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Income Tax Appellate Tribunal, BENCH ‘SMC’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM]
This appeal by the revenue is directed against the order of the Commissioner of Income Tax-(A)-9, Kolkata relating to A.Y. 2013-14 on the following grounds :- “1. The Order of the Ld. CIT (A) is arbitrary, illegal, perverse and bad in law. 2. For that the Ld. CIT(A) erred in holding that Section 50C of the Act did not apply to the booking rights and to treat the Sale consideration at Rs.65,00,000/ - and not at Rs.94, 14,000/-. 3. For that the Ld. CIT(A) erred in holding that the booking rights was held for more than 36 months hence the same is to be considered as long term capital asset. He has further erred in directing to treat the income from transfer of the property as Long Term Capital Gains and also allow the benefit of indexation as per section 48 of the it Act in computing the capital gains. 4. For that the Ld CIT (A) erred in reducing the returned income of the assessee. 5. For that the Revenue craves leave to add, alter or amend any ground before or at the time of hearing.” 2. The assessee is a HUF and derives income from rent and capital gains. It filed its return of income on 16.07.2013 declaring gross total income of Rs.8,58,201/-. The facts of the issue that arises for my consideration is brought out at para 2 pages 2 to 5
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of his order. For the sake of brevity the same is not extracted. In brief the facts are as follows :- The assessee booked a flat in a building complex by name Ideal Heights for consideration of Rs.48,18,875/-. He claimed that he acquired booking rights in the flat. The assessee claims that before completion of the building, he transferred and nominated these booking rights in the flat to, Mr.Mohan Lal Dugar and Mr. Abhishek Kumar Dugar for the consideration of Rs.65,00,000/- and thus earned Rs.14,55,545/-. The assesse claimed expenses of Rs.7,68,522/- and the net income of Rs.66,87.023/- was offered to tax under the head “other sources”. The AO was of the view that the assessee was offered possession of the flat by the developer and therefore it ha to be taken that the flat was delivered to the assessee and hence the transaction in question was for transfer of a flat and not of booking rights and hence the gain is assessable on capital gains. Hence the AO treated the date of acquisition of the property as 11.02.2012 and the date of transfer as 26.03.2013 and treated the transaction as short term capital gain. He applied section 50C of the Act and substituted the sale consideration. Short term capital gain was computed at Rs.45,95,125/-.
Aggrieved the assessee carried the matter in appeal. The First Appellate Authority agreed with the contentions of the assessee that what was transferred was booking rights and not immovable property in the form of a flat. Consequently he held that section 50C of the Act were not applicable. He gave a factual finding that the assessee has never taken possession of the flat and had nominated the buyer in its place. He directed the AO to treat the transfer of property as long term capital gain. Aggrieved the revenue is before us on appeal.
After hearing the rival contentions and considering the papers on record of the authorities below and the case law cited I held as follows:-
The important dates are given in part-VIII at page-5 of the assessment order which is extracted for the reference :
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“• Date of Booking of flat 27.12.2006 • Date of Allotment of flat 19.01.2007 • Date of Agreement for Purchase of Flat by the assessee 15.09.2008 • Date of Last instalment of Payment made by the assessee 19.05.2012 • Date of Possession offered for fit out/interiors to assessee 01.08.20111 • Date of Residential Possession offered To assessee 11.04.2012 • Date of Agreement for Sale of flat by assessee 25.01.2013 • Date of NOC given by assessee to Developer Regarding transfer of property and receipt of 65Lakh from Mohan Lal & Abhishek Dugar 12.02.2013 • Date of Conveyance for Sale of flat by assessee 26.03.2013”
A perusal of the paper book filed by the assessee demonstrates that the possession was never taken by the assessee. Recitals at para-9 of the conveyance deed executed by the builder M/s. Idle Heights Pvt. Ltd in favour of Mr.Mohan Lal Dugar and Mr. Abhishek Kumar Dugar and Shri M.K.Singhania, demonstrates that the possession was handed over by the developer to these purchasers on 26.03.2013. Hence this proves that the assessee has never received possession of this property. The asset acquired was rights in the property, by way of an agreement and what was transferred was there rights. These rights are capital asset.
The Hon’ble Madras High Court in the case of CIT vs Sri.SR Jeyashankar 373 ITR 120 (Madras) held as follows :- “Assessability of asset sale - STCG or LTCG - sale of right - date of allotment letter issued by the builder - Whether the asset which was sold by the assessee would be subject to short term capital gains in terms of Section 2(42A) or long term capital gains in terms of Section 2(29A) - Held that- The Tribunal placed reliance on Mrs.Madhu Kaul v. CIT [Z014 (2) TMI 1117 - PUNJAB & HARYANA HIGH COURT] - a right has been conferred on the allottee to hold a flat which was later identified and possession delivered on a later date - the mere fact that possession was delivered later does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter and the payment of balance instalments, identification of a particular flat and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter - the allottee gets the title to the property on issuance of allotment letter and the payment in instalments is only a
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consequential act upon which delivery of possession to the property flows - thus, there is no reason as to why the same principle should not be applied to all transactions based on agreements in respect of capital asset - the breach of agreement would only give right to the beneficiary for enforcing the right over the property - thus, the order of the Tribunal is upheld - Decided against revenue. “
Applying the proposition laid down in this case to the fact of this case I uphold the finding of the ld. CIT(A) that the asset is a long term capital and liable to long term capital gain. As what is sold is not an immovable property, section 50C does not apply. 7. Hence I uphold the finding of the ld. CIT(A) at 4 and 4.1. of his order.
In the result the appeal of the revenue is dismissed.
Order pronounced in the Court on 25/10/2017.
Sd/- [ J.Sudhakar Reddy ] Accountant Member Dated : 25/10/2017. [RG Sr.PS] Copy of the order forwarded to: 1.Mahesh Kumar Singhania (HUF), 2A, Room No.5, 9th Floor, Commerce House, Ganesh Chandra Avenue, Kolkta-700013. 2. I.T.O., Ward-31(1), Kolkata. 3. C.I.T.(A)- 9, Kolkata 4. C.I.T-4, Kolkata 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches
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