GOVIND SINGH GREWAL ,NEW DELHI vs. ITO, WARD- 61(1), NEW DELHI

Facts of the case, in brief, are that the assessee is an individual and derives income from profession, capital gain and income from other sources. He filed his return of income on 31st July, 2013 declaring the total income at Rs.8,89,482/-. The AO, during the course of assessment proceedings, noted that the assessee has sold the commercial property bearing shop No.DCT-112 on first floor, having covered area of 123.800 sq. mtrs. in the multi-storied building known as DLF City

The assessee, relying on various decisions, submitted that the date of allotment has to be treated as the date of acquisition. However, the AO was not satisfied with the explanation given by the assessee and determined the long-term capital gain of Rs.5,34,328/-

In appeal, the ld.CIT(A), on the basis of various arguments advanced by the assessee, issued enhancement notice to the assessee and held that the transfer of the asset in this case is short-term capital asset and the assessee is not entitled for indexation benefit. He, therefore, directed the AO to treat the gain arising on the transfer as short-term capital gain and calculate short-term capital gain without granting any indexation benefit.

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- “1. On the facts and circumstances of the case, the order passed by learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in enhancing the income of the assessee without following due procedure as prescribed under the law. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in treating the transaction of sale of capital asset as short-term capital gain as against long term-capital gain declared by the assessee 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in misinterpreting the provisions of Section 2(42A) of the Income Tax Act. 5 i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in ignoring the settled position of law that holding period has to be computed from date of issue of allotment letter and not from date when agreement to sell was registered ii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in ignoring the fact that the rights, title and interest in the property was itself from the date of Allotment letter of property, 6) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in not considering the judicial precedents relied upon by the 7) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in enhancing the income of the assessee by arbitrarily indulging into surmises and conjectures. 8) That the appellant craves leave to add, amend or alter any of the grounds of appeal.”

The ld. Counsel for the assessee strongly challenged the order of the CIT(A) in directing the AO to treat the gain on transfer of asset as short-term capital gain. He submitted that the issue in the instant case stands decided in favour of the 4

Similar view has been taken by the Delhi Bench of the Tribunal in the case of Praveen Gupta vs. ACIT reported in 2010 (8) TMI 820 wherein it has been held: ‘going into the provisions, it is not necessary that to constitute a capital asset the assessee must be the owner by way of a conveyance deed in respect of that asset for the purpose of computing capital gain. The word ‘held’ used in section 2(14) as well as Explanation to section 48 clearly depicts that assessee must have some right in the capital asset which is subject to transfer. By making the payment to the builder and having received allotment letter in lieu thereof, the assessee will be holding capital asset and, therefore, the benefit of indexation has to be granted to the assessee on the basis of payments made by him for acquiring the said asset. Therefore, the assessee should be given the benefit of indexation. Similar view has been taken by the Delhi Bench of the Tribunal in the case of Jitendra Mohan vs. ITO reported in 2006 (11) TMI 371, the Hon’ble Gujarat High Court in the case of CIT vs. Anilaben Upendra Shah (2003) 262 ITR 657, CIT vs. Jindas Panchand Gandhi, reported in 279 ITR 552 and various other decisions. He accordingly submitted that the order passed by the lower authorities being bad in the eye of law has to be set aside and the gain on the sale of flat should be treated as long-term capital gain by allowing indexation benefit from the date of allotment/date of buyer’s agreement and not from the date of payments/date of registration.

The ld. DR, on the other hand, heavily relied on the order of the CIT(A). He submitted that the ld.CIT(A) has rightly held that the property was allotted to the

I have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find, the assessee in the instant case was allotted a property at DLF City Court on 30th October, 2007 and the assessee entered into a commercial space buyer’s agreement with DLF City on 22.01.2008 and started making payments from 30th October, 2007 to 18th May, 2010, totaling to Rs.80,33,579/-. The conveyance deed in favour of the assessee for the said property was registered on 24th May, 2011 and the possession of the property was also taken on 19.01.2011. The assessee sold the property on 21st September, 2012 for a sale consideration of Rs.1,25,00,000/-. I

I find, in appeal, the ld.CIT(A) held that since the property was held by the assessee for a period of 16 months from the date of registration till the date of transfer, therefore, the property in question is short-term capital asset and profit on such transfer is short-term capital gain and the assessee is not entitled to any indexation benefit.

It is the submission of the ld. Counsel that for the purpose of calculating the period of holding for the purpose of computation of capital gain, it is the date of agreement with the builder that has to be considered as the date of acquisition and not the date of actual registration in favour of the assessee. I find, the issue stands squarely covered in favour of the assessee by the decision of the Hon’ble jurisdictional High Court in the case of CIT vs. K. Ramakrishna, reported in 363 ITR 59, wherein it has been held that in order to determine the taxability of capital gain arising from sale of property, it is the date of allotment of the property which is relevant for the purpose of computing holding period and not the date of registration of conveyance deed. I find, following the above decision, the coordinate Bench of the Tribunal in the case of Ranjana Bammi vs. ACIT has held that for determining the taxability of capital gain arising from sale of property, it is the date of allotment of property which is relevant for the purpose of computing holding period and not the date of registration of conveyance deed. I find, the Hon’ble Punjab & Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT, reported in 363 ITR 54, has held 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 instalments, 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. The Hon’ble High Court accordingly held that the capital gain arising in that case was long-term capital gain. I find, the Delhi Bench of the Tribunal in the case of 9

The various other decisions relied on by the ld. Counsel for the assessee also supports his case to the proposition that for determining the taxability of capital gain arising from sale of property, it is the date of allotment of the property which is relevant for the purpose of computing the holding period and not the date of registration of conveyance deed. In this view of the matter, I hold that the asset in question is a long-term capital asset and the assessee is entitled to the benefit of indexation from the date of allotment/agreement. In this view of the matter, I set

In the result, the appeal filed by the assessee is allowed. The decision was pronounced in the open court on 31.03.2021. Sd/- (R.K. PANDA) ACCOUNTANT MEMBER Dated: 31st March, 2021. dk Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi