TINA KAPOOR,MUMBAI vs. ITO 26(2)(1), MUMBAI

ORDER

PER N.K. PRADHAN, AM

by the appellant in this appeal is that the Ld. CIT(A) erred in (i) enhancing the assessment, (ii) holding that the gains of Rs.1,76,84,336/- (before indexed cost of acquisition) arising on transfer of residential properties at Sterling Whitefields, Hyderabad and 1/3rd share in RNA Mirage, Worli, Mumbai during the previous year relevant to AY 2011-12 are “Short Term Capital Gains” (STCG) as against “Long Term Capital Gains” (LTCG) as claimed by the appellant in the return of income and accepted by the Assessing Officer (AO) during the course of assessment u/s 143(3), and (iii) holding that for the purpose of sections 2(29A) & 2(42A), the period of holding is to be reckoned from the date of possession.

3. Briefly stated, the facts of the case are that the Assessing Officer (AO) observed that during year under consideration, the appellant had sold two house properties viz. (1) Flat No. 404 at Sterling Whitefield, Hyderabad for Rs.54,00,000/-on 14.03.2011 and (2) Flat No. 2902 at RNA Mirage, Worli, Mumbai for Rs.7,00,00,000/- on 10.03.2011 and earned capital gains of Rs.1,37,84,998/-. Out of the above sum, she had deposited Rs.1,33,02,998/- in Capital Gain Account Scheme (CGAS) on 05.09.2011 and claimed deduction u/s 54 in the return of income filed u/s 139(4) of the Act. The AO denied the claim of the appellant on the ground that the deposit made in CGAS on 05.09.2011 was after the due date of filing the ‘Return of Income’ u/s 139(1) of the Act. Further the AO observed that the appellant invested the amount of capital gains in an under-construction property of M/s Rustomjjee Reality Pvt. Ltd. by way of allotment letter dated 08.03.2013. He further found that (i) the same was a proposal, (ii) the appellant had not entered into any legal agreement which was not registered.

In view of the above, the AO denied the claim of exemption u/s 54 and brought to tax Rs.1,37,84,998/-. 4. Aggrieved by the order of the AO, the appellant filed an appeal before the Ld. CIT(A). One of the grounds of appeal was that the AO had erroneously held that the assessee is not eligible for deduction u/s 54 as the return of income was filed u/s 139(4) of the Act. The Ld. CIT(A) relying on the case-laws allowed the appeal on the above ground of the assessee. However, the Ld. CIT(A) observed in respect of Flat 2902 at RNA Mirage, Worli, Mumbai, the possession letter by the builder was given to the appellant on 20.04.2010. Therefore, he computed the holding period from April 2010 to March 2011 and this being less than 36 months, treated the gains as STCG. Similarly, in the case of Flat No. 404 at Sterling Whitefields, Hyderabad, the Ld. CIT(A) observed that the same was held by the assessee only on 19.09.2010 and since the property was held between 19.09.2010 and 14.03.2011, he held the gains arising out of the sale as STCG. The Ld. CIT(A) thus directed the AO to compute the gains of Rs.1,76,84,336/- as STCG.

5. Before us, the Ld. counsel of the appellant submits that the date of purchase agreement and date of registration and payment of stamp duty for Flat 2902 at RNA Mirage, Worli, Mumbai is 27.02.2007.

It is also submitted by him that the date of purchase agreement and date of registration and payment of stamp duty for Flat No. 404 at Sterling Whitefields, Hyderabad is 29.03.2007. In view of the above, the Ld. counsel submits that it is a case of LTCG. Reliance is placed by him on the decision in (i) Anita D. Kanjani v. ACIT [(2017) 49CCH 0043], (ii) Richa Bagrodia v. DCIT [ITA No. 3601/M/2012] dated 22.04.2014, (iii) Meena A Hemnani v. ITO [ITA No. 5998/M/2010] dated 17.01.2014], (iv) ACIT v. Smt. Vandana Rana Roy [ITA No. 6173/M/2011] dated 07.11.2012], (v) CIT v. Vimal Lalchand Mutha 187 ITR 613 (Bom.) and CBDT Circular No. 471 dated 15.10.1986.

We begin with the 1st issue. We are of the considered view that immovable property is not conveyed by delivery of possession, but by a duly registered deed. Further, it is the date of execution of registered document, not the date of delivery of possession or the date of registration of document which is relevant. Once the executed documents are registered, the transfer will take place on the date of execution of documents and not on the date of registration of documents. It has been held so in Alapati Venkataramiah v. CIT (1965) 57 ITR 185 (SC), CIT v. Podar Cements Pvt. Ltd. (1997) 226 ITR 625 (SC) and CIT v. Vishnu Trading & Investment Co. (2003) 259 ITR 724 (Raj). We find that in the instant case the date of registration and payment of stamp duty in respect of Flat 2902 at RNA Mirage, Worli, Mumbai is 27.02.2007. The sale agreement is 10.03.2011. The date of registration and payment of stamp duty in the case of Flat 404 at Sterling Whitefields, Hyderabad is 29.03.2007. The sale agreement is 14.03.2011 Thus, following the decisions mentioned hereinbefore, we set aside the order of the Ld. CIT(A) that it is a case of STCG and we hold that it is a case of LTCG. Thus the 1st issue is decided in favour of the appellant. 7.1 Now we arrive at the 2nd issue. As per the Act, capital gain arising on the transfer of a residential house is exempt u/s 54 in the following circumstances: (i) the asset transferred is a residential house, the income of which is chargeable under the head “income from house property”; (ii) the asset transferred is a long-term capital asset and hence there is a long-term capital gain; (iii) the asset has been transferred by an individual or a Hindu Undivided Family; (iv) the assessee has, purchased one residential house property in India within one year before or two years after the date on which transfer took place or constructed the same within 3 years after the date of such transfer. If all these four conditions are satisfied the assessee can claim the exemption u/s 54. We find that in the instant case, the appellant has not filed the relevant documents/evidence in respect of its property in M/s Rustomjjee Reality Pvt. Ltd. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to examine the condition to be fulfilled for claiming exemption u/s 54 delineated above and then pass an order after giving reasonable opportunity of being heard to the assessee. We direct the appellant to file the relevant documents/evidence on the above subject before the AO. The 2nd issue is allowed for statistical purposes. As the matter has been restored to the file of the AO, we are not adverting to the case laws relied on by the Ld. counsel and Ld. DR.