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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI ASHWANI TANEJA
आदेश / O R D E R
PER C.N. PRASAD, JM:
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
3 & C.O. No. 127/M/20-15 dated 2.2.2005, the assessee had acquired substantial domain over the fact as full consideration was paid and therefore, when the flat was ultimately sold in December, 2009, more than 36 months had elapsed giving rise to Long Term Capital Gain. The Ld. Counsel for the assessee submits that the Ld. CIT(A) following the decision of the Jurisdictional High Court in the case of Hilla J.B. Wadia (216 ITR 376) and taking note of the CBDT Circular No. 495 dated 22.9.1987 held that the period of holding is more than 36 months , therefore the gain is to be computed as Long Term Capital Gain.
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:
“2.4.8. In the instant case, the appellant had made the full payment by way of cheque No.445416 dated 16.1 0.2004 (Rs.11 ,00,000/-) and cheque No.227006 dated 02.02:2005 (Rs.10,00,000/-) on the basis of which allotment letter was issued to him on 02.02.2005 which is not under dispute. What is also not under dispute is the date of sale agreement of the premises in question on 04.12.2009.
2.4.9 In view of the same, even without admitting the additional evidence, it is clear that as on the date of allotment letter (02.02.2005), the appellant had acquired substantial domain over the flat as full consideration was paid and therefore, when the flat was ultimately sold in December 2009, more than 36 months had elapsed giving rise to LTCG and therefore, no merit could be found in the action of the Ld AO in treating it as STCG. As brought out earlier, the decision in the case of Smt. R.R. Sood (supra) was given in light of the pre amended section and after the amendment w.e.f. 1.4.88 which has been explained-in detail by the CBDT Circular No.495 dated 22.09.1987 reproduced earlier, it has been held that any arrangement whereby person acquires any right in any building which is either being constructed or which is to be constructed gives rise to acquisition
5 & C.O. No. 127/M/20-15 of rights which are taxable under the head 'capital gains. It was also clearly stated in the above circular that transactions of this nature are not required to be registered under the Registration Act, 1908 for giving rise to any rights, the transfer of which would give rise to capital gains tax, thus, clearly establishing that even without a transfer of title of flat by the builder in a multi- storied construction, if an arrangement of full payment is made and a letter of allotment is issued, the person acquires a right in such a flat, the transfer of which would definitely give rise to capital gains and if the duration of holding of such rights is more than 36 months which is a case at hand, it would certainly be taxed as LTCG. Ld. A.O. has also not doubted the acquisition of new property in respect of which deduction u/s.54 has been claimed and therefore, it cannot also be said that there was some ulterior motive in getting an allotment letter issued on 02.02.2005 when the property was ultimately sold on 04.12.2009. Thus, respectfully following the decision of the Hon'ble Bombay High Court in the case of Hilla J.B. Wadia (supra) and in light of the CBDT Circular No.495 (supra), the issue has to be decided in favour of the appellant. Accordingly, Ground Nos. 1 & 2 are allowed and Ground No.3 is not required to be adjudicated in view of the decision in respect of earlier grounds.
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.
C.O. NO. 127/M/2015
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.
6 & C.O. No. 127/M/20-15 10. In the result, the appeal filed by the Revenue and the cross objection filed by the assessee are dismissed. Order pronounced in the open court on 29th April, 2016.