ITO 16(1)(4), MUMBAI vs. JITENDRA A SHAH, MUMBAI

The appeal is filed by the Revenue and the Cross objection is filed by the assessee against the order of the Ld. CIT(A)-27, Mumbai dated 31.01.2014 pertaining to assessment year 2010-11.

The only issue in the appeal of the Revenue is that whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in holding that Capital Gain arising on transfer of flat was a Long Term Capital Gain and not Short Term Capital Gain when holding period was less than 36 months from the date of purchase of property.

Brief facts are that assessee is an individual and filed its return of income on 1.02.2011 declaring total income of Rs. 7,65,550/-. The assessment was completed u/s. 143(3) on 7.12.2012 determining taxable income at Rs. 55,16,760/-. While completing the assessment, the Assessing Officer computed the capital gain on sale of flat of the assessee at Shreyansh, Kesar Baug CHS Ltd., Borivali, Mumbai as Short Term Capital Gain as against the assessee’s computation of Long Term Capital Gain. On appeal, the Ld. CIT(A) held that the computation of the assessee as Long Term Capital Gain is correct by allowing the appeal of the assessee.

The Ld. Departmental Representative submits that the Assessing Officer has taken the date of sale deed as relevant date for computing the period of 36 months necessary for a capital asset to qualify as Long Term Capital asset as against the date of allotment considered by the assessee in computing the capital gains. He strongly supports the orders of the Assessing Officer.

The Ld. Counsel for the assessee strongly places reliance on the orders of the Ld. CIT(A) holding that as on the date of allotment letter

We have heard the rival contentions, perused the orders of the lower authorities and the case law relied on by the Ld. Counsel. In this case, the assessee sold his flat situated at A-703, 7th Floor, Kesar Baug CHS Ltd., Borivali, Mumbai by entering into agreement for sale dated 4.12.2009 for Rs. 70 lakhs. The assessee claimed index cost of acquisition and computed the Long Term Capital Gain at Rs. 40,51,026/-. The said Long Term Capital Gain was claimed exempt u/s. 54 of the Act and shown NIL income from capital gains. The assessee computed Long Term Capital Gain taking the date of allotment i.e. 2.2.2005 as the relevant date for computing period of 36 months as holding period. According to the assessee, more than 36 months had elapsed between the date of acquisition of capital assets i.e. on 2.2.2005 and the date of transfer/sale i.e. 4.12.2009, thus the holding period is more than 36 months. The assessee computed Long Term Capital Gain accordingly. The Assessing Officer however computed the Short Term Capital Gain by taking the date of purchase deed i.e. 26.4.2007 as the relevant date for computing

The Ld. CIT(A) taking note of the fact that the assessee had made full payment of consideration on 2.2.2005 and obtained allotment letter from the builder on the same day considered the date of allotment as the date for computing the period of 36 months as against the purchase date adopted by the Assessing Officer. While taking this view the Ld. CIT(A) followed the decision of the Hon’ble Bombay High Court in the case of Hilla J.B. Wadia (supra) and also taking note of the CBDT Circular No. 495 dated 22.9.1987 concluded that the Long Term Capital Gain computed by the assessee is in order. While holding so, the Ld. CIT(A) observed as under:

On going through the order of the Ld. CIT(A) and the findings therein, we do not find any infirmity in the order passed by the Ld. CIT(A) in holding that the date of allotment should be taken for computing the holding period of 36 months for arriving at Long term capital gain in this case. In the circumstances, we uphold the order of the Ld. CIT(A). The appeal filed by the Revenue is dismissed.

The cross objection filed by the assessee is only in support of the order of the Ld. CIT(A). As the Revenue’s appeal is dismissed upholding the order of the Ld. CIT(A), the cross objection become infructuous and the same is dismissed.