SMT. MALALI VENUGOPALA UMADEVI,BANGALORE vs. INCOME TAX OFFICER (INTERNATIONAL TAXATION), WARD- 2(1), BANGALORE

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against order of the CIT(A) dated 17.5.2019. The assessee has raised following grounds of appeal:

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As regard to the addition on account of Short - term capital gains amounting to Rs. 7,21,250/- the appellant has elaborately discussed in detail in the statement of facts and the same may kindly be considered.

2.1. In addition to the facts brought out in the statement of facts the appellant wishes to submit that the appellant had entered into a contract of terms to purchase the flat from M/s. Azofen [11 Ltd., in the year 1995-96 to be precise on 29/03/1995. The appellant purchased the property for a total consideration of Rs. 22,53,255/- paid on various dates and stages. The total cost of acquisition of the property amounted to Rs.22,53,255/- and further all the payments were made through banking channels.

2.2 It is submitted that the learned assessing officer in her order assessment has considered only a sum of Rs. 17,57,500/- being the cost of acquisition of the subject matter of the property which was allotted to the appellant and the same being Hat No. 602, 6th Floor, No. D-4, "lok Upavan - Phase - II", Smt. Gladys Road, Off Pokhran Road No. 2, Loka Upavana, Thane (West) - 400 610.

2.3. It is submitted that the appellant along with her husband sold the above mentioned property to one Sri. Ajay

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Gopala Rao vide a registered sale deed dated 15/06/2007. The appellant computed the capital gains and arrived at a loss of Rs. 3,43,000/- being 50% of the total loss of Rs. 6,86,000/- as her share of loss from the sale of the property.

2.4. It is submitted that the learned assessing officer has held that the property was acquired by the appellant only after receiving the possession of the property. Hence the property in question do not become a long term capital asset and taxed the entire sale consideration as short term capital gains as per the provisions of section 2(42A) of the Act.

2.5. Firstly, it is submitted that the learned assessing failed to appreciate the fact that the appellant had made a total payment of Rs. 22,53,255/- as against the cost of acquisition allowed by the learned assessing officer of Rs. 17,57,500/-. The following is the chart which depicts the clear position of the claim of cost of acquisition by the appellant amounting to Rs. 22,53,255/-:

Year_ Amount Indexed Indexed 50% Share paid Cost Amount

1995 - 96 16,75,900/- 281 32,86,195/- 3,86,556/- 2006 - 07 3,64,106/- 519 2007 - 08 2,13,249/- 551 2,13,249/- Total Cost of 22,53,255/- 38,86,000/- 19,43,000/- Acquisition

32,00,000/- 32,00,000/- 6,00,000/- Consideration received from sale of property Net Gain / Loss 9,46,745/- (6,86,000) (3,43,000)

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The learned assessing officer without appreciating the 2.6 above mentioned fact has adopted the cost of acquisition of the property at Rs. 17,57,500/- as against the actual and total cost of acquisition of the subject matter of property which was sold at Rs. 22,53,255/- the payments amounting to Rs. 3,64,106/- and Rs. 2,13,249/- were made subsequently in the year 2006-07 Et 2007-08 in addition to the advance amount made by the appellant of Rs. 16,75,900/- totalling to Rs. 22,53,255/-. The learned assessing officer ought to have considered for the purpose of arriving at the cost of acquisition for the advancement of substantial cause of justice. The details and break-up of the cost of acquisition amounting to Rs. 22,53,255/- is as under:

SI.No. Particulars Date of Amount Remarks Payment

a. amounts paid 11/08 / 2006 17, 57,500/ - The said amount is Total towards purchase of the flat at mentioned in the Lok Upavan Flat as per sale registered sale deed deed dated 11/08/2006 dated 11/08/2006. Copy enclosed b.Amount towards registration 1,06,4501- The amount is towards 11/08/2006 Charges. the stamp duty paid towards the registration of the property. c. Amount towards other 11/08/2006 25,710/- The amount has been administrative charges paid to the Sub-Registrar for the purpose of office, Thane. registration. d. Other expenses incurred at the 11/08/2006 22,995/- General Expenses Sub-Registrar Office.

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e. Payment made towards Paring 09/01/1997 40,000/- Receipt received from Space Azofen Ltd., i.e. the Developer, vide NOC Possession dated 14/08/2005. Copy enclosed. f. Payment made towards Corpus 22/07/2006 33,250/- Receipt received from the Fund to Lok Upvan -II, Building said association and receipt Society Welfare Association (P) No.420. Copy enclosed.

g. Payment made towards due to 12/06/2007 1,44,024/- Statement reflecting the the society Lok Upvan – II, payment being DD taken in Building Society Welfare favour of LOK UPAVAN I Association (P) BLDG 34D4 CO=OPERTIVE HOUSING SOCIETY. Copy of bank statement enclosed. h. Commission paid to Ms. Kamala 19/06/2007 64,000/- E-Mail received from Ms. Venkataraman Kamala Venkataraman claiming service charges Rs.64,000/- & Bank statement wherein the Demand Draft has been issued from the account of the appellant. Copy of E- mail and bank statement enclosed. i. Courier, Postage, TTK service 19/06/2007 5,225/- charges j. Power of Attorney charges, 2,475/- travelling to Indian Consulate for attestation.

Total cost of acquisition of flat 22,53,255/-

2.7 It is submitted further that the above mentioned payments which have been tabulated in the above chart are all allowable expenditure and which has been incurred in connection to the flat of the appellant. The learned assessing office erred in not treating the same for the purpose of arriving

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at the total cost of acquisition of the flat. The Act specifically allows the appellant to claim any expenditure incurred and incidental towards purchase or sale of the capital asset which the learned assessing officer failed to appreciate.

2.8. As regard to the issue whether the sale consideration received by the appellant is a long-term or short term capital asset, it is submitted that the physical possession of the property was given to the appellant by the developer only on 14/08/2006 but whereas the learned assessing officer failed to appreciate the fact that appellant had entered into agreement in the year 1995-96 itself and major portion of the payments towards the said agreement towards purchase of the property were made by the appellant to the developer along with her husband jointly.

2.9. Without prejudice the appellant wishes to submit that the learned assessing officer ought to have appreciated the fact that the property includes bundle of rights and the appellant had specific performance, assignable right, further the developer is precluded to allot or sell the allotted units to any other persons which is allotted to the appellant, and other such restrictions on the builder and the appellant acquires certain various rights by entering into agreement with the developer. Out of sale consideration the appellant was entitled to claim proportionately Long term capital gain as well Short term capital gain on the rights acquired through the arrangement and for undivided portion of land as well title right. It is submitted further that the learned Assessing Officer ought to have to have apportioned the sale consideration received by the appellant by selling the property and the same should have been attributable to Long

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term capital gain and short term capital gain. The principle of apportionment is well settled in tax laws by the decisions of the Hon'ble Apex Court in the case of Continental Construction Ltd Vs. CIT (1992) 195 ITR 81 and CIT Vs. Best and co. (Private) Ltd (1966) 60 ITR 11.

2.10 The appellant during the course of assessment proceedings had explained the above mentioned transaction and the learned assessing officer without considering and by not appreciating the above mentioned facts arbitrarily held that since the appellant received the procession of the property only on 14/08/2006 as per section 2[47] of the Act the date of acquisition of the property is 14/08/2006 and thus the sale consideration received of Rs. 32,00,000/- from the sale of the property which is sold on 15/06/2007 amounts to short term capital gain and brought to tax.

2.11. Therefore, in view of the above the appellant humbly pray before your Honour to kindly direct the learned assessing officer to adopt the total cost of acquisition of the property at Rs. 22,53,255/- as against the amount considered by the learned assessing officer of Rs. 17,57,500/- and further the appellant humbly prays that the property which the appellant has sold along with her husband jointly is a long term capital asset. Thus, the appellant humbly pray before your Honour to delete the addition made by the learned assessing officer of Rs. 7,21,250/- under the head short term capital gains for the advancement of substantial cause of justice.

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by assessee on 14.8.2006 and sold by her on 15.6.2007. The resultant gain is short term capital gain. However, as seen from the payment details, the assessee made substantial payment of Rs.16,91,954/- before 27.12.1996 and all formalities relating to acquisition of property were already completed. Only formal registration of Sale deed was pending and it was executed on 11.8.2006. Now the contention of the assessee is that for the purpose of computation of capital gain indexation cost of acquisition to be made from the date of making substantial payment and not from the actual date of sale deed. Now the issue before us is whether date of substantial payment towards acquisition of flat to be considered as a date of acquisition or the date of sale agreement to be considered as a date of acquisition of the said property. This controversy was settled by the Hon’ble Karnataka High Court in the case of A. Suresh Rao 223 Taxman 228 in which Hon’ble High Court analysed various provisions of the Act pertaining to computation of capital gain under various situations and also circulars issued by the CBDT on this issue. Relevant portion of the observation wherein the issue before us has been properly analysed is reproduced hereunder: “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 co- operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever,

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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 sub-clauses (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. 4 71 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 v. 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

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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.' 10.1 Further, in the case of Richa Bagrodia v. Dy. CIT [2019] 103 taxmann.com 73/175 1TD 552 (Mum.), the Tribunal considered similar issue and observed as under: '4. We heard both the parties and perused the orders of the Revenue Authorities as well as the judgments of the Hon'ble High Court and the decisions of the Tribunal cited by learned representatives of both the parties. The only issue that is to be decided is whether the date of allotment of the flat or the date of possession of the flat by the assessee should be considered as the date for computing the holding period of 36 months. On perusal of the cited orders of the Tribunal (supra), we find that an identical issue came up for adjudication before the Tribunal in the case of Meena A Hemnani (supra), order dated 17th January, 2014 wherein one of us (AM) is a party and the issue was decided in favour of the assessee by relying on various decisions of the Tribunal as well as the judgment of the Hon'ble Gujarat High Court in the case of C'IT v. Anilaben Upendra Shah [2003] 262 ITR 6571[2004] 134 Taxman 522 (Guj.). Relevant discussion is given in paras 3 & 4 of the said order of the Tribunal which read as under: "3. There are couple of issues raised in this appeal. Rest of the grounds raised in the appeal are either consequential or general in nature. Accordingly, they are dismissed as general or consequential. The issues, which need to be adjudicated in this appeal are (0 if the capital gains earned by the assessee are in the nature of the short term as held by the AO or long term capital gains as offered by the assessee in the return. At the outset, Ld Counsel for the assessee mentioned that the assessee purchased a flat vide the allotment letter dated 9-9-2003 from the builder namely Prestige Estates Projects Pvt. Ltd. There was a construction agreement between the parties dated 1-12-2003 and the registered deed of the same was dated on 22-9-2006. The said flat was sold by the assessee to Bennet Coleman & Company on 10-11-2006. The assessee earned capital gains on this transaction and offered the same as long term capital gains reckoning the date of allotment i.e.. 9-9-2003 for the purpose of determining the holding period of three years relevant for the long term capital gains. However, in the assessment proceedings, AO

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considered the date of registration i.e., 22-9-2006 the date of registration and determined the short term capital gains. Therefore, now the issue to be decided by the Tribunal relates to if the date of allotment should be considered for the purpose of computing the said long term capital gains. In this regard, Ld Counsel filed various decisions to suggest that the date of allotment must be considered for the purpose of computing the long term capital gains instead of date of registration. Ld Counsel filed the order of the Tribunal in the case of ACIT v. Smt Vandana Rana Roy vide [ITA No. 6173/M/2011 (A Y 2007-2008) dated 7-11-2012], wherein one of us (AM) is a party, and stated that the "date of allotment" should be reckoned as relevant date for computing the holding period for the purpose of computing the capital gains. In this regard, Ld Counsel brought our attention to para 7 and 8 of the said order of the Tribunal to support his case. The said judgment was decided considering the judgment of the Gujarat High Court in the case of CIT v. Anilaben Upendra Shah [2003] 262 ITR 657 (Guj.) apart from other decisions of the Tribunal in the case of Jitendra Mohan v. ITO [2007] 11 SOT 594 (Delhi) and also another decision of the ITA T in the case of Pravin Gupta v. ACIT and the relevant propositions are extracted in para 7 of the Tribunal's order dated 7-11-2012. The said paras 7 and 8 from the order of the Tribunal in the case of Smt Vandana Rana Roy read as under: "7. We have heard both the parties, perused the cited decisions and we find that there is no dispute on the facts The only issue that is to be decided is whether date of allotment of the flat or the date of possession of the fiat by the assessee should be considered as date of holding for computing the holding period of 36 moths. In alternative, the "date of registration" should be the relevant date. On perusal of the said decisions relied upon by the Ld Counsel, we find that the decisions are relevant and applicable to the facts of the present case. The conclusion of the Hon'ble Gujarat High Court judgement in the case of CIT v. Jindas Panchand Gandhi reads as under: "Assessee having sold the fiat allotted to him by a co-operative housing society after a period of 36 months from the date of allotment, capital gains arising to him were long-term capital gains despite the fact that the physical possession of the flat was given to the assessee much later and, therefore he was entitled to deduction from such gains as per law" 7.1 The conclusion of the Hon'ble Gujarat High Court judgment in the case of CIT v. Anilaben Upendra Shah reads as under: • "Assessee having held the shares and allotment of a flat in a co-operative housing society for a period of more than 36 moths the capital gain arising from sale of said flat was longterm capital gain and assessee was entitled to benefit of section 80T irrespective of the fact that the assessee

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did not get possession of the fiat in question at the time of allotment and it was constructed later on." 7.2 The conclusion of Hon'ble ITA T, Delhi Bench in the case of Jitendra Mohan v. ITO reads as under: "On the facts of the case, assessee held the capital asset (shed) allotted to it on installment basis from 2e December, 1994, the date of payment of second installment and sale thereof on 1.5°7 December, 2000, gave rise to long term capital loss even though possession of shed was handed over by DS1DC to assessee on 28m May, 1998." 7.3 The conclusion of Hon'ble ITA T, Delhi Bench in the case of Praveen Gupta v. ACIT reads as under "Assessee can be said to have held the flat when he made the payment to the builder and received the allotment letter, and therefore, benefit of indexation of cost of acquisition of the fiat has to be granted to the assessee from the date (1995) when he started making payment to the builder and not from the date of execution of conveyance deed in 2001." 8. All the above decisions are uniform in concluding that the "date of allotment" is reckoned as the date for computing the holding period for the purpose of capital gains. The date of allotment in this case being 19- 112001 and the date of sale is 23-8-2006, therefore, the holding period is much more than 36 months. In this case, the gains earned by the assessee on the sale of flat have to be computed as capital gains. Without prejudice, even if the date of possession, being 14-8-2003, is considered; the assessee is still entitled to the benefits of the Long Term Capital Gains. Therefore, in our opinion, order of the CIT (A) does not call for any interfere. Accordingly, the grounds raised by the Revenue are dismissed." 4. Considering the above settled nature of this issue, we are of the opinion that the assessee must succeed on this issue. Accordingly, the relevant grounds of appeal are allowed." 7. From the above settled position of the issue, it can be safely concluded that the "date of allotment" should be reckoned as the date for computing the holding period for the purpose of capital gains. In the instant case, the date of allotment is 11-4-2003 (FY 2003-2004) and the date of sale of the property is 14-10-2007, therefore the holding period is more than 36 months. Therefore, the capital gains earned by the assessee on the sale of the flat have to be treated as 'long term capital gains'. The assessee paid the first installment on 11-4-2003, thereby conferring a right to hold a flat, which was later identified and possession delivered on later date. The Hon'ble Punjab & Haryana High Court in the case of Mrs. Madhu Kaul v. CIT vide Income-tax [Appeal No. 89 of 1999, dated 17th January, 2014] held that the mere fact that possession was delivered later, does not detrat from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. Thus, the Id DR's arguments on non-

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existence of the flat at the time of issuing of allotment letter stands answered by the said judgment of the Hon'ble High Court of Punjab & Haryana (supra). The same view was supported by various decisions of the Tribunal as well as the judgments of the Hon'ble Gujarat High Court and the relevant conclusions were already extracted in the above paragraphs of this order. Regarding the judgments of the Hon'ble jurisdictional High Court relied on by the Ld DR are distinguishable on facts. Therefore, considering the above settled nature of the issue as well as the following the principle of consistency, we are of the considered opinion that the ground no. I raised by the assessee should be allowed. Accordingly, ground no. 1 is allowed. 11. Same view was taken by coordinate bench in the case of Bhatkal Ramarao Prakash v. ITO [2019] 102 taxmann.com 145/175 1TD 144 (Bang, - Trib.). Being so in our opinion, in this case for computing the inflation cost of the asset, the date to be reckoned from the date of allotment of the property to the assessee and not the date on which possession certificate issued to the assessee. Further, a judgement relied by CPT in the case of Balbir Singh Maini (SC) (supra) have no application and it was delivered on different context with reference to section 2(47)(v) of the Act and the judgement of Hon'ble High Court relied by the assessee's counsel in the case of A. Suresh Rao cited (supra) is a direct judgement applicable to the facts of the case. Being so, we have no hesitation in reversing the finding of the Ld. CIT(A) on this issue and direct the A.O. to consider the date of allotment of property i.e. 20-5-1986 for the purpose of determining the cost of inflation of the assets, while computing the cost of acquisition of property in terms of section 49 of the Act. This ground of the assessee is allowed.”

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"long-term capital asset" means a capital asset which is not a short-term capital asset ;

Sec.2(42A) of the Act defines Short Term Capital asset as follows:- “(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 : ……..

Sec.2(42B) of the Act defines Short term capital gain as follows:- “(42B) "short-term capital gain" means capital gain arising from the transfer of a short-term capital asset;” 10. We have to look at the definition of the term “Short term capital gain” because what is not short term capital gain is Long term capital gain and that is the way Long term capital gain has been defined in the Act. Short term capital gain means capital gain arising from the transfer of a short term capital asset. Short term capital asset has been quite exhaustively defined, covering several situations. For the present appeal the portion of the definition which says 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” alone is relevant. 11. It is not in dispute that the Assessee paid cost of the site as early as 22.3.2001 and was in possession of the property as lessee cum Agreement holder with right to obtain conveyance of absolute interest over the land that was leased. The expression “held by the Assessee” in the context of Sec.2(42A) of the Act, is rather ambiguous, in the sense that it does not speak of the date of vesting of legal title to the property. Even the provisions of sec.2(47)(v) & (vi) of the Act which defines what is “transfer” for the purpose of the Act, considers possessory rights as akin to legal title. It is therefore necessary to look into the policy and object of the provisions giving exemption from levy of tax on capital gain. In the present case, as we have already seen, the Assessee had paid the entire consideration for the site originally allotted as early as in the year 2001. The Assessee had performed its part of the contract with the society. Therefore the claim of the Assessee that it held the property from 22.3.2001 has to be accepted, ITA No. 2692/Bang/2018 Page 5 of 17 keeping in mind the policy and object of the provisions giving exemption from levy of tax on capital gain. 12. The Hon’ble Karnataka High Court in the case of CIT Vs. Dr.Shakuntala ITA No.117 of 2006 judgment dated 19.9.2007 had to deal with a case where the Assessee got a site allotted in her favour by the Bangalore Development Authority (BDA) under a lease-cum-sale agreement dated 28.2.1981 and was put in possession of the site allotted. She got absolute sale deed from BDA

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only on 19.9.1996. She sold the property on 25.3.1997. The question before the Hon’ble Karnataka High Court was as to whether the capital gain can be regarded as LTCG or STCG. The case of the revenue was that the period of holding had to be reckoned from 19.9.1996 and the capital gain had to be regarded as STCG. The plea of the Assessee was that the holding period had to be reckoned from 18.2.1981 the date on which the Assessee got possession of the property under lease-cum-sale agreement was accepted by the Hon’ble Karnataka High Court. Similar decisions were rendered by the Hon’ble Allahabad High Court in the case of Smt.Rama Rani Kalia 358 ITR 499 (All) & Amar Nath Agarwal 371 ITR 183 (All).

“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 co- operative 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 sub-clauses (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

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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.4 71 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 ITA No. 2692/Bang/2018 Page 7 of 17 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 hypertechnical 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

ITA No.1686/Bang/2019 Smt. Malali Venugopala Umadevi, Bengaluru

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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.”

In the light of the aforesaid decisions, we are of the view that the capital gain in question in the present case has to be treated as LTCG as claimed by the Assessee. Ground Nos.3 to 5 are accordingly allowed.”

Year_ Amount Indexed Indexed 50% Share paid Cost Amount

1995 - 96 16,75,900/- 281 32,86,195/- 2006 - 07 3,64,106/- 519 3,86,556/- 2007 - 08 2,13,249/- 551 2,13,249/- Total Cost of 22,53,255/- 38,86,000/- 19,43,000/- Acquisition 32,00,000/- 32,00,000/- 6,00,000/- Consideration received from sale of property Net Gain / Loss 9,46,745/- (6,86,000) (3,43,000)

ITA No.1686/Bang/2019 Smt. Malali Venugopala Umadevi, Bengaluru Page 20 of 20

commission of 1% on Rs.16 lakhs which worked out at Rs.16,000/- and the same to be deducted from the sale consideration. The assessee would get a benefit of Rs.16,000/- out of Rs.4,95,755/- claimed by the assessee.

Sd/- (Chandra Poojari) Accountant Member

Bangalore, Dated 8th Apr, 2021. VG/SPS

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Asst. Registrar, ITAT, Bangalore