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2017 (9) TMI 720 - AT - Income TaxSTCG on sale of two residential flats - character of capital assets transferred - period of holding - claiming indexation for computing long term capital gain - Held that - The tile, interest and rights in the flats is created wherein specific flat was earmarked and allotted by the builder in favour of the assessee in September 2005, hence, the period of holding in these case W.r. t. flats being held by the assessee for more than three years before the same were sold by the assessee in October/December, 2009. The claim of the assessee hereby allowed by us by holding that the assessee transferred long term capital asset being flats on October/December 2009 which were acquired in September 2005 i.e. period of holding is more than thirty six months in the case of both the flats. We would like to also make it clear that the assessee will be entitled for cost inflation index(CII) based on the actual payments made and date of payment, accordingly CII will be worked out with reference to amount of payment and date of payment, on progressive payments. We order accordingly.
Issues Involved:
1. Deletion of addition related to Short Term Capital Gains (STCG) on sale of two residential flats. 2. Determination of the holding period for capital gains tax purposes. Issue-wise Detailed Analysis: 1. Deletion of Addition Related to STCG on Sale of Two Residential Flats: The Revenue challenged the CIT(A)'s decision to delete the addition of ?33,08,740/- in relation to STCG on the sale of two residential flats. The Assessing Officer (AO) had contended that the assessee acquired substantial rights in the flats only upon the execution of the registered purchase agreement on 14.03.2008, and since the flats were sold in October 2009, the gains should be treated as short-term. The AO relied on the decision in Mrs. Lata vs. Addl. CIT, where similar facts were considered. 2. Determination of the Holding Period for Capital Gains Tax Purposes: The core issue was whether the holding period should be calculated from the date of the allotment letter in 2005 or from the date of the registered purchase agreement in 2008. The AO argued that the right to acquire the property was distinct from the ownership of the property itself, which only came into existence upon registration in 2008. Consequently, the AO computed the gains as short-term capital gains. Tribunal's Findings: 1. CIT(A)'s Order: The CIT(A) held that the right to acquire the property, which was created by the allotment letter in 2005, culminated in the ownership of the flats. The CIT(A) referenced Section 53A of the Transfer of Property Act, asserting that the transfer took place when the contract was executed and part performance was done. Thus, the CIT(A) concluded that the holding period should be calculated from 2005, making the gains long-term. 2. Tribunal's Decision: The Tribunal upheld the CIT(A)'s order, emphasizing that the assessee acquired substantial rights in the flats upon the allotment in 2005, followed by installment payments. The Tribunal referred to CBDT Circulars No. 471 and 672, which stipulate that the date of allotment under similar schemes should be considered the date of acquisition for capital gains purposes. The Tribunal distinguished the case from Gulshan Malik v. CIT, noting that in the current case, the builder did not specifically state that the allotment letter would not create any title or interest in the flats. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming that the gains from the sale of the flats should be treated as long-term capital gains. The assessee was entitled to the benefit of cost inflation index based on actual payments made and the date of payment for computing long-term capital gains. The Tribunal's decision was pronounced in the open court on 23rd August 2017.
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