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Facts
The assessee appealed against the Ld.CIT(A)'s order for AY 2016-17, which treated capital gains from property sale as short-term and disallowed conversion charges and indexation benefit on cost of construction. The revenue authorities considered the MCD plan sanctioned on 26.03.2014 for determining the holding period, while the assessee contended the actual sanction was on 14.12.2009, qualifying for long-term capital gains and indexation.
Held
The Tribunal, following a precedent set in a co-owner's case with an identical issue, held that the Ld.CIT(A) erred in determining short-term capital gains. The matter is remanded to the Assessing Officer to re-compute the capital gains as long-term by properly considering the approval date of the Delhi Nagar Nigam and providing an adequate opportunity of being heard to the assessee.
Key Issues
Whether the capital gains arising from the property sale should be classified as short-term or long-term, and consequently, whether the assessee is entitled to indexation benefit on the cost of construction and claiming conversion charges, primarily dependent on the correct date of the MCD plan sanction for determining the property's holding period.
Sections Cited
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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI CHALLA NAGENDRA PRASAD
सुनवाईक�तारीख/ Date of hearing: 02.11.2023 30.01.2024 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Assessee against the order of the Ld.CIT(A)-30, New Delhi dated 18.10.2022 for the AY 2016-17. The assessee has raised the following grounds in his appeal: - 1. “Order of the Ld.CIT(A) is bad in law and against the facts of the case.
2. The Ld.CIT(A) and Ld.AO are totally unjustified in not allowing the claim of assessee on account of conversion charges to the tune of Rs.17,12,535/- i.e. 50% of total conversion charges paid to MCD. 1
I.T.A.No.2941/Del/2022
3. The Ld.CIT(A) is not justified in not allowing cost of construction on indexation basis in the calculation of STCG where the property remained more than 3 years with the assessee.
4. The Ld.CIT(A) is totally unjustified in taking cost of construction Rs.37,42,405/- in place of Rs.46,33,271/-.” 2. The Ld. Counsel for the assessee, at the outset, submits that assessee is a co-owner along with late Smt. Sushma Khanna and the Tribunal in the co-owner’s case namely Smt. Sushma Khanna represented by legal heir Shri Raj Kishan Khanna in dated 29.09.2023 decided identical issue directing the Assessing Officer (for short referred as the “AO”) to compute the long term capital gains as against computation made by the AO as short term capital gains. Copy of the order is placed on record.
Heard rival submissions. On perusal of the order of the Tribunal in co-owner’s case, we find that the issues in appeal have been considered by the Tribunal and restored the issues to the file of the AO to compute the long term capital gains by taking into consideration the approval of the Delhi Nagar Nigam observing as under:
“2. Following grounds have been raised by the assessee in this appeal:
I.T.A.No.2941/Del/2022
Order of the Ld.CIT(A) is bad in law and against the facts of the case.
The Ld.CIT(A) and Ld.AO are totally unjustified in not allowing the claim of assessee on account of conversion charges to the tune of Rs.17,12,535/- i.e. 50%of total conversion charges paid to MCD.
3. The Ld. CIT(A) is not justified in not allowing cost of construction on indexation basis in the calculation of STCG where the property remained more than 3 years with the assessee.
4. The Ld.CIT(A) is totally unjustified in taking cost of construction as Rs.37,42,405/- in place of Rs.46,33,271/- by ignoring indexation cost. The observation of the Ld.CIT(A) is wrong in holding that MCD plan was sanctioned on 26.03.2014 and property was sold on 04.03.2016. In fact the MCD plan was sanctioned on 14.12.2009 and was valid up to 13.12.2014. So the assessee was eligible for indexation cost.” 3. Heard the arguments of both the parties and perused the material available on record. 4. The Ld.CIT(A) at page no.9 of the order concurred with the observation with the Assessing Officer and in determination of “Short Term Capital Gains” (STCG) as the property was reconstructed after demolition of old house and after getting the plan sanctioned from MCD on 26.03.2014. As the property was not in existence for a period of more than 3 years…….”
5. The property was sold on 04.03.2016 and hence the revenue authorities held that the property was not in existence for a period of more than 3 years Short Term Capital Gains have been determined. 6. The approval of the Delhi Nagar Nigam is reproduced below:
I.T.A.No.2941/Del/2022
The Delhi Nagar Nigam has approved the permission on 14.12.2009 which was based on the letter of the assessee dated 10.08.2009 and the same was valid upto 13.12.2014.
From the above, we hold that the Ld.CIT(A) fallen into error in determining the period of Short Term 4
I.T.A.No.2941/Del/2022
Capital and hence the matter is remanded to the file of the Jurisdictional Assessing Officer (JAO) to compute the Long Term Capital Gains by properly taking into consideration the approval of the Delhi Nagam Nigam.”
Following the order of the Tribunal, we restore this appeal to the file of the AO to compute the long term capital gain, keeping in view the directions of the Tribunal in the co-owner’s case namely Late Smt. Sushma Khanna represented by legal heir Shri Raj Kishan Khanna. Needless to say, the AO shall provide adequate opportunity of being heard to the assessee.
In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 30/01/2024