TMI Blog2006 (11) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 2(14) of the Act the property/shed was held by the assessee for bringing the shed within the meaning of definition of the words capital asset on 28-12-1994 on payment of instalment, hence, the sale of the shed by the assessee on 15-12-2000, after holding the same for a period of more than 36 months is to be treated as long-term capital asset and the sale of the same resulting into loss/gain also amounted to long-term capital loss/gain. Thus, the tax authorities below without considering the proper meaning of the words capital asset held by the assessee and property used in section 2(14) of the Act have wrongly applied the decision of Bombay High Court in Smt. R.R. Sood s [ 1985 (10) TMI 79 - BOMBAY HIGH COURT] while concluding that only when the assessee paid the final instalment on 19-12-1997 and got the possession on 18-5-1998 the assessee held the asset/shed on 18-5-1998 and the sale of the same by the assessee on 15-12-2000 has to be treated as short-term capital asset in the hands of the assessee resulting into short-term capital gain. Hence, we set aside the orders of tax authorities below and allow the grounds of appeal taken by the assessee. In the result the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the chart. The possession of the said industrial shed was handed over to the assessee by DSIDC on 18-5-1998 and the plot was sold for a sum of Rs. 17 lakhs by the assessee on 15-12-2000 and after working out the indexed cost on each paid instalment the assessee declared capital loss in the return at Rs. 2,58,008/-. 3. The short question which arose and was to be considered by the tax authorities below was whether the profit/loss which arose to the assessee from the sale of the industrial shed was a long-term or a short-term capital gain/loss. The assessee has claimed before the tax authorities below that in this case the industrial shed should be taken as having been held from 8-7-1994 i.e. , when the allotment of the industrial shed was made by DSIDC in favour of the assessee. 4. On the other hand according to the Assessing Officer the industrial shed has been held by the assessee for a period of much less than 36 months as provided in section 2( 42A ) and the profit arising from the transfer of the said shed is to be treated as short-term capital gain of Rs. 2,95,807/- in the hands of the assessee because this plot was allotted subject to fulfilment of certain conditions by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place. 10. As per section 2( 14 ) of the Income-tax Act, 1961 Capital Asset means property of any kind held by an assessee, whether or not connected with his business or profession but does not include. . . . . 11. As per section 2( 42A ) short-term capital asset means a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer. 12. As per section 2( 42B ) short-term capital gains means capital gain arising from a transfer of a short-term capital asset. 13. As per section 2( 47 ) transfer , in relation to a capital asset includes : ( i ) The sale, exchange or relinquishment of the asset; or ( ii ) The extinguishment of any rights therein; or ( iii ) The compulsory acquisition thereof under any law; or ( iv ) In a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or ( iva ) The maturity or redemption of a zero coupon bond; or ( v ) Any transaction involving the allowing of the possession of any immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re cost of the shed to DSIDC in instalments, without default, and had also sold the shed after obtaining the possession of the same from DSIDC. 18. Now the question required to be determined is whether the assessee held any property right in the shed on the date of allotment i.e., 8-7-1994 of the shed by DSIDC or held the property right in the shed on 28-12-1994 when the first instalment of Rs. 1,25,255/- was paid by the assessee after the date of allotment. In the instant case according to the ld. AR the assessee held the property right in the shed on 28-12-1994 when he paid the first instalment after the allotment, so, he suffered a long-term capital loss. On the other hand according to the ld. DR, as well as per the orders of tax authorities below, the assessee held property right in the shed only after the payment of the final instalment on 19-12-1997, and when the assessee was given the possession on 18-5-1998, so, the shed was held by the assessee for a period of less than 36 months on the date of the sale i.e. , on 15-12-2000 and it was to be treated as short-term capital asset. 19. The Apex Court in the case of Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471, held the word proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to landlord after termination of tenancy were in the nature of cost of improvement of the asset viz., right to possess floor space. 23. In this case the Tribunal held that the capital gain arose to the assessee when the said floor space was transferred to different parties for mone-tary consideration. The Tribunal held that right to possess floor space or possession thereof is a capital asset under section 2( 14 ) of the Income-tax Act, 1961. 24. In the case of K.R. Srinath v. Asstt. CIT [2004] 268 ITR 436, the High Court of Madras held as under:- The assessee had a right to insist on specific performance, gave up the rightly readily and received a sum. There can be no doubt that by termination of the earlier agreement and by allowing the vendor to sell the said property to any person at any price, the assessee had given up or relinquished his right of specific performance and as consideration for relinquishing that right, the assessee was paid a sum of Rs. 6,00,000/-. The right, title and interest acquired under the agreement of sale clearly fall within the definition of capital asset. Instead of assigning the right to third party/parties, the assessee relinquished those righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above-mentioned decisions ( supra ) it is absolutely clear that the words capital asset defined in section 2( 14 ) of the Act and the word property used in this section is of the widest amplitude. Which means that any right which a person can be called to hold in a capital asset would be included in the word property used and included in the definition of capital asset in section 2( 14 ) of the Act. Again reverting to the facts of the instant case wherein by a draw of lots the assessee was declared successful for the allotment of a shed, subject to payment of all outstanding dues and interests and in lieu thereof the assessee paid an instalment of Rs. 1,25,255/- on 28-12-1994 and thereafter continued paying the remaining instalments to DSIDC, on account of which a particular Shed No. D-13 was allotted to the assessee and ultimately the possession of the same was handed over to the assessee on 28-5-1998 and thereafter the assessee sold the same on 15-12-2000. It means that when in a draw of lots an allotment of a shed was made to the assessee on instalment basis after a payment of instalment of Rs. 1,25,255/- on 28-12-1994 as per the wider meaning of the word property used in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
