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2018 (2) TMI 978

Treatment to Capital gain on sale of flat - STCG v/s LTCG - period of holding - possession held for more than 36 months - CIT-A treated as LTCG - Held that:- Interest in the property is created the moment the agreement to purchase is entered into in favour of the assessee accompanying with part payment. The date of possession is not material for deciding the period of holding by the assessee for the purpose whether the gain is long term or short term. - CIT(A) has passed a reasoned and elab .....

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making an addition of ₹ 2,,88,65,116/- treating the capital gain arising as a result of sale of flat No. 1807, Ashok Towers, Mumbai, as short term capital gain. 2. On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in not appreciating the action of the A.O. where it is held by the A.O. that short term capital gain is arising as a result of the sale of flat since the assessee has received physical possession of the property is not held for more than 36 months. 3. .....

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ase are that the assessee filed return of income on 28.07.2012 declaring total income of ₹ 24,20,660/- which was processed under Section 143(1) of the Income Tax Act (hereinafter the Act ). Thereafter the case of the assessee was selected for scrutiny under CASS and notice under Section 143(2) was issued on 08.08.2013. During the year the assessee earned income by way of salary, long term capital gain and other sources. The assessee has sold one residential property on 11.05.2011 for a con .....

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to the conclusion that the gain on the said sale of asset is short term capital gain. The AO, ignored the evidences such as agreement of purchase dated 18.12.2006 and the contention of the assessee that the property was held for more than 36 months as it was purchased vide agreement of purchase dated 18.12.2006 and it was sold on 11.05.2011. Ultimately the AO added a sum of ₹ 2,88,65,116/- as short term capital gain on the sale of said property by framing the assessment under Section 143( .....

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at the said transfer is STCG, the AO has noted that the physical possession of the flat was received on 19.01.2011 and the period of three years for the purpose of capital gain starts from the date of taking possession of the flat. According to the AO, vide agreement to purchase dated 18.12.2006, the assessee has just acquired right to acquire flat which cannot be equated with ownership of flat . The AO has also observed that in the definition of the term short term capital gain the word held de .....

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ter including payment of installments by the specified date. The allotment letter/agreement to purchase prevents builder/transferor to sell the same unit to another intended buyer. Hence, period of holding commences from the date of issue of allotment letter/ agreement to purchase as the allottee gets clear rights in the property. In the instant case, as on the date of signing of agreement to purchase, the appellant has already paid ₹ 14,63,318/- for the flat. Since, the agreement to purch .....

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and taking the delivery of possession is only a formality.'' The Board vide circular no. 672 after referring to Circular No. 471 extended the facility of exemption u/s 54 & 54F in respect of allotment of flat/house. On careful reading of the circulars, it is clear that an allottee of the flat gets a title to the property on issuance of the allotment letter and the construction by the developer of premises thereafter shall be said to have been carried out at the instance of and on be .....

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nd, therefore, capital gains was in the nature of long term capital gains. 2. ACIT vs. Sanjay Kamath (ITA no 448/IND/2013)(lnd.) The Hon'ble Tribunal has held that as per the provisions of Section 2(47)(ii) transfer in relation to capital assets include the extinguishment of any right therein. The letter of allotment extinguishes the rights of a builder in the said flat in favour of the assessee in respect of this flat and by signing the letter of allotment, the assessee agreed to buy the sa .....

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ting the capital assets so sold as long term capital assets. In short, the signing the letter of allotment and paying the booking the amount the assessee acquired the rights in the flat. All the rights in the flats are duly acquired when the assessee is given the letter of allotment, which clearly described the prescribed number of the flat so allotted. The holding period is therefore to be computed from date of allotment even if agreement was registered at a later date. 3. Addl. Director of Inc .....

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. 15.10.1996 issued by the CBDT. The Court held that the right of the assessee prior to 15.05.1986 under the letter of allotment were rights in the property that were transferred. The Court also relied on the decision in the case of CIT v. Ved Prakash & Sons. (HUF) 207 ITR 148 (P & H) and CIT v. Smt. Beena K. Jain 217 ITR 363 (Bom.). The Court upheld the contention of the assessee that for the purpose of s. 2(14) and s. 2(42A) what was relevant was the holding of the property as signifie .....

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ses of capital asset which are held by an assessee. Once that is so, adverting to the facts of the present case, the assessee was allotted flat on 27-2- 1982 on payment of installments by issuance of an allotment letter and he had been making payment in terms thereof but the specific number of the flat was allocated to the assessee and possession delivered on 15-5-1986. The right of the assessee prior to 15-5-1986 was a right in the property. In such a situation, it cannot be held that prior to .....

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at by the land owner was long-term and short-term. The assessee in that case claimed that capital gain was in the nature of long term capital gain. The Tribunal, however, held that capital gain was short term capital gai and period of holding of the flats could be counted only from the date on which the possession of the flats had been given by developer to the land owner. With regard to the above decision of the Tribunal, in the facts of the case the issue was not for purchase of a flat from a .....

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the assessee may not necessary physically possess that asset for the purpose of computing capital gain. In the instant case, the appellant had acquired the right of ownership over the flat in Ashok Tower as a result of making payment and by executing agreement to purchase dated 18.12.2006 and that right of the appellant is itself a capital asset. The word held used in Sec. 2(14) as well as explanation to Sec. 48 clearly depict that the appellant has got clear right in the said capital asset and .....

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vant material on record. We find that the assessee purchased flat No. 1807, Ashok Towers from M/s. Peninsula Land Ltd. vide agreement of purchase dated 18.12.2006 and sold the same on 11.05.2011. The assessee was given possession of the flat on 19.01.11. Now the question is whether the asset was held for a period of 36 months or less. In our considered view the interest in the property is created the movement the agreement to purchase is entered into in favour of the assessee accompanying with p .....

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