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Mrs. Bindiya H. Malkani, Mr. Bharat H. Malkani, Mr. Pravin H. Malkani, legal heirs of late Shri H.G. Malkani Versus The Commissioner of Income Tax Mumbai City IX, Mumbai

2016 (7) TMI 162 - BOMBAY HIGH COURT

Capital gains on the transfer of plot of land - STCG or LTCG - Held that:- The assessee-appellant ‘held (owned)’ the property only upon the order being passed upon filing of the Consent Terms in Court on 11th March, 1988. The said land was sold on 29th November, 1988. Therefore it falls beyond the scope of long term capital gains and within the province of short term capital gain. Accordingly, we are of the view that the gains resulting from the sale of the said land in November 1988 would be a .....

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nal assessee-appellant ( the appellant ). The impugned order relates to Assessment Year 1989-90. 2. This appeal was admitted on 1st April, 2004 on the following substantial question of law:- Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in coming to the conclusion that the capital gains arising to the appellant on the transfer of the impugned plot of land vide agreement dated 29th November, 1988 is short term capital gains and not long term capital .....

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i, for consideration set out therein. The appellant purchaser was required to file a Suit in this Court being Suit No.1077 of 1981 against the vendor Shubhada Prints Pvt. Ltd., inter alia, seeking specific performance of the agreement to assign the leasehold rights in the said land. An earnest money of ₹ 25,000/- had been paid at the time of execution of the agreement. During the pendency of the Suit, the parties arrived at Consent Terms on 11th March, 1988 pursuant to which the defendant .....

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18th May, 1980 and hence the gain was long term in nature. The Assessing Officer, however, found that the appellant came into possession only pursuant to the Consent Terms and therefore the amount of consideration received on sale by the appellant is to be treated as short term capital gain and he was assessed accordingly. 6. In appeal the CIT(A) by order dated 25th March, 1991 allowed the appeal of the appellant. The CIT(A) directed the Assessing Officer to treat the gain on sale of the said l .....

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roperty for more than 3 years before the same was sold. In this case by virtue of the agreement dated 18th May, 1980 the assessee had interest in the said land from that date and the sale taking place in March 1988, it is eligible to benefit of long term capital gain in terms of Section 54 of the Act. Therefore, it is submitted that said land is held for more than 36 months. It is submitted that the Consent Terms only re-affirmed his pre-existing right under the agreement dated 19th May, 1980. M .....

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to seek specific performance which he sought to enforce by filing the suit. The appellant did not have possession of the said land. It is only on the Consent Terms being filed in Court that the appellant got ownership and possession. 10. We find that the issue in question arose before this Court in CIT v/s. Dr. D. A. Irani 234 ITR 850. In the case of D.A. Irani (supra) it was held that where a sale of property took place within 5 months of acquiring ownership, the gains arising on sale were sho .....

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