UTSAV JAIN,KOLKATA vs. I.T.O, WD29(4), KOLKATA, KOLKATA

आदेश /O R D E R

PER Waseem Ahmed, Accountant Member:-

This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-XVI, Kolkata dated 15.03.2013. Assessment was framed by ITO Ward-45(2), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 29.11.2011 for assessment year 2009-10. Assessee has raised the following concise grounds:- 1) For that without prejudice to any other ground taken herein, the Ld. Commissioner of Income tax (Appeals) - XVI, Kolkata, erred both in law and in the facts and circumstances of the case to have dismissed the appeal of the appellant assessee.

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 2 2) For that without prejudice to any other ground taken herein, both the Ld. Income Tax Officer and the Ld. Commissioner of Income tax (Appeals) - XVI, Kolkata erred both in law and in the facts and circumstances of the case to have disallowed assessee's claim of Long Term Capital Gains arising from the effective sale with regard to Apartment No. 302 on 3rd floor in building 'E' in the multi-storeyed residential complex named as "Pearl Gateway Towers" in Sector 44, Noida, Dist. Gautam Budh Nagar, (U.P.) and instead treating the same as Short Term Capital Gains for Rs. 5247000/- and levying tax on it.

3) For that without prejudice to any other ground taken herein, the appellant is entitled to the deductions available in cases resulting in Long Term Capital Gain, which has been denied to the appellant inasmuch as the assessee invested his gains in a residential house within the prescribed period and neither the Assessing Officer nor the Ld. Commissioner of Income tax (Appeals) - XVI, Kolkata allowed this claim of the assessee as both of them treated the emanating gains to be "short term capital gain" and not "long term capital gains" 4) For that without prejudice to any other ground taken herein, the Ld. Commissioner of Income tax (Appeals) - XVI, Kolkata erred both in law and in the facts and circumstances of the case to have confirmed the quantum and levy of interest which had been made by invoking Section 234B and Section 234C of the Income Tax Act, 1961 as there can be no levying of interest on disputed liability.”

Shri Prasun Kr. Bhattacharya, Ld. Authorized Representative appearing on behalf of assessee and Shri Niloy Baran Som, Ld. Departmental Representative appearing on behalf of Revenue.

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 3 agreement must have been made in the month of April’06 i.e. 45 days prior to the first date of payment i.e 24.5.2006. During the year under consideration, assessee has sold the said flat on 07.03.2009 and claimed as Long Term Capital Gains (LTCG for short). However, AO treated the gains as Short Term Capital Gains (STCG for short) and sought clarification from assessee in this connection. In compliance to the notice, the assessee submitted that the allotment letter was received from the Company on dated. 01.01.2006. Therefore the period of holding for the working of capital gain should be reckoned from 01.01.2006 or at the most from the date of first payment of booking amount which is 10.02.2006. However, AO disregarded the plea of assessee by observing as under:-

(i) After payment of booking amount, balance payment was to be paid within 45 days and the second payment was made after booking amount on dated 24.05.2006. So it is clearly indicated that the agreement was made in the month of April, 2006. The AO also observed that the copy of agreement was not made available at the time of assessment. (ii) As per the terms and conditions of allotment, the offer for possession of flat only to be given after the payment of balance basic price and other charges. The assessee in the instant case, has paid substantial amount of ₹1,56,95,250/- on the price on 06.06.2008 leaving a balance of Rs. 13,90,998.93 still to be paid. (iii) The booking amount paid by assessee was in the nature of earnest money. Therefore, the claim of assessee for holding the right of ownership in the flat is not tenable and the letter of allotment or agreement only give a right to an acquired flat and not the right of ownership. The assessee has never shown in his books of account as assets but treated as advance against flat. (iv) That the principle of allotment of flat under self finance scheme of DDA Project is not applicable in this case as the flat in the instant case

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 4 was not allotted by the authority within the meaning of Circular No. 471 dated 15.10.1986 and Circular No. 672 dated 16.12.1993.

Considering the above facts, AO treated the gains as STCG and consequently provision of Sec. 54 of the Act was not available to the assessee.

I duly considered the case laws cited by the A/R. the facts of the case are different with cited case laws. In this case the appellant made second payment after the application money on 24/05/2006 which should be within 45 days of agreement. That also established that agreement was made in the month of April, 2006. The property was sold on 07/-3/2009 or Rs.2,13,56,250/-. The above facts clearly prove that the property was held for less than three years and there was a short term capital gain of Rs.52,47,000/-.”

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 5 Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us.

Ld. AR further submitted that in the instant case assessee has sold the right which is capital asset within the meaning of Sec. 2(14) of the Act and he prayed before the Bench to quash the orders of Authorities Below.

On the other hand Ld. DR submitted that the booking amount is nothing but the earnest money which was paid on 10.02.2006 and same cannot be taken as date to reckon the period of holding the agreement. As such the period of holding should be reckoned from the month of April, 2006 and the impugned property has been transferred in the month of March, 2009. Therefore the period of holding is less than 36 months so the benefit of exemption u/s. 54 cannot be made available to assessee. He vehemently relied on the orders of Authorities Below.

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 6 the instant case has sold the right vested before taking the possession of the property but Authorities Below have not treated the transactions as sale of the right but treated the transactions as sale of the property. Now the issue before us to adjudicate is so as to whether the date of allotment should be taken for the period of holding for the working of capital gain. From the facts of this case, we find that there is no separate agreement executed by assessee for the purchase of the flat and the letter of allotment which is in the paper book at pages 23 to 33 is the only document which gives right of ownership in the flat. Therefore, in our view with the date of allotment letter will be taken for working out the period of holding in the instant case. We also relied in the following judgments:-

1) CIT, Salary Circle, Chennai v. S.R.Jeyashankra (2015) 53 taxmann.com 107 (Mad) where the head-note:- Section 2(29A), read with section 2(42A), of the Income-tax Act, 1961 – capital gains – Long term capital gains (Land and building) – assessment year 2009-10 – whether where assessee had entered into an agreement with builder for purchase of undivided share of land and construction, date of allotment of undivided share in land was to be adopted as date of acquisition for computing capital gain instead of date of sale deed – Held, yes [para 10] [in favour of assessee]

2) Ms. Madh Kaul v. CIT (2014) 43 taxmann.com 417 (P&H) where head- note:- Section 2(29B), read with section 2(42B), of the Income-tax Act, 1961 – capital gains – Long-term capital gains (Allotment of flat) – assessment year 1990-91 – A flat was allotted to assessee on 07.06.1986 – she aid first installment on 4-7-1986 – possession of flat was delivered on a later date – thereafter she sold flat on 5-7-1989 – in return of income for assessment year 1990-91, she disclosed capital gain arising from sale of flat as long-term capital gain – lower authorities treated capital gain as short-term capital gain – whether in peculiar facts of case, capital gain arising from sale of flat was a long-term capital gain – Held, yes [para 8] [in favour of assessee]

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 7 3) Vinod Kumar Jain v. CIT (2010) 195 taxmann 174 (P & H) where head- note:- Section 2(29A) red with section 54, of the Income-tax Act, 1961 – capital gains – long-term capital gains/assets – assessment year 1989-90 – assessee was allotted a flat under scheme of DDA on 27.2.1982 – delivery of possession of said flat took place on 15.5.1986 when actual flat number was allocated to assessee – assessee sold said flat on 6.1.1989- He claimed that capital gains arising on sale of flat was a long term capital gain but according to revenue authorities, flat was allotted on15.5.1986 and, therefore, capital gain was short-term capital gain – whether under self-financing scheme, an allottee gets title to property on issuance of an allotment letter and payment of instalments is only a consequential action upon which delivery of possession flows – Held, yes – Whether therefore, right of assessee prior to 15.5.986 was right in property and even prior to said date assessee was holding said flat – Held, yes – whether, therefore, capital gain arising on sale of said flat was a long-term capital gain and, consequently, assessee was entitled to set off same under section 54 – Held, yes.

Taking a consistent views relying on the aforesaid judgments of Hon'ble High Courts and facts of the present case, we reverse the orders of Authorities Below and direct the Assessing Officer to take the date of letter of allotment for working out the period of holding. In the instant case letter of allotment is on 01.01.2006 and accordingly the right was acquired on that date. The assessee sold the right acquired by way of letter of allotment is to be dated on 07.03.2009. accordingly the period of holding exceeds 36 months in the present case. So the period of holding in the instant case exceeds 36 months and income arising on the sale of said property will be treated as LTCG. Accordingly the common grounds of assessee’s appeal are allowed.

ITA No.1514/Kol/2013 A.Y.2009-10 Utsav Jain v. ITO Wd-29(4) Kol. Page 8 already allowed assessee’s appeal, so this ground of assessee premature in nature and do not require any adjudication.