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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG, & SHRI O.P. KANT,
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal filed by the revenue is directed against the order of the CIT(A)-XXIV, New Delhi, dated 10/02/2010 for A.Y 2007-08.
2. The grounds raised by the assessee read as under:
“1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in treating the transferred property as long term capital asset instead of short term capital asset for the purposes of computing the capital gain and contravening the 2(47) of the Act where ‘transfer’ has been defined.
Directing the AO to allow deduction u/s 54EC of the Act after necessary verification.”
Briefly stated, the facts giving rise to this appeal are that the seventy seven years old lady assessee, derives income from house property and investments made in mutual funds and bank deposits. One of the properties situated at Y-36, Regency Park – II, DLF Phase– IV, Gurgaon was sold on 12.4.2006 for a total sale consideration of Rs. 67 lakhs. The AO treated the gain arising from this sale of residential flat as short term capital gains [STCG] as against long term capital gains [LTCG] shown by the assessee. The assessee preferred an appeal before the ld. CIT(A) which was allowed and the first appellate authority accepted the claim of the assessee by allowing the claim of the assessee and also directed the AO to allow deduction u/s 54EC of the Income tax Act, 1961 [for short, 'the Act']. Now the aggrieved Revenue is before this Tribunal in the second appeal with the grounds raised as mentioned above.
We have heard the rival submissions and have perused the relevant material on record. The ld. DR supporting the action of the AO contended that the possession of the said flat was provided to the assessee on 10.7.2000 and the conveyance deed was executed by the 27.6.2003 which was sold on 12.4.2006 thus does not qualify claim of LTCG and exemption u/s 54EC of the Act. The ld. DR vehemently contended that the ld. CIT(A) incorrectly held that as per section 53A of the Transfer of Property Act, the assessee became deemed owner of the said property on 22.11.1995 the date of document executed transferring the rights in the property as the assessee is enjoying the property since then and the department has already taxed income from this house property u/s 22 of the Act, even prior to the registering the immovable property.
Replying to the above, the ld. AR supported the order of the ld. CIT(A) and drew our attention to this fact that the said flat was purchased by the assessee from DR. [Mrs] Hema Mukherjee on 14.11.1995 for a consideration of Rs. 9,50,000/- and the assessee made payment of all subsequent dues to the builder i.e. DLF Universal Ltd. It was also pointed out by the ld. DR that possession of the said flat was give to the assessee on 10.7.2000 and re rented the said flat to Pepsico Co and the rental income earned therefrom was offered to tax as income from house property. The ld. AR contended that the substantial amount of consideration of Rs. 9,50,000/- was paid on 14.11.1995 to original allottee Dr.Hema and the assessee became owner of the said flat on 14.11.1995 by making substantial payment and investments. The ld. AR also contended that he ld. CIT(A) rightly 22.11.1995 and thus the income arise on the sale of the said flat on 12.4.2006 is LTCG and the assessee is also entitled for exemption u/s 54EC of the Act.
On careful consideration of the above from the first appellate order, we note that the ld. CIT(A) granted relief to the assessee with the following observations :
“ 4.1 According to Section 2(14) capital asset means property of any kind. Capital asset has been interpreted by various courts that the capital asset has a wide ambit to include rights other than those which are specifically excluded under the Act. The definition of transfer in section 2(47) of the Income-tax Act, 1961, is wide enough to include relinquishment of an asset. The transfer u/s 2(47) includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein- or the compulsory acquisition thereof under any law. Section 45 provides taxability of profits or gains arising from the transfer of a capital asset. Here the dispute is that whether the asset is a long term or otherwise. I am of the view, considering the aforesaid decisions and the object of the Act, the definition given in the Act and provisions of section 53A of the Transfer of the Property Act that the appellant became deemed owner as on 22.11.1995, the date of document executed transferring the rights in the property, as the assessee is enjoying the property since then and the department has already taxed income from this house property u/s 22 of the I. T. Act, even prior to registering the sale of immovable property. The conveyance deed registered on 27-06-2003 recognizes the agreement Vendor builder, allottee and the assessee and in consideration of which the aforesaid conveyance deed was registered. My above inference is buttressed by the judgment of the Delhi Tribunal in the case of Jitendra Mohan Vs. ITO 11 SOT 594 (Del). The relevant extract of this judgment of the Delhi Tribunal is extracted as under:
“The relevant and material facts for the disposal of this issue involved in the grounds of appeal taken by the assessee are that the assessee has been allotted a ‘D’ type industrial shed at Kirti Nagar Packaging Complex by Delhi State Industrial Development Corporation Ltd. (hereinafter called ‘DSIDC’) vide letter dt. 8th July, 1994 which was not of any specific shed as the same was to be decided later on through a draw of lots. On 27th August, 1996 by a draw of lots the Shed No. D-13 was allotted to the assessee subject to payment of all outstanding dues and interest. The assessee was allotted the plot on installment basis and the 1st installment of Rs. 60,000 was paid on 21st October, 1993 and a 2nd installment of Rs. 1,25,255 was paid on 28th December, 1994, similarly, other installments were paid by the assessee on different dates as given in the chart appearing at p. 2 of paper book and the final installment of Rs. 1,64,561 was paid by the assessee on 19th December, 1997. In this manner a total sum of Rs. 14,04,193.50 was spent by the assessee towards the purchase of this industrial shed and the indexed cost of the same was worked out by the assessee at Rs. 1,958,008 as calculated at p. 2 of the chart. The possession of the said industrial shed was handed over to the assessee by DSIDC on 18th May, 1998 and the plot was sold for a sum of Rs. 17 lakhs by the assessee on 15th December, 2000 and after Rs. 2,58,008.
18. Now the question required to be determined is whether the assessee held any property right in he shed on the date of allotment i.e., 8th July, 1994 of the shed by DSIDC or held the property right in the shed on 28th December, 1994 when the first installment of Rs. 1,25,255 was paid by the assessee after the date of allotment. In the instant case according to the learned Authorised Representative the assessee held the property right in the shed on 28th December, 1994 when he paid the first installment after the allotment, soykfie suffered a long-term capital loss. On the other hand according to the learned Departmental Representative, as »well as per the orders of tax authorities below, the assessee held property right in the shed only after the payment of the final installment on 19th December, 1997, and when the assessee was given the possession on 18th May, 1998, so, the shed was held by the assessee for a period of less than 36 months on the date of the sale i.e., on 15th December, 2000 and it was to be treated as short-term capital asset.
Now keeping in view the provision of s. 2(14) of the IT Act, as well as, the ratio of the above-mentioned decisions (supra) it is absolutely dear that the words 'capital asset' defined in s. 2(14) of the Act and the word 'property' used in this section is of the widest amplitude. Which means that any right which a person can be called to hold in ‘a capital asset would be included in the word 'property used and included in the definition of 'capital asset' in s. 2(14) of the Act. Again reverting to the facts of the instant case wherein by a draw of lots the assessee was declared successful for the allotment of a shed, subject to payment of all outstanding dues and interests and in lieu thereof the assessee paid an installment of Rs. 1,25,255 on 28the December, 1994 and thereafter continued paying the remaining installments to DSIDC, on account of which a particular Shed No. D-13 was allotted to the assessee and ultimately the possession of the same was handed over to the assessee on 28th May, 1998 and thereafter the assessee sold the "same on 15th December, 2000. It means that when in a draw of lots an allotment of a shed was made to the assessee on installment basis after a payment of installment of Rs. 1,25,255 on 28th December, 1994 as per the wider meaning of the word 'property' used in the definition of 'capital asset' in s. 2(14) of the Act the property / shed was held by the assessee for bringing the shed within the meaning of definition of the words 'capital asset' on 28th December, 1994 on payment of installment of Rs. 1,25,255, hence, the sale of the shed by the assessee on 15th December, 2000, after holding the same for a period of more than 36 months is to be treated as long-term capital asset and the sale of the same resulting into loss / gain also amounted to long-term capital loss/gain.
Hence, for the reasons stated above, in our opinion the tax authorities below without considering the proper meaning of the words 'capital asset' held by the assessee and 'property' used in s. 2(14) of the Act have wrongly applied that decision of Bombay High Court in Smt. R.R. Sood's case (supra) while concluding that only when the assessee paid the final 19th December, 1997 and got the possession on 18th May, 1998 the assessee held the asset / shed on 18th May, 1998 and the sale of the same by the assessee on 15th December, 2000 has to be treated as short-term capital asset in the hands of the assessee resulting into short-term capital gain. For the reasons stated above, we set aside the orders of tax authorities below and allow the grounds of appeal taken by the assessee." 4.2 I have carefully considered the submission of the appellant and perused material on record. There is substance in the submission of the AR. In view of the foregoing discussion, judicial pronouncements, reasons and case laws mentioned in the submission of the AR, it is held that the gains derived from the relevant property duly mentioned in the assessment order is assessable as long term capital gains. This inference is based on proper application of law on given facts. The learned Assessing Officer therefore, is directed to assess the gains derived from transfer of the property under reference as long term capital gains.
4.3 Since the gains derived from transfer of the property has to be assessed as long term capital gains, therefore, the deduction u/s 54EC of the I. T. Act and indexation of the cost of acquisition are allowable. However, the AO is directed to allow deduction u/s 54EC of the I. T. Act after necessary verification. Further, the indexation of the cost of acquisition has to be allowed after working out the actual cost of acquisition. Accordingly, the AO is directed to do needful.”
In the light of the above dicta laid down by the co ordinate ITAT Delhi in the case of Jitendra Mohan [supra], when we analyse the facts of the present case and conclusion of the ld. CIT(A), then we are inclined to hold that in the present case the property situated at 436, Regency Part -11, DLF Phase IV, Gurgaon was held by the assessee on 22.11.1995 on payment o Rs. 50,000/- to original allottee Dr. Hema hence the income accrued from the sale of the said property i.e. the flat by the assessee on 12.4.2000 after holding the same for more than 36 months has to be treated as LTCG and the assessee consequently the assessee was rightly held as eligible for exemption u/s 54EC of the Act by the ld. CIT(A). We are unable to see any valid reason to interfere with the conclusion of the first appellate authority and thus we uphold the same. Accordingly, ground Nos. 1 and 2 of the Revenue being devoid of merits are dismissed.
In the result, the appeal of the Revenue is jettisoned.
The order is pronounced in the open court on 18.03.2016.