the assessee. Para 4 of said letter specially identifies and earmarks the impugned flat in the name of the assessee along with the flats and total consideration along with any service tax, works. contract tax, value added tax, goods & service tax Maharashtra value added tax etc. Once both the parties have treated the said letter as a contract for acquisition of the flats thus, in sum and substance it cannot be said that it is merely a letter of intent, when proposal and offer in the letter has been accepted alongwith the terms and conditions.

"Madam/Sir, 1. Kindly refer to the Letter of Intent dated 14/02/2011 issued by us in respect of above referred Flat No. 162 at Kalpataru Sparkle. Pursuant to the above Letter of Intent, as per the terms of the letter, you have paid a sum of Rs. 10,00,000/- (Rupees Ten Lakhs only) vide cheque no. 470517 dated 14/02/2011 drawn on HSBC Bank, the receipt of which has been issued to We hereby confirm that upon acceptance of our letter of intent by paying an initial amount of Rs. 10,00,000/-, you had accepted our offer and we had allotted the above flat to you on 14/02/2011 Further the said Flat No. 162 as allotted to you was subsequently divided into Flat No. 162 and Flat No. 163 vide Modification Letter. We confirm that the earmarked Flat No. 162 was merely converted from 1 (one) habitable unit to 2(two) separate habitable units; with above allotment being renumbered from Flat No. 162 to Flat No. 162 and Flat No. 163.

2. We further confirm that you have made all subsequent payments as per the agreed terms in the Letter of Intent. Pursuant to the allotment of the flat, as stated above, we have entered into a registered sale agreement with you in respect of the above flat vide sale deed dated 14/12/2017. Yours Faithfully, For Kalpataru Enterprises Narendra Lodha Director"

12. Ld. AR further relied on the following decision of Hon’ble High Courts as well as decision of the ITAT in support of his case which are discussed in brief by us:-

i) Hon’ble Punjab & Haryana High Court in case of Mrs. Madhu Kaul vs. ICT (363 ITR 54).

ii) Hon’ble Bombay High Court in case of PCIT vs. Vembu Vaidyanathan (413 ITR 248).

in the case of Anita D. Kanjani vs. ACIT dated 13.02.2017:-

9. With a view to resolve this dispute, we have firstly analysed the provisions of section 2(42A) which defines ‘short term capital asset’ as under:-

“Section 2(42A) in the Income- Tax Act, 1961

(42A) “short- term capital asset" means a capital asset held by an assessee for not more than thirty- six months immediately preceding the date of its transfer":

Perusal of aforesaid definition shows that the legislature has used the expression ‘held’. It is further noted by us that in various other allied or similar sections, the legislature has preferred to use the expression ‘acquired’ or ‘purchased’ e.g. in section 54 / 54F. Thus, it shows that the legislature was conscious while making use of this expression. The expressions like ‘owned’ has not been used for the purpose of determining the nature of asset as short term capital asset or long term capital asset. Thus, the intention of the legislature is clear that for the purpose of determining the nature of capital gain, the legislature was concerned with the period during which the asset was held by the assessee for all practical purposes on de facto basis. The legislature was apparently not concerned with absolute legal ownership of the asset for determining the holding period. Thus, we have to ascertain the point of time from which it can be said that assessee started holding the asset on de facto basis.

12. “The definition as contained in Section 2 (42A) of the Act, though uses the words, "a capital asset held an assessee for not more than thirty-six months immediately preceding the date of its transfer", for the purpose of holding an asset, it is not necessary that, he should be the owner of the asset, with a registered deed of conveyance conferring title on him. In the light of the expanded definition as contained in Section 2(47), even when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction the assessee is put in possession of an immovable property or he retained the same in part performance of the contract under Section 53-A of the Transfer of Property Act, it amounts to transfer. No registered deed of sale is required to constitute a transfer. Similarly, any transaction whether by way of becoming a member of or acquiring shares in a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of any immovable property, also constitutes transfer and the assessee is said to hold the said property for the purpose of the definition of 'short-term capital gain’. In fact, the Circular No.495 makes it clear that transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building

and are common mode of acquiring flats particularly in multistoried constructions in big cities. The aforesaid new subclauses (v) and (vi) have been inserted in Section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. A person holding the Power of Attorney is authorized the powers of owner, including that of making construction though the legal ownership in such cases continues to be with the transferor. The intention of legislature is to treat even such transactions as transfers and the capital gain arising out of such transactions are brought to tax. Further, the Circular No.471 goes to the extent of clarifying that for the purpose of Income-tax Act, the allottee gets title to the property on the issuance of the allotment letter and the payment of installments is only a follow up action and taking the delivery of possession is only a formality. In case of construction agreements, the tentative cost of construction is already determined and the agreement provides for payment of cost of construction in installments subject to the condition that the allottee has to bear the increase, if any, in the cost of construction. Therefore, for the purpose of capital gains tax the cost of the new asset is the tentative cost of construction and the fact that the amount was allowed to be paid in installments does not affect the legal position. Therefore, in construing such taxation provisions, what should be the approach of the courts and the interpretation to be placed is clearly set out by the Apex Court in the case of Smt. Saroj Aggarwal vs CIT 156 ITR 497 wherein it is held as under:

"Facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Where it is possible to draw two inferences from the facts and where there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hyper-technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered...............Courts should, whenever possible unless prevented by the express language by any section or compelling circumstances of any particular case, make a benevolent and justice oriented inference. Facts must be viewed in the social milieu of a country."

Therefore, keeping the aforesaid principles in mind, when we look at Section 48, the language employed is unambiguous. The intention is very clear. When a capital asset is transferred, in order to determine the capital gain from such transfer, what is to be seen is, out of full value of the consideration received or accruing, the cost of acquisition of the asset, the cost of improvement and any expenditure wholly or exclusively incurred in connection with such transfer is to be deducted. What remains thereafter is the capital gain.

It is not necessary that after payment of cost of acquisition, a title deed is to be executed in favour of the assessee. Even in the absence of a title deed, the assessee holds that property and therefore, it is the point of time at which he holds the property, which is to be taken into consideration in determining the period between the date of acquisition and date of transfer of such capital gain in order to decide whether it is a short-term capital gain or a long-term capital gain.”

Thus, from the aforesaid judgment, it is clear that for the purpose of holding an asset, it is not necessary that the assessee should be the owner of the asset based upon a registration of conveyance conferring title on him.

11. Similarly, in the case of Madhu Kaul (supra), the Hon’ble Punjab & Haryana High Court analysed various circulars and provisions of the Act that on allotment of flat and making first installment the assessee was conferred with a right to hold a flat which was later identified and possession delivered on later date. The mere fact that possession was delivered later, would not detract from the fact that assessee (allottee) was conferred a right to hold the property on issuance of an allotment letter. The payment of balance amount and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter upon the assessee.

13. In the case of CIT vs K Ramakrishnan (supra), Hon’ble Delhi High Court analysed the provisions of the Act and held that date of allotment is relevant for the purpose of computing holding period and not the date of registration of conveyance deed. Similarly in the case of CIT vs S.R. Jeyashankar(supra), Hon’ble Madras High Court took a similar view following the aforesaid judgment and held that holding period shall be computed from the date of allotment. It is noted by us that similar view has been taken by other High Courts in the judgments which have been relied upon by the Ld. Counsel before us and mentioned in earlier part of our order. Page | 23

14. In the assessment order, the Ld. AO has placed reliance upon the judgment of Hon’ble Supreme Court in the case of Suraj Lamps & Industries Pvt Ltd (supra) for the proposition that transfer of a property shall be effective only on registration of conveyance deed in view of section 54 of Transfer of Property Act. In our view, it is a settled proposition of law and there is no dispute on that. The absolute legal ownership of an immovable property shall take place in terms of various provisions of Transfer of Property Act which needs to be read with provisions of section 2(47) of Income-tax Act, 1961 for the purpose of computing tax liability arising on account of sale / purchase of immovable properties under Income-tax Act. But the issue here before us is different. As discussed earlier, the holding period is to be determined in terms of section 2(42A) of the Act which has been reproduced and discussed above. The issue of transfer of ownership is not the issue to be decided here for computing the holding period. Therefore, we find that application of the ratio of aforesaid judgment would not be appropriate here.

16. As a result, grounds raised by the assessee are allowed in terms of our directions as given above. However, the alternative issue raised by the assessee is not being adjudicated at this stage.

in the case of Mrs. Sneha Bimal Parekh vs. PCIT dated 30.06.2016:-

The case law relied upon by the ld.DR in this case are distinguishable on facts and are not applicable to the present case, we therefore, respectfully following the ratio laid down in the above decisions relied on by the ld.AR hold that the assessee acquired the ownership right in the flat on the date of letter of intent when the assessee booked the flat and paid booking amount and not on the date of registration and thus held the property for more than 36 months and is entitled for indexation while calculating the gain. In view of the above observations, we are of the considered view that revisionary powers exercised by the PCIT for setting aside the order framed by the AO u/s 143(3) that the date of ownership is the date of registration of flat of in the name of assessee and not the date of allotment is wrong and therefore, we set aside the order of PCIT. The appeals of the assessee is allowed. in the case of Fatema Jaffer Ghadiali vs. ITO dated 17.02.2016:-

6.7. In addition to the above, in our considered view the holding period should be computed from the date of allotment of flat, as ‘Right’ in allotment was always a ‘Right’ in the property. Thus, when the assessee was given possession of the flat, the date of its holding period shall relate back to the date when the said flat was allotted to the assessee. We take support in this regard from the judgment of Hon’ble Punjab and Haryana High Court in the case of Vinod Kumar Jain v. CIT 344 ITR 501.

6.8. Thus, viewed from any angle, we find that holding period of the flat sold by the assessee is more than 36 months. Thus, keeping in view facts of the case brought before us and the aforesaid judgments, it is held that flat sold by the assessee was long term asset and accordingly capital gain arising on sale of such asset is held to be assessed as long term capital gain. Thus, ground no.4 is allowed.

15 The Ld. DRP in its conclusion seems to be confused between a right to hold and a right to acquire the capital asset and therefore has relied upon the case of Hon’ble Supreme Court in Suraj Lamp Industries Pvt. Ltd. Vs. State of Haryana and under that impression concluded that the period of holding for indexation purposes would be FY 2017-18 when the ownership and possession was acquired. The settled legal principles and followed legal precedents relied by assessee and referred by us in preceding paras categorically states and settled the issue of calculation of long term capital gain on account of indexed cost of acquisition and assuming the conferment of legal right and holding of the asset by allotment letter or in any other manner agreed and acted upon by the parties concerned which would amount to holding of the property for the above required purpose and possession and ownership of the capital asset for the said purpose is not essential requirement because said stage comes after completion of various formality including completion of all payments /installments and other legal requirements necessary for executing a registration deed for formally transferring an immovable property by execution of registered sale deed. For these reasons, we find that the contents of letter of intent dated 14.02.2011 are such which fulfils all the requirement of an allotment letter as it even bind the assessee to make the entire payment of consideration amount irrespective of non- execution of sale agreement.

in assessee’s own case with respect to other 4 flats in the same property on the ground that the revenue has challenged the same before the Hon’ble High Court. In that regard, we are of the considered view that the AO whose order is challenged before us which was passed in pursuance of the order of Ld. DRP, is bound to follow the order of the ITAT and of the Hon’ble High Court and mere challenging of the order in the superior appellate forum does not absolve him of his legal duty to follow the order of the superior authorities unless the said order is set aside or stayed. Our view is fortified by the decision of the Hon'ble Allahabad High Court, K. N. Agarwal Vs. Commissioner of Income Tax, order dated 11.01.1991, [1991] 189 ITR 769B (ALL) which says, “Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject- matter of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases.” Thus the observation of AO in the impugned order dated 18.12.24 in para 4.2 i.e. “Moreover, the order of the Hon’ble ITAT has not been accepted by the revenue and has preferred an appeal before the Hon’ble High Court”, are not in consonance with the settled legal principles and followed legal precedents.

17. The Ld. Coordinate Bench in AY 2019-20 (supra) has already decided the same issue in favour of the assessee with respect to Flat no. C-161, C-162, C-163 and C-164 at Kalpatru Sparkals, Bandra East and the present case pertains to Flat no. C-165 in the same property and the concerned AY is 2022-23. The Ld. Coordinate Bench had decided the ground no. 2 in favour of the assessee observing “Thus, we hold that date of acquisition for the purpose of computation of capital gain for the impugned immovable property /flats has to be reckoned in FY 2010-11 i.e. from the date of the letter 14.02.2011”.

Therefore, we respectfully follow the decision of Ld. Coordinate Bench and accordingly decide the ground no. 1 and 2 in favour of the assessee. We accordingly direct the AO to consider the date of acquisition for the purpose of computation of capital gain as the date of letter of intent i.e. 14.02.2022 and compute the capital gains accordingly for the concerned AY 2022-23.”

15. In the case of the assessee, we have examined the documents including the agreement for sale dated 16th November 2007 and at page 4 in clause 2, the flat has been identified as Flat No. B-707, 7th floor and it is mentioned “The purchaser herby agrees to purchase and acquire Flat B-707, 7th floor, measuring 65 Sq.mtr built up area of the said unit in the said building known as Arihant Krupa being constructed on the said property, for a total considering of Rs. 34,57,000/,”. Clause 3 of the agreement to sale has given the schedule of payment. As per the payment made find mentioned in the written arguments and reproduced by us in para no. 9 of this order shows that the substantial amount has been paid in FY 2007-08. It was submitted that 64.85% of the total cost was already paid till FY 2007-08. Therefore, respectfully following the judgment of the Jurisdictional Tribunal in Anand Swarup Mehta vs. ITO in ITA 851/Mum/2025 (supra), we are of the considered opinion that the assessee /appellant has got the right to hold the asset from the date of ‘agreement to sale’ dated 16th November 2007 (FY Page | 29 2007-08) and the arguments of the Ld. AR on behalf of the assessee are therefore cogent and convincing wherein he has argued that the indexation benefit should start from FY 2007-08. Thus, the assessee has justified his claim of considering the date of acquisition of the asset for the purpose of computation of capital gain from the date of agreement for sale dated 16th November 2007 and not from the letter of possession dated 16th December 2010 as has been proposed in the assessment order. For the above discussion and the reasons mentioned therein, the Ground No. 2, 3 & 4 are allowed in favour of the assessee. We accordingly direct the AO to consider the date of acquisition for the purpose of computation of capital gain as the date of agreement for sale dated 16th November 2007 and compute the capital gains accordingly for the concerned AY 2015-16.

Ground no. 1

16. Since the Ground no. 2 to 4 has been allowed in favour of the assessee and appellant has succeeded on merit, therefore the legal ground no. 1 kept open and we have not decided the same for the above reasons.

Ground no. 5.

17. Since the said ground has not been adjudicated earlier, the Ld. AO may consider the claim of the assessee with respect to the payment of Rs. 2,32,500/- as additional amenities cost paid to the builder to be allowed from the calculation of long term capital gain. The ground no 5 is restored to the file of Ld. AO for statistical purposes.

Grond no. 6 & 7

18. These grounds pertain to the charging of interest and penalty proceedings, which according to us is premature and accordingly not considered for decision at this stage by the Tribunal.

Ground no. 8

19. This ground is general in nature needs no specific adjudication.

Order pronounced in the open court on 23.06.2025.