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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI R.C. SHARMA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against the order dated 02/01/2017 passed by the Ld. Commissioner of Income Tax (Appeals)-46, Mumbai, for the assessment year 2012-13, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order passed u/s 143 (3) read with section 148 of the Income Tax Act, 1961 (for short ‘the Act’).
The assessee has challenged the impugned order by raising the following grounds:- Ground No. 1: Capital gain on sale of residential house property treated as short term capital gain amounting to Rs. 32,86,739/- The Ld. CIT (A) has erred in law and facts in treating capital gain on sale of residential house property a short term capital gain & in upholding the disallowance made by the Ld. A.O. on account of not allowing exemption u/s 54 of the Income Tax Act, 1961 on the ground that:
2 Assessment Year: 2010-11
(i) The period of holding is to be determined from the date of possession and not from the date of agreement. (ii) Alternatively & without prejudice, though the assessee became owner by way of agreement assessee would become the beneficial owner only on the complete payment.
Ground No. 2: General The AO order being contrary to evidence, law and facts of the case should be amended or modified in the light of the ground deduced above.”
The facts, in brief, are that the assessee filed her return of income for the assessment year under consideration declaring the total income of Rs. 19,48,715/-. Revised return was also filed. The return was processed u/s 143 (1). Subsequently, the case was re-opened u/s 147 of the Act. In response to the notice issued u/s 142 (1), the assessee submitted the details called for by the AO. It was noticed that the assessee and her husband, being joint owners, sold their flat for a total consideration of Rs. 26,67,631/- and the assessee claimed exemption to the extent of her share u/s 54 of the Act. It was noticed that agreement for purchase of the said property was executed on 03.03.2006. The agreement for sale of the said property was executed on 20.06.2009 and agreement for purchase of new property was executed on 22.09.2008. Accordingly, the AO asked the assessee as to why exemption u/s 54 should not be disallowed since, the property was under construction and the same was not held by the assessee for three years. The assessee contended that the residential property on the first floor in Tower-C at Oberoi Woods, MG Goregaon (East), was allotment in their favour vide letter of dated 29.03.2005. The agreement for sale of the said property was registered on 03.03.2009. Hence, the property was held by the assessee for more than three years. The assessee relying on the various judgments of the Hon’ble High Courts and the various Benches of the Tribunal contended that the date of allotment of the flat is the date of purchased for the purposes of section 54/54F of the Act.
3 Assessment Year: 2010-11 However, the AO rejected the contention of the assessee and denied the claim of the assessee holding that the assessee is not entitled for exemption u/s 54 of the Act and added the said amount to the total income of the assessee treating the same as income from short term capital gain. In the first appeal, the Ld. CIT (A) affirmed the action of the AO.
Before us, the Ld. counsel for the assessee submitted that the Ld. CIT (A) has wrongly confirmed the action of the AO. The Ld. counsel further pointed out that the assessee and her husband, being co-owner of the said flat, sold the same and the husband of the assessee claimed exemption u/s 54 in respect of his share of sale consideration. The AO disallowed the claim on the ground that the appellant has not held the property in question for three years. In appeal, the Ld. CIT (A) relying on the various judgments of the High Courts and the CBDT Circular No. 672 dated 16.12.1993 reversed the findings of the Ld. CIT (A) and allowed the exemption u/s 54/54F to the extent of his share i.e., Rs. 32,86,739/-. The Ld. counsel further submitted that there is no reason for taking divergent views in the identical facts and circumstances of the case. The Ld. counsel further submitted that since the AO has not passed the assessment order in accordance with the law laid down by the various High Courts and the decisions of various Benches of the Tribunal, the Ld. CIT(A) ought to have set aside the assessment order. The Ld. counsel invited our attention to the decision of ITAT, Mumbai in the case of Anita D Kanjani vs. ACIT (Mum) ITAT (2017) taxmann.com 67 (Mum Trib.) in which, the Tribunal has held that the holding period should be computed from the date of issue of allotment letter and not on the date of registration of conveyance deed.
On the other hand, the Ld. Departmental Representative (DR) relying on the concurrent findings of the authorities below submitted that since the full and final payment of the consideration was made much later then the date of agreement, the assessee had no right on the said property as on the date of execution of agreement. Since, the possession of said flat was taken by the 4 Assessment Year: 2010-11 assessee in May, 2009, the Ld. CIT(A) has rightly confirmed the action of the AO.
We have heard the rival submissions and also gone through the material placed on record. We notice that in the case of the co-owner of the same property, the Ld.CIT (A) has allowed exemption u/s 54 of the Act taking into consideration the submissions made by the assessee in the light of the various judgments of the High Courts and the decisions of the ITAT. The relevant portion of the order of the Ld. CIT (A) passed in the case of the co-owner reads as under: “5.3 I have considered the appellant’s submission. In this case appellant had booked a residential property in Oberoi Woods, Flat C-105, Goregaon (E), Mumbai – 400063 on 29.03.2005 by making initial payment of Rs. 5,12,750/-.Before 20.06.2006 appellant had paid 50% of his share of Rs. 13,22,895/-. Agreement for the purchase of flat was executed on 15.2.2006 and registered on 31.3.2006. The construction was completed on 03.5.2008 and flat was possessed on 27.5.2009 and sold on 20.6.2009. Appellant considered date of allotment of flat i.e. 29.03.2005 as date of acquisition and computed the Long Term Capital Gain (LTCG). As appellant’s date of acquisition is considered as date of allotment, it complete 3 years of owing the property, hence the appellant had computed Long term capital gain and claimed exemption u/s 54 for Rs. 26,59,277/-. However, AO had disallowed the claim of the appellant on the ground that appellant had only taken possession of the property on 27.5.2009, hence according to AO the appellant had not owned property on 27.5.2009, hence according to AO the appellant had not owned property for more than 3 years considering the date of possession and date of sale of the property, hence claim of exemption u/s 54 is disallowed and computed STCG on the property.
In view of the above decision of Delhi High Court which is upheld by Supreme Court and also above Circular of the Board, AO has to compute the capital gain by considering the date of allotment of property as date if acquisition. For the purpose of section 54/54F here in this case date of allotment for the appellant is 29.3.2005 on which date appellant had paid initial payment and received allotment letter. This date has to be 5 Assessment Year: 2010-11 considered as date of acquisition and capital gains has to be computed. In this case, date of allotment is considered as date of acquisition then appellant had right upon the property for more than 3 years, hence appellant is eligible for exemption u/s 54/54F from the Long term capital gain earned. Appellant’s claim of exemption u/s 54/54F for Rs. 32,86,739/- is allowed.”