TMI Blog2013 (11) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... /DDIT-1(1)/10-11/2005-06/Kol dated 02.01.2012. The assessment was framed by DDIT(IT)-1(1), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2008-09 vide his order dated 20.12.2010. 2. The inter-connected issue in these two appeals, of assessee and of revenue is as regards to whether the date of allotment of flats by developer by way of allotment letter is to be considered as right in the property for the purpose of computation of capital gains i.e., Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG), as the case may be. Further, whether the assessee is entitled to deduction u/s 54 or 54F of the Act or not? For this, assessee in ITA No. 473/K/2012 has raised following relevant grounds nos. 2 and 3: 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the order of the AO in disallowing the claim of deduction u/s. 54 of the Income-tax Act, 1961. 3. On the facts and in the circumstances of the case, the learned CIT(A) should have alternatively held that the appellant was entitled to relief u/s 54F of the Act and should have directed the AO accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and grounds of appeal both by assessee and revenue are, that the assessee and his wife jointly booked two flats i.e. Apartment No. 1103 1104 on 11th floor, Tower-A of Ashoka Tower, Parel, Mumbai from one Developer namely, Peninsula Land Ltd. also known as Morajee Goculdas Spinning Weaving Company Limited and paid an amount of ₹ 4,64,705/- as initial booking payment on 04.02.2004. The total consideration for the above-stated flats was ₹ 1,12,11,892/- to be paid individually by the assessee. The booking of these flats was done on 04.02.2004 by making a payment of ₹ 4,64,705/- i.e. initial booking amount. The Developer viz., Peninsula Land Ltd. acknowledged the booking and subsequently, allotted flat by issuing allotment letter dated 12.05.2004. The flats allotted were apartment nos. 1103 1104 on 11th floor, Tower-A of Ashoka Tower, Parel, Mumbai. According to assessee, the allotment letter issued by the Developer i.e. Peninsula Land Ltd. in exchange of initial payment with periodic payments between the period 29.05.2004 to 07.09.2007, thereby giving effect to the agreed balance payment, the assessee had been vested with legal right of ownership over the ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee had not taken the flat under scheme of DDA. Neither is the allotment of flat done by any co operative society. The allotment of flat by Peninsula land Ltd. is similar to any commercial booking of flat and is not equivalent to scheme of DDA flat as in para 2 of circular 471 dated l 5.10. 86. In the case of assessee the transaction is not that the Peninsula Land Ltd. is undertaking construction on behalf of assessee. The transaction is purely a sale. The assessee need not compensate the company Peninsula Land Ltd. for increase in cost, if any. The assessee cannot claim the purchase of flat from a commercial developer as similar to a construction activity. Hence the above circular are not applicable in case of the assessee. The fact that the assessee can have recourse to filling of suit in case of non delivery of flat was stated by assessee. However, no documentary evidence has been filed in support of such claim. The inference by assessees A/R in letter dated 09.12.10 is not from any documents, agreements placed on record. It appears that the points in circular no.471 has been stated by the assessee to highlight as if the circular is applicable to it. 4. And for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pass unless there is a deed of conveyance duly registered. In this case since the deed was registered on 12.9.2007 hence as per this requirement, the asset is not a long term capital asset. 5. Aggrieved against the order of AO, the assessee preferred appeal before CIT(A), who allowed the claim of LTCG of the assessee vide para 7 to 13 as under: 7.I have duly considered the observations of the Assessing Officer in the assessment order and written submissions of the assessee. The appellant had booked two flats for a consideration of ₹ 1,12,11,892/-. He paid an amount of ₹ 4,64,705/- as initial booking amounts on 4.2.2004 to M/s. Peninsula Land Ltd. The builder issued a receipt and an allotment letter dated 12.05.2004 to the appellant. The acknowledgment receipt and allotment letter served on 12.05.2004 were for Apartment No. 1103 and 1104 on 11th floor, Tower A of Asoka Tower, Parel Mumbai with the intention of buying them. The builder in exchange of the token amount received had vested upon the appellant legal rights over the flats to be constructed with the agreement for balance payment and on fulfilling the other conditions. The appellant has submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract Act, 1872. The assessee may be eligible for liquidated damages but not for specific performance, if the property is no constructed because of any reasons at the time of dispute. The assessee has only a right in the flat which is still to come in existence. The agreement of booking of the flat with Peninsula Land Ltd., has been even registered on 08.12.2006, which only gives rights to the assessee against apartments to come in existence but no title under the Transfer of Property Act, 1882 has been passed on to the appellant. 11. The right in property/flat has not become final since the installments are still being paid by the appellant and in case of any violation of the provisions of the agreement may result it non-eligibility of the appellant to get the said flats. It is a contingent contract of the appellant with the builder. The right to own the flat will come in existence only if the flat is ready free from legal disputes, the appellant pays entire money of its transfer and registered thereafter with the Tehsildar etc. Therefore, there is no right in the immovable property given to the assessee till the date of the sale of its right to get a flat upon fulfilli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, it is held that these are not long term capital gain arising from the sale of immovable property. These grounds of appeal are partly allowed. 6. But disallowed the claim of deduction u/s. 54 of the Act vide para 14 to 16 as under: 14. After holding that it is a LTCG, it is further held that the provisions of Section54 are not applicable in the case of the assessee as per the detailed reasons given by the Assessing Officer in the assessment order. Section 54 is applicable only in a case where the transfer is of a Long Term Capital Asset being building or land .appurtenant thereof and/or belong a residential house, the income of which s chargeable under the head income from House property. It is like any other right of purchase of any property including. movable property. It is dealing in the right of an immovable property without actual delivery by the appellant. 15. The conditions of section 54 are not fulfilled. The appellant has never become owner of the property by any express or deemed provisions of the law including section 53A of Transfer of property Act. The appellant does not qualify to be the owner of the House Property as per section 27 of the I.T, Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was registered on 08-12-2006. The assessee sold this immovable property on 12.9.2007 i.e. two apartments No. 1103 1104 in Ashoka Tower, Parel, Mumbai to one Shir Ashim Ahuja vide registered sale agreement for a total consideration of ₹ 2,96,50,000/- thereby realizing a capital gain of ₹ 1,84,38,108/- and the same was disclosed in his return of income filed for the relevant AY 2008-09. The assessee in his return of income claimed deduction u/s. 54 of the Act for the reason that this total sale consideration of ₹ 2,78,56,224/- was invested in purchase of a new flat in the very AY i.e., 2008-09. The Assessing Officer rejected the claim of the assessee for LTCG firstly for the reason that element of ownership was absent in the case of the assessee on or before 08-12-2006, as the date of purchase agreement was registered by the assessee on 08-12-2006 and not on the date of booking of property on 04-02-2004 or allotment letter issued by the builder/developer on 12-05-2004. According to AO, the mere allotment letter was not a legal right and as per Section 54 55 of the Transfer Property Act legal title over a property does not pass unless there is a deed of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said allotment issued on 12-05-2004 and the acknowledgement receipt of initial booking amount had vested upon him title, domain and control over the apartments identified by him. The assessee was having legal right over the property and for this we have to note the definition of capital asset where the word used is held in the Section 2(14) read with explanation to Section 48 of the Act clearly depicts rights of the assessee over a capital asset and also specifies the benefit of indexation to be granted to the assessee on the basis of payments made by him for acquiring the said asset. The relevant definition of capital asset as provided in Section 2(14) reads as under:- Definitions. 2. In this Act, unless the context otherwise requires, - (14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include The above stated two apartments do not fall under any of the exclusion clauses as is given in Section 2(14) of the Act. The definition of LTCG is provided in Section 2(29A) of the Act as reads as under:- (29A) long-term capital asset means a capital asset which is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provide the applicant with that property by accepting certain advance amount and making agreement for balance payment as scheduled in the agreement. Thus, going into the provisions, it is not necessary that to constitute a capital asset the assessee must be the owner by way of conveyance deed in respect of that asset for the purpose of computing capital gain. The assessee had acquired a right to get a particular flat from the builder an that right of the assessee itself is a capital asset. The word held used in s.2(14) as well as in Explanation to s.48 clearly depicts that assessee must have some right in the capital asset and, therefore, the benefit of indexation has to be granted to the assessee on the basis of payments made by him for acquiring the said asset and the assessee has rightly claimed the indexation benefit from the dates when he has made the payments to the builder. The AO is directed to provide the benefit of indexation to the assessee. It was concluded by saying that Assessee can be said to have held the flat when he made the payment to the builder and received the allotment letter and, therefore, benefit of indexation of cost of acquisition of the flat has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod in question was in the nature of LTCS. Since the property acquired is LTCG i.e. right over the property in question enjoyed by the assessee, the sale of the said property the consideration was necessarily in the nature of LTCG as for as the provisions of the Act abovementioned. At the best, the date of allotment letter dated 12-05-2004 is to be considered as date of acquisition of right in the property. Hence, we allow this issue in favour of assessee and against the Revenue. This issue of Revenue s appeal, raised by way of ground No.1-5, is dismissed. 11. Now coming to the issue of assessee s appeal, CIT(A) as well as Assessing Officer noted the fact that although the assessee has held the right over the capital asset and the same was in the nature of LTC asset but he denied deduction u/s. 54 of the Act by stating that the property in question although not in existence at the time of transfer and was not in the nature of house property. The CIT(A) vide his order has opined (which is summarized) as under:- That the conditions of section 54of the Act were not fulfilled by the assessee. The assessee had never become owner of the property by any express or deemed provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o seek that capital gains tax not chargeable on the sale consideration. Here, we have to referred to the decision of Hon ble Karnataka High Court in the case of CIT v. Smt. K.G. Rukumini Amma (2011) 96 Taxman 86 (Kar), wherein it is held that the context in which the expression a residential house is used in section 54 makes it clear that it was not the intention of the legislation to convey the meaning that it refers to a single residential house. If that was the intention, they would have used the word one . As in the earlier part, the words used are buildings or lands which are plural in number and that is referred to as a residential house , the original asset, an asset newly acquired after the sale of the original asset also can be buildings or lands appurtenant thereto, which also should be a residential house . Therefore, the letter a in the context it is used should not be construed as meaning singular . But, being an indefinite article, the said expression should be read in consonance with the other words buildings and lands and, therefore, the singular a residential house also permits use of plural by virtue of section 13(2) of the General Clauses Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
