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Income Tax Appellate Tribunal, “J”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- Mumbai, for the assessment year 2010-11, on the following grounds :-
1. (a) On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals), has erred in considering the Long Term Capital Gains as Short Term Capital Gains. (b) The learned Commissioner of Income Tax (Appeals) has erred in denying exemption under Section 54 of the Income Tax Act, 1961. (c) The learned Commissioner of Income Tax (Appeals) has erred in not allowing exemption under Section 54 F of the Income Tax Act, 1961, considering the facts.
2. On the facts and circumstances, the learned Commissioner of Income Tax (Appeals) erred in disallowing interest paid to the tune of Rs. 13,50,113/- from the head - Income from Other Sources. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in not allowing the deduction of interest of Rs. 13,50,113/- from the head - Income from House Property.
3. Rival contentions have been heard and record perused. The facts of the case are that the assessee is a partner in four firms and declared income from remuneration and interest from the firms, rental income and interest income and long term capital gains. During the course of scrutiny assessment the AO found that assessee has booked a premise on 30-9- 2004 vide allotment letter issued by M/s Dinsha Developers. However, formal purchase agreement was entered on 10-9-2009 and possession of the said premises was also obtained on 10-9-2009, which was sold by the assessee on 1-10-2009. As per the AO the assessee was owner of the premise for a period of less than 36 months, therefore, not eligible for long term capital gains. As per the AO since possession was taken on 10-9- 2009, the assessee remained owner of the premises only for a period of one month. Action of the AO was confirmed by CIT(A). Against, which assessee is in further appeal before us.
We have heard rival contentions and found from the record that assessee was allotted flat by M/s Dinsha Developers vide letter dated 30- 9-2004. Clause 5 of the allotment letter reads as under :- “5. As per your request, we hereby intend to reserve for you a Flat No.B-1103-Building known as KSHITIJ being constructed on Plot No.3, Sector 19, Sanpada, Navi Mumbai of approximately Built Up Area 72.970 sq. Mtrs. inclusive of chargeable lofts, the facilities and proportionate passage, walls, staircase, lift walls, otla, open space, balcony, for the lump sum price of Rs.2105538/- (Rupees Twenty One lac five thousand Five Hundred Thirty Eight Only) which sum shall be paid by you to us. However, the AO relied on the clause-8 of the allotment letter according to which, in case of any violation on the part of the assessee for payment of instalment, the allotment made by M/s Dinsha Developers shall be 3 cancelled and the instalment money so paid will not be refunded without any interest. In view of the above, the AO did not give any cognizance to the allotment letter and held that since the possession was given only on 10-9-2009, which was sold on 1-10-2009, the assessee was held only short term capital asset, profit thereon is liable to tax as short term capital gain under provisions of Section 2 sub-section 14. However, right in a property vide an allotment letter is also a capital asset. The AO has also agreed that right in the property was given to the assessee vide allotment letter. As per Circular No.471 dated 15-10-1986 read with CBDT Circular No.672 dated 16-12-1993, the allottee gets title to the property on issuance of allotment letter and subsequent payments is merely a follow up action and taking possession is merely a formality. Making agreement at a later date or taking possession at a later date cannot be held as a right distinct from the one procured by way of allotment letter.
We found that at the time of allotment the assessee has also made payment of Rs.2 lakhs vide DD No.641073, dated 8-12-2003 and Rs.8 lakhs vide DD No.641074 dated 20-12-2003. Further the payment was made by assessee on 5-2-2004 vide DD No.309531 dated 5-2-2004 amounting to Rs.10 lakhs and Rs.24 lakhs vide DD No.028138 dated 9-2- 2004. We had also verified the bank statement which confirms the payments made by the assessee. The Hon’ble Madras High Court in the case of S.R.Jeyashankar, 373 ITR 120, held that where the assessee had entered into an agreement with builder for purchase of undivided share of land and construction, the date of allotment of undivided share in land