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Before: Shri V. Durga Rao
O R D E R
PER V. DURGA RAO, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-5, Chennai dated 18.07.2019 relevant to the assessment year 2016-17.
Brief facts of the case are that the assessee is an individual and has filed her return of income for the assessment year 2016-17 on 04.09.2016 admitting an income of ₹.13,21,974/-. The case of the assessee was selected for scrutiny under CASS and after following due process, the assessment under section 143(3) of the Income Tax Act, 1961 [“Act” in short] dated 24.12.2018 was completed.
The assessee had entered into two agreements with M/s. Hiranandini Realtors Pvt. Ltd. The first agreement entered into by the assessee on 18.09.2008 towards conveyance of UDS of 340.62 sq.ft. for a consideration of ₹.2,38,434/-. The second agreement dated 18.09.2008 is pertaining to construction of residential flat bearing No. 2602 admeasuring 3487 sq.ft. built up area on the 26th Floor, Hiranandani Upscale, Egattur Village, Kancheepuram District for a consideration of ₹.1,94,28,246/-. The assessee sold the flat to one Mr. Asif Ilahi on 25.08.2015 for a consideration of ₹.2,40,00,000/- vide document No. 10911/15. The assessee has computed the long term capital loss of ₹.1,11,72,030/- after reducing the indexed cost of acquisition, by taking the base year as 2010-11. The assessee has taken the date of possession of the flat as 28.10.2010. However, the Assessing Officer came to a conclusion that the assessee has got possession of the impugned property only during the financial year 2013-14 on the ground that the assessee has received the possession of the property on 08.11.2013 after payment of an amount of ₹.2,38,434/-. The case of the Assessing Officer is that once the assessee has paid the full amount i.e., on 08.11.2013, that date has to be taken into consideration and accordingly, the Assessing Officer completed the assessment order by calculating short term capital gain as the assessee has sold the said property on 25.08.2015 and determined the total taxable income at ₹.20,81,319/-. On appeal, the ld. CIT(A) confirmed the assessment order passed by the Assessing Officer.
On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the date of agreement for conveyance of UDS entered into by the assessee is dated 18.09.2008 and the total cost of land and construction to the extent of ₹.2,40,80,651/- was completely paid before 28.10.2010 and therefore, the base year for computing the indexed cost of acquisition should be 2010-11. It was further submitted that the very similar issue has been considered by the Hon’ble Jurisdictional High Court in the case of CIT v. S.R. Jeyashankar (2015) 373 IR 120 (Mad) and prayed that the same decision may be followed.
On the other hand, the ld. DR strongly supported the orders of authorities below.
Both the sides have been heard, perused the materials available on record and gone through the orders of authorities below. The only issue involved in this appeal for consideration is whether the date of agreement entered into has to be taken into consideration for the purpose of calculation of capital gain or the date of possession has to be considered. The Hon’ble Jurisdictional High Court in the case of CIT v. S.R. Jeyashankar (supra) has considered the very same issue and held that the date of agreement should be considered for the purpose of calculation of capital gains. For the sake of convenience, the relevant held portion of the order is extracted as under: “The assessee purchased an undivided share in a piece of land. Prior thereto, he had entered into an agreement with a builder for constructing thereon a residential unit of built-up area of 3,465 sq. ft. including the common area. The agreement was for purchase of land as well as for construction of home by a project promoted by the builder. The agreement was determined for a consideration at Rs. 81,68,811 to be paid by the assessee to the builder towards construction of the residential unit. The assessee sold the entire unit by a sale deed dated April 10, 2008 and claimed the difference between the cost of acquisition and the sale consideration as long-term capital gains. The Assessing Officer denied the benefit of section 2(29A) and made addition on the ground that the undivided share of land was registered on August 4, 2005, and since the property was purchased in August, 2005, and sold in April, 2008, the capital gains arising from sale were to be assessed as short-term capital gains only. The Commissioner (Appeals) relying on Circular No. 471, dated October 15, 1986, allowed the claim of the assessee. The Tribunal held that the date of allotment of the flat had to be adopted as the date of acquisition of the immovable property when
it came to acquiring a flat from the promoter of the flat by way of executing the construction agreement and not the date of the sale deed for purchase of the undivided share in the land. On appeal: Held, dismissing the appeal, that the right 10 the property flowed from the date of agreement with the builder, viz., February 22, 2005. Over a period of time, payments had been made and the transaction was concluded in accordance with the terms of the agreement by registering the undivided share in land and handing over the flat. Therefore, the assessee had a right consequent on the agreement dated February 22, 2005, in respect of the property sold by the assessee on April 10, 2008. Therefore, it exceeded the period of 36 months and the assessee was entitled to the benefit of long-term capital gains.” The ld. DR could not controvert the above judgement of the Hon’ble Jurisdictional High Court. Therefore, respectfully following the above judgement of the Hon’ble Jurisdictional High Court in the case of CIT v. S.R. Jeyashankar (supra), the order passed by the ld. CIT(A) is reversed and the appeal filed by the assessee stands allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced on 29th December, 2021 at Chennai.