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PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by revenue is directed against the order of Commissioner (Appeals)-33, Mumbai dated 14th of March 2016 for assessment year 2011-12. The revenue has raised following grounds of appeal; (1) On the facts and circumstances of the case and in law, the learned Commissioner (Appeals) has erred in not appreciating the action of assessing officer in assessing the capital gains on transfer of rights in unit No. 101 & 102, Hyde Park, Mumbai, as short-term capital gain of Rs.2,90,38,940 /-. (2) On the facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in not appreciating the action of assessing officer where it has held by the assessing officer that short-term capital gain is arising as a result of sale of flats since the assessee has received possession of the two flats No. 101 and 102, Hyde Park, Andheri, Mumbai on 11.03.2008 and sold the same on 21. 09.2010 and 07.07.2010 which shows that the said flats were not held for more than 36 months. (3) On the facts and circumstances of the case and in law, learned Commissioner (Appeals) has erred in directing the assessing officer to allow deduction under section 54F of the Income tax Act. (4) On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in directing the assessing officer to compute Priya Ravi Gehi the tax on long term capital gain in accordance with the provision of section 112 of Income tax Act. (5) The appellant prays that order of learned Commissioner (Appeals) on the above grounds be set aside and that of assessing officer be restored.
2. Brief facts of the case that assessee filed her return of income for assessment year 2011-12 on 30 July 2011 declaring total income of Rs.15,94,630/-. Subsequently, the assessee filed revised return of income on 30 September 2011 declaring total income of Rs. 1,11,43,440 /-. In the revised return of income filed on 30 September 2011, the assessee disclosed long-term capital gain of Rs. 96,57,972/- on sale of immovable properties. On verification of facts the assessing officer noted that the assessee along with her husband sold office premises bearing 101 and 102 in Hyde Park , Marol, Saki Vihar Road, Andheri, Mumbai for a consideration of Rs. 5.00 Crore and Rs. 4.30 Crore, by executing agreements on 21 September 2010 and 07.07.2010 respectively. After verifying the details furnished by assessee, the assessing officer noted that the assessee and her husband purchased unit No. 101 for a consideration of Rs. 1.60 Crore from M/s Ekta Supreme Corporation Mumbai, vide agreement dated 25th December 2007 which was executed on 11 March 2008. The unit No. 102 was purchased by the agreement to sale dated 25 December 2007, executed on 11th March 2008, for consideration of Rs. 1.72 Crore. Therefore, on sale of both the units the assessee claimed long-term capital gain (being 50% share) in both the units at Rs. 27,103/- and Rs. 98,60,004/-. The assessing officer took his 2 Priya Ravi Gehi view that both the properties were acquired on 11th March 2008, the assets were held by the assessee for a period of less than 36 months, therefore, falls under the category of short-term capital asset. On appeal before Commissioner (Appeals) the claim of assessee was accepted and the assessee was also granted exemption under section 54F. The ld Commissioner (Appeals) took his view that the date of acquisition of Unit No.101 is 01.12.2006 and for unit No.102 is 29.12.2006 and not the date of executions of agreements dated 25.12.2007. Hence, the period of 36 months of holding the asset is complete. Therefore, aggrieved by the order of Commissioner (Appeals) the revenue has filed present appeal before us.
We have heard learned departmental representative (DR) for the revenue and learned authorised representative (AR) of the assessee and perused the material available on record. The learned DR for the revenue submits that the assessee purchased both the units only on 11 March 2008 and the units were sold on 21 September 2010 and on 7th of July 2010, therefore, the qualifying period of 36 months was not completed on the date of transfer of her right in the units. Since the assessee was not entitled for long-term capital gain therefore the gain was treated as short-term capital gain and at junction under section 54F was also rightly denied to the assessee. The occupation certificate was issued by Municipal Corporation in respect of units purchased by assessee only on 27th of February 2009. 3 ITA No. 3974/M/2016 Priya Ravi Gehi Thus the assessee was also not held eligible from the date of occupation certificate issued on 27th of February 2009. In support of his submissions the ld DR relied on the decision of Delhi High Court in Gulshan Malik Vs CIT [2014] 43 taxmann.com 200(Delhi) 4. On the other hand the learned AR of the assessee submits that during the relevant year the assessee sold two office units purchased by her along with her husband. The assets were held by the assessee for more than 36 months, therefore, it was ‘long term capital asset’. The assessee jointly purchased two office units vide allotment letters dated 1 December 2006 and 29 December 2006 respectively. The unit No. 101 was purchased on a consideration of Rs. 1.60 crore and unit No.2 on a consideration of Rs.1.72 crore respectively. The allotment letter recorded the terms, conditions and consideration for the purchase and the specifications of the premises. For unit No.1 the assessee has paid total Rs. 80 lakhs and for unit number No.2 the assessee paid Rs. 86 lakhs. All payments were made through account payee cheques. In pursuance of allotment letters the agreements were executed on 25 December 2007, both the agreements were registered on 11.03.2008. The assessee has not taken the possession of both the units. The assessee sold the unit No.101 by agreement to sale dated 21.09.2010 for a consideration of Rs. 5.00 Crore and unit No.102 vide agreement to sale dated 07.07.2010 for consideration of Rs. 4.30 Crore. In support of his submissions the ld AR 4 Priya Ravi Gehi for the assessee relied on the decision of Tribunal in Anita D. Kanjani Vs ACIT [2017] 79 taxmann.com 67(Mum-tri), decision of Delhi High Court in CIT Vs Ram Gopal [2015] 55taxmann.com 536(Delhi).
We have considered the rival submissions of the parties and have gone through the orders of the authorities below and the material placed before us. During the assessment the assessing officer noted that though the agreements for the purchases of units were entered on 1 December 2006 and on 25 December 2007, but the same was executed on 11 March 2008.
The assessing officer after considering the contention of the assessee took the view that the unit No.101 and 102 have been sold by the assessee on 21 September 2010 & 07/7/2010. Both the units were acquired on 11 March 2008 as per the agreement furnished by assessee. The assets were held by the assessee for a period of less than 36 months and therefore, it falls under the category of short-term capital asset. The assessee urged similar contention before learned Commissioner (Appeals) as urged before us. The learned Commissioner (Appeals) after considering the contention of the assessee observed that when a letter of allotment is issued by a builder to the allotting, the allottee gets valuable right in the units to be constructed and these rights are irrevocable and will continue till the allottee complies with the conditions mentioned in the allotment letter including payment of the instalment by the specified date. The allotment letter prohibits builder transfer or sale the same unit to another 5 Priya Ravi Gehi intended buyer. Therefore, the holding commence from the date of issuance of allotment letter as the allottee gets clear right in the property.
The learned Commissioner (Appeals) also appreciated that the assessee has already paid 41.17% of her share in Unit No. 101 and in Unit No.102 75.58% of her share. The letter of agreements are signed both the parties these are legally enforceable contract creating right in favour of assessee.
The learned Commissioner (Appeals) further relied upon the circular of CBDT No. 471 dated 15 September 1986 and No. 672 dated 16th October 1993 wherein it was clarified that “the allottee gets title to the property on the issue of the allotment letter and the payment of instalment is only a follow-up action and taking the delivery opposition is only a formality”.
On the basis of his observation the learned Commissioner (Appeals) concluded that for the purpose of transfer of unit No. 101 and 102 the allotment letter dated 1 December 2006 and 29 December 2006 respectively will be date of acquisition of property leading to long-term capital gain and not the date of execution of the agreements which is 25 December 2007 and accepted the appeal of the assessee.
The coordinate bench of Mumbai tribunal in Anita D. Kanjai Vs ACIT (supra ) held that in order to determine nature of asset in term of section 2(42A), holding period has to be computed from the date of issue of allotment letter and not from the date when agreement to sale was registered. The facts of the case law relied by ld DR for the revenue in 6 Priya Ravi Gehi Gulshan Malik Vs CIT (supra) are different. In the said case the assessee was not entitled for transfer, until the buyer’s agreement is signed.
Therefore, the assessee in that case was not entitled to transfer his right on the basis of allotment letter. The Hon’ble Delhi High Court in case of CIT versus Ram Gopal (supra) while considering its earlier decision in Gulshan Malik (supra) held as under; “5. This Court, in the decision reported as Gulshan Malik v. CIT [2014] 223 Taxman 243/43 taxmann.com 200 had the occasion to, inter alia, consider what amounted to acquisition of a capital asset - though in the context of a claim that capital gains had accrued due to the sale of the property. The facts in that case were that the assessee had booked a flat, and was recipient of a provisional allotment letter. Subsequently, the transaction was converted into a written agreement to sell. The Court, noting the contentions of the parties and also, significantly, taking note of the definition of "transfer" and "capital asset", was of the opinion that "capital asset" has been defined in extremely wide terms - A reference to Section 2(47), which defines "transfer", and particularly its second Explanation to Clauses (v) and (vi) made it clear that possession, enjoyment of property as well any interest in any of transferrable capital asset was included within the ambit of "capital asset". The Court held importantly that even booking rights or rights to purchase the apartment or to obtain its letter was also capital asset and has categorised the same as under: '7. It is clear that a "capital asset" under the Act is property of "any kind" that is "held" by the assessee. Necessarily, a capital asset must be transferable. Thus, to understand what kind of property can be considered a capital asset, it would be apposite to refer to the definition of transfer in Section 2(47) of the Act. Section 2(47)(v) and (vi), and Explanation 2 make it adequately clear that possession, enjoyment of immovable property, as well as an interest in any asset are all transferable "capital assets". The reference to acquisition "by way of any agreement or any arrangement or in any other manner whatsoever" establishes that it is not conveyance of property or the doctrine of part performance (enacted through Section 53A of the Transfer of Property Act) which result in enforceable rights, for the purposes of Priya Ravi Gehi the Income Tax. The scheme of the Act puts it beyond doubt that even rights or interests in a property are kinds of property that are transferable capital assets. Thus, there is no doubt that booking rights or rights to purchase the apartment or rights to obtain title to the apartment are also capital assets that can be transferable.' 6. In the present case the question is not whether the assessee sold the booking rights and was, therefore, entitled to benefit of capital gains. It is, rather, whether his entering into the transaction and acquiring a property for Rs. 73,27,000/- (acquisition cost) amounted to his acquiring a capital asset. In the light of the definitions of "capital asset" under Section 2(14) and "transfer" under Section 2(47) as discussed in Gulshan Malik (supra), this Court has no doubt that the assessee's contentions were merited. The reference to Suraj Lamps Industries (P.) Ltd. (supra), in the Court's opinion, is of no consequence because the Supreme Court, on that occasion had to deal with a property transaction and whether a sale transfer, based upon confirming a GPA, amounted to sale or conveyance. That decision did not consider - rather had no occasion to deal with Sections 2(14) and 2(47) in the context of a claim of acquisition of rights of property and interest in a capital asset, for the purpose of income tax.
So far as the second issue is concerned, i.e. whether improved cost was deducted, this Court has no manner of doubt that the Revenue does not dispute the acquisition of second property at Model Town. Given that the Revenue does not dispute that the second transaction of purchase took place, it has to necessarily follow that the cost of improvement was deductible. No substantial question of law arises on that score too.”
7. Considering the above factual and legal discussion we do not find any illegality or infirmity in the order passed by Commissioner (Appeals).
Therefore, the ground No.1 of appeal the raised by revenue is dismissed.
Ground No.2 is incidental to the ground No.1. We have noted that the assessee has not claimed that she has taken the possession of both the units, therefore, the grounds of appeal raised by the revenue is not discernible from the facts of the present case. The ld. DR for the revenue has not argued anything in support of this ground of appeal. Hence, dismissed.
9. Ground No.3 to 5 relates to deduction under section 54F and taxing the LTCG in accordance with the provision of 112 of the Income-tax Act. As we have noted that these grounds are consequential in nature and do not require a specific adjudication.
In the result appeal of the revenue is dismissed Order pronounced in open court on 31.07.2018.