JAYATI S. CHAKRABORTY,MUMBAI vs. ACIT 31(2), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER;

directed against the order of ld. CIT(A)-42, Mumbai dated 23.08.2016

which in turn arises from the assessment order passed under section 143(3)

of the Act dated 10.03.2015 for Assessment Year 2012-13. The assessee has

raised the following grounds of appeal:

ITA No. 7122 Mum 2016-Jayati S Chakraborty

following additional grounds of appeal:

2.The Learned Assessing Officer vide order dated 10/03/2015 u/s. 143(3) of the Act disallowed my claim of Long Term Capital Gains and treated the sale of the residential flat as Short Term Capital Gains.

Consequently the Assessing Officer did not allow the exemption u/s 54 as claimed be me.

Assessment Year 2012-13 on 31.09.2012 declaring total income of Rs.

28,92,390/-. In the computation of income, the assessee claimed Long Term

Capital Gain on sale of residential flat No. 302, Oberoi Springs, Mumbai

(Flat) on 05.10.2011. The assessee claimed acquisition of flat on

25.04.2008. The said flat was sold by assessee on 05.10.2011 for sale

consideration of Rs. 2,90,00,000/-. The assessee claimed indexation cost

and after deducting the indexation cost from sale price, the assessee has

shown/ claimed capital gain of Rs. 1,65,83,053/-. The assessee invested Rs.

1,40,00,000/- for purchase of new house/ flat and claimed exemption thereof

and remaining amount of Rs. 25,83,053/- was offered for Long Term

Capital Gain. During the assessment proceeding, the Assessing Officer

asked the assessee to produce the copy of sale and purchase deed of

properties and the details of investment for the claim of exemption under

section 54 of the Act. The assessee furnished necessary details. On

verification of the details, the Assessing Officer noted that the assessee 2

ITA No. 7122 Mum 2016-Jayati S Chakraborty

entered in agreement to sale dated 19.07.2009 for purchase of the residential

flat from Oberoi Construction Pvt. Ltd. for Rs. 87,84,050/-. The assessee

also paid stamp duty of Rs. 4,21,980/- which was claimed as a part of cost of acquisition. The assessee also claimed exemption under section 54 on

investment of sale consideration on purchase of two flats within two year

from the date of sale of old flat. The claim of the assessee was not accepted

by Assessing Officer on taking view that entire payment was not paid by the

assessee, the purchase agreement was registered on 19.07.2009 and the

assessee has sold the flat on 05.10.2011. Moreover, the assessee has not

received the possession of property on 25.04.2008. Therefore, the claim of

assessee for acquisition of property on 25.04.2008 i.e. on which the assessee

purchased it from previous owner was not accepted. The Assessing Officer

treated the entire gain as Short Term Capital Gain and brought it to tax accordingly. The claim of exemption was also not allowed as the entire gain

was treated as short term capital gain and further the capital gain arisen was

invested in two flats. On appeal before the ld. CIT(A), the action of

Assessing Officer was confirmed. Therefore, further aggrieved by the order

of ld. CIT(A), the assessee has filed the present appeal before us. 4. We have heard the submission of ld. Authorized Representative (AR) of the

assessee and ld. Departmental Representative (DR) for the Revenue and

perused the material available on record.

ITA No. 7122 Mum 2016-Jayati S Chakraborty

assessee submits that the assessee in the computation of income the assessee

claimed exemption under section 54 of the Act. In the statement of fact before ld CIT(A), the assessee has specifically contended that the sale

proceed was reinvested into another residential flat by temporarily placing

the amount of Rs. 1.15 Crore in Capital Gain Account Scheme with

Nationalized Bank. The assessee is raising additional ground of appeal,

which is emanating from the facts available on record. No further fact or

any documentary evidence is required to be brought on record. The assessee

inadvertently omitted to raise the ground related with the exemption under

section 54 of the Act. The ld. AR of the assessee further submits that

additional ground related with exemption under section 54 is purely a legal

issue, which does not require ascertainment of new facts. 6. On the other hand, the ld. DR for the Revenue not strongly opposed the

raising of additional ground of appeal. 7. We have considered the contention of ld. representatives of parties and

found that in the computation of total income, the assessee has claimed

Long Term Capital Gain and exemption under section 54 of the Act for

reinvestment of sale proceed in new residential house within two year after

the date of transfer of old asset (old house). The contention of the assessee

regarding the investment of capital gain is recorded by assessing officer in

para 4.1(iv) of his order. Considering the nature of claim for which no new 4

ITA No. 7122 Mum 2016-Jayati S Chakraborty

facts are necessary to be brought on record. We admit the additional ground of appeal raised by assessee. 8. Ground No.1 relates to treating the gain on sale of residential flat as Short Term Capital Gain instead of Long Term Capital Gain. The ld. AR of the assessee submits that the assessee purchased a flat was initially booked by one Sh. Santanu Lodh. The allotment Letter was transferred in the name of the assessee on 25.04.2008. In pursuance of transfer of allotment letter the agreement was entered by her with the Developers on 19th July 2009 and the same was registered only on 03.08.2009. The assessee sold the said flat on 05.11.2011. Therefore, the assessee claimed that her holding period of the property should be counted from 25.04.2008 when she got an offer of allotment. As the assessee finally sold the property on 05.11.2011.The assessee claims that her holding period was over 36 month and she should get the benefit of LTCG as well as indexed cost of consideration from 2008 itself. The ld. AR for the assessee also relied on the CBDT circular No. 672 dated 16th December 1993 and the decisions of Madhu Kaul v. CIT [2014] 363 ITR 54 (P&H), Vinod Kumar Jain v. CIT[2012] 344 ITR 501 (P&H), Anita D Kanjani v. ACIT 23(1), Mumbai (ITA No. 2291/Mum/2015), Sneha Bimal Parekh v Pr. CIT, Mumbai (ITA No. 5489/Mum/2015), ACIT v. Sanjay Kumath (ITA No. 448/Ind/2017) , Simi Khanna v. ACIT (ITA No. 2076/Mum/2017) & Nitin Prakash v. DCIT, Thane.

ITA No. 7122 Mum 2016-Jayati S Chakraborty

not filed the copy of the allotment letter on record to show that the assessee has enforceable right against the builder. 10. In the rejoinder submissions the ld AR for the assessee submits that they

would file the copy of allotment letter dated 17th May 2006 in the name of Santanu Lodh within three working day. 11. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. The narrow dispute before us is

whether the Capital Gain earn by assessee is short term or the long term capital gain and / or the assessee is entitled for exemption under section 54 of the Act. The lower authorities have not disputed the certain dates. It is not

in dispute that the assessee purchased the right in the asset/ flat from the person who was initially allotted the flat vide allotment letter. The assessee purchased the said flat vide agreement dated 25.04.2008, which was duly

confirmed by the Builder (Oberoi Constructions). In pursuance of the purchase agreement from the original allotees the agreement to sale was executed on 19th July 2009 and was registered on 3rd August 2009. This

agreement was executed in lieu of allotment letter dated 17/05/2006 & 25 /04/2008, which is duly endorsed on the agreement. We have also perused the contents of the allotment letter issued by the builder. The perusal of

allotment reveals that Rs. 8,78,405/- was paid on account of earnest money, 6

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Rs. 13,17,608/- was paid at the time of issuing of allotment letter. Rs.

4,39,203/- was payable on completion of plinth of the building, Rs. 47,43,387/- was payable in forty equal instalment on completion of 40th

slabs of the building where the said flat is situated. Rs. 3,51,362/- was

payable on completion of brick work of the building, Rs. 3,51,362/- was

payable at the time of plastering of building. Rs. 3,51,362/- on completion

of flooring and tiling and remaining similar balance of Rs. 3,51,362/- was

payable at the time of ready to use of the flat. Thus, entire amount was

payable in a time frame manner, which is linked to the progress of the

construction.

10-1986 issued following instruction:

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the scheme the tentative cost of construction is already determined and the D.D.A. facilitates the payment of the cost of construction in instalments 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 instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of flats under the Self-Financing Scheme of the D.D.A. shall be treated as cases of construction for the purpose of capital gains. 13. The CBDT in Circular No. 672 dated 16-12-1993 issued following

instructions:

(Del.) held that in order to determine taxability of capital gain arising from

sale of property, it is date of allotment of property which is relevant for

purpose of computing holding period and not date of registration of

conveyance deed. The Hon’ble Punjab & Haryana High Court in Madhu

Kaul vs. CIT(supra) held that where a flat was allotted to assessee on 7-6-

1986 and she paid first instalment on 4-7-1986 and possession of flat was

delivered on a later date and thereafter she sold flat on 5-7-1989, capital

gain arising from sale of flat was a long-term capital gain.

ITA No. 7122 Mum 2016-Jayati S Chakraborty

vs. CIT (supra) on the facts that assessee was allotted a flat by Delhi

Development Authority (DDA) on 27.02.1982 on instalments under residential scheme. However, the possession of flat was given to the

assessee on 15.05.1986. The allotment letter issued indicates the flat number

and the balance amount payable. The assessee sold the flat on 06.01.1989

and claimed Long Term Capital Gain and further claimed the set off of

capital on purchase of another flat. The Assessing Officer disallowed the

claim of assessee that possession of flat was given only on 15.05.1986 and,

therefore, the capital gain on sale of flat were Short Term Capital Gain. On

appeal before the ld. CIT(A), the action of Assessing Officer was upheld.

Tribunal also dismissed the appeal of the assessee. On further appeal before

the Hon’ble Delhi High Court, the assessee was allowed Long Term Capital Gain. While allowing appeal of the assessee, the Hon’ble Court referred the

CBDT Circular No. 471 dated 15.10.1996 which described nature of right

that an allottee acquires on allotment of a flat under self-financing scheme.

It was held that assessee was a flat on 27.02.1982 on payment of instalment

by issuing of an allotment letter and he had been making payment in term

thereof, specific number of flat was allotted to the assessee and possession

was delivered on 15.05.1986. The right of assessee prior to 15.05.1986 was

the right in the property. In such situation, it cannot be held that prior to that

said date, the assessee was not holding the flat and the assessee was allowed 9

ITA No. 7122 Mum 2016-Jayati S Chakraborty

a Long Term Capital Gain and was also entitled for set off under section 54 of the Act. 16. Considering the decision of various High Courts as referred above and the CBDT Circulars No. 471 & 672, we find that the holding period should be computed from the date of issue of allotment letter. In case, the holding

period is more than 36 month from the date of allotment till the date of transfer, the asset is to be treated as Long Term Capital Asset in the hand of assessee and on transfer of such asset; the assessee would be entitled for Long Term Capital Gain. Now coming the facts of the present case, the assessee acquired the right in flat no. 302, 3rd Floor, Tower-C with car parking in Oberoi Spring, Oshiwara, Andheri vide allotment letter dated 25.04.2008, which is duly confirmed and acknowledge by M/s Oberoi

Construction. The assessee sold the said flat on 05.10.2011. Therefore, the gain earned by assessee is taxable as Long Term Capital Gain. Hence, the ground no.1 of the appeal raised by assessee is allowed. 17. Ground No.2 relates to claim of exemption under section 54 of the Act. In view of our finding on ground no.1 wherein the assessee is declared entitled for Long Term Capital Gain. We have noted that the Assessing Officer

disallowed the exemption on his observation that assessee had invested capital gain for purchase of two flats. 18. The Hon’ble Karnataka High Court in CIT vs. Jyothi K. Mehta (201

Taxman 79) held that in newly asset acquired after the sale of original asset 10

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can also be a building or lands appurtenant thereto, which also should be “a

residential house”. Therefore, the letter 'a' in the context it was used should

not be construed as meaning "singular". But being an indefinite article, the

said expression should be read in consonance with the other words

'buildings' and 'lands' and, therefore, the singular 'a residential house' also

permits use of plural by virtue of section 13(2) of the General Clauses Act.

Therefore, merely because the assessee purchased two units, it could not be

said that she was not entitled to the benefit of section 54.

Assessing Officer is directed to allow exemption to the assessee under

section 54 of the Act.

Order pronounced in the open court on 18/10/2018.

Sd/- Sd/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER Mumbai, Date: 18.10.2018 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “J” Bench, ITAT, Mumbai 6. Guard File BY ORDER, Dy./Asst. Registrar ITAT, Mumbai