TMI Blog2012 (7) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by : Sanjiv Dutt Respondent by : Vijay C. Kothari ORDER Per Rajendra Singh , AM: This appeal by the revenue is directed against the order dated 30.7.2010 of CIT(A) for the assessment year 2007-08. The only dispute raised in this appeal is regarding computation of capital gain from sale of flats by the assessee during the year. 2. The facts in brief are that the assessee who was owner of land since 1962 had entered into development cum sale agreement dated 21.2.2001 with a builder M/s. Bhagtani Property Development Pvt. Ltd. as per which the assessee handed over land to the developer for development and construction of flats against agreed consideration of ₹ 61.00 lacs and 55% share in built up area amounting to 6147.52 sq.ft. The builder was also required to provide alternate accommodation to the assessee being 4-bed room hall tenement equivalent to ₹ 1.00 lacs per month for 30 months to facilitate family of the assessee to stay during the period of construction. There was also provision for sharing of TDR @ 55% if available in future. Subsequently, as per supplementary agreement dated 9.10.2002, the assessee got a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - and therefore capital gain to the above extent was claimed exempt and net taxable gain was computed at ₹ 1,19,19,800/- and after deducting legal expenses of ₹ 6.00 lacs assessee declared taxable long term capital gains of ₹ 1,13,19,800/-. 2.2 The AO did not accept the computation of capital gain made by the assessee as long term capital gains. The AO observed that the assessee had taken possession of the flats as per full occupation certificate issued by Executive Engineer dated 24.2.2005 and therefore, assessee was holding the said flats from the said date and since flats were sold in April/ May, 2006, the period of holding was less than three years and therefore capital gain had to be treated as short term capital gain . The AO therefore, asked the assessee to explain as to why claim of long term capital gains should not be rejected and assessment be made as short term capital gain. The assessee submitted that as per agreement dated 22.2.2001, the assessee had right of claim in flats which was as asset and which was available to the assessee since 21.2.2001. The assessee argued that he was not claiming flats as an asset. The asset in the hands of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The sale consideration for this purpose had been taken by the assessee as cash payment at ₹ 61.00 lacs and cost of construction of the 55% share of the assessee by the builder @ ₹ 1,575/- per sq.ft. aggregating to ₹ 96,81,525/- making gross sales proceeds at ₹ 1,57,82,360/-. As the land had been held prior to 1.4.1981, the cost of acquisition had been taken at market value of the land as on 1.4.1981 which was ₹ 18,44,100/- and after deducting the indexed cost of acquisition, the long term capital gain had been computed and declared in the Income tax return for assessment year 2002-03. The AO was, therefore, not correct in stating that the assessee had not declared income in respect of sale of land in the relevant year and that no deduction should be allowed in respect of cost of construction against sale of flats. As regards the period of holding, assessee reiterated the submissions made before AO that the assessee had acquired valuable, exchangeable and legally tenable right on signing the agreement to acquire the flats which was a property within the meaning of section 2(14). In pursuance of the said rights, the builder had delivered flats and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty which had been acquired by him in the year 2001. The flats had been constructed in financial year 2004-05 and assessee had got possession on 24.2.2005. Since the flats had been sold in the year 2006, obviously the gain from sale of flats had to be treated as short term capital gain. It was further argued that on the date of agreement on 4.10.2001, the assessee had only right of acquisition of flats and that limited right had ceased on getting the possession of the flat. The flat was a new asset which had been sold during the year and, therefore, period of holding in respect of flats has to be reckoned from the date of acquiring possession of the flat. The ld. DR placed reliance on the judgment of Hon'ble High Court of Bombay in case of CIT vs. Dr. D.A. Irani (234 ITR 850). He also referred to the decision of the Tribunal in the case of Mrs. Lata Vasudeva in ITA No.2864/M/2009 dated 7.5.2010 for assessment year 2003-04 in support of the case of the revenue. 4.1 The ld. AR for the assessee on the other hand reiterated the submissions made before lower authorities and strongly supported the findings given by the CIT(A). The ld. AR placed reliance on the following judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent cum sale agreement dated 21.2.2001 to M/s. Bhagtani Property Development P. Ltd., a builder. The consideration agreed was a cash payment of ₹ 61.00 lacs and 55% share in the built up area to be constructed by the builder amounting to 6147.52 sq.ft. Subsequently, 55% of the share of the assessee was revised to 14322 sq.ft. in view of the property being released from CRZ control. Thus the consideration receivable by the assessee for transfer of 45% right in the land to the builder was payment of ₹ 61.00 lacs and cost of construction of 55% of built up area to the builder. Since the possession of the land had been given in August 2001, the assessee had declared capital gain from the transfer of 45% right in land in the assessment year 2002-03, the details of which have been given in para 2.1 earlier. The building had been constructed during the period 2002-05. The assessee had been given possession of the flats vide full occupation certificate dated 24.2.2005. The assessee sold two flats during the assessment year under consideration for aggregate consideration of ₹ 5.38 crores on 10.4.2006 and 2.5.2006 with each flat having built up area of 2850 sq.ft. 5.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - towards purchase price of the flat and became owner of the flat which was earlier occupied as tenant. In the assessment year 1977-78, the assessee and mother sold the flat for a sum of ₹ 1,80,000/- and handed over the possession of the flat. The assessee declared capital gain as long term capital gain taking the holding period since 1962-63. The AO computed capital gain as short term capital gain taking the holding period of the flat since 1976. The Tribunal held that the right of occupation and ownership right had to be taken as a composite estate which could not be bifurcated. The Tribunal also observed that, in case, right of occupation was taken as the main estate then bigger estate has to be considered as cost of improvement and in such a case, the holding period has to be reckoned from the date of holding of the main estate but, in case, the bigger estate was taken as main estate, the holding period has to be reckoned from the date of acquisition of bigger estate. Since, these aspects had not been considered by lower authorities, the Tribunal restored the issue to the file of AO for fresh consideration. The assessee filed appeal against the order of the Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar was the case of Jitendra Mohan (supra), in which the assessee had been allotted industrial shed by Delhi State Industrial Corpn. and period of holding had been reckoned from the date of allotment. In these cases, the allotment had been made under the scheme of government which is not applicable to the facts of the present case. In case of Smt. Kasmira P. Parikh (supra), and in case of Sharad Thadani (supra), the flats had been booked with the builder and later sold on taking possession. The Tribunal in these cases held that the period of holding had to be reckoned from the date of allotment and not from the date of possession of the flat. The decisions of the Tribunal can not be followed in view of the judgment of the Hon'ble High Court of Bombay in case of CIT vs. Dr. D.A. Irani (supra), in which it has been clearly held that the right to acquire the flat is different from the ownership rights and such right does not subsist on acquisition of ownership rights and, therefore, what the assessee had transferred is not the right to acquire the flat but the flat itself. Therefore, as held earlier, the capital gain has to be computed in respect of sale of assets being the flats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed as short term capital gain and the balance gain arising from sale of land had to be treated as long term capital gain. The Hon'ble High Court of Bombay following the earlier judgment in case of CIT vs. Citi Bank N.A. (261 ITR 570) upheld the view taken by the Tribunal, that land was a different asset from super structure and therefore profit from sale of land which was an independent asset had to be computed separately and accordingly bifurcation of capital gain into long term capital gains and short term capital gain was upheld. 5.5 The situation is identical in the present case. In this case, the assessee along with flats had also sold right of the assessee in the land which was an independent asset and which was being held by the assessee since 1962 as an owner. Therefore, following the judgment of Hon'ble High Court of Bombay (supra), the capital gain in respect of transfer of right of assessee in the land has to be computed separately as long term capital gains and gain in respect of sale of super structure has to be treated as short term capital gain. The ld. AR has argued that in case of CIT vs. Hindustan Hotels Anr. (supra), the gain in respect of su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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