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ACIT, Circle - 21 (2) , Mumbai Versus Shri Michelle N. Sanghvi

2018 (2) TMI 978 - ITAT MUMBAI

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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-2-2018 - Shri D.T. Garasia, Judicial Member And Shri Rajesh Kumar, Accountant Member For The Appellant : Shri M.C. Omi Ningeshen For The Respondent : Shri P.P. Sagar ORDER Per Rajesh Kumar, AM This appeal has been filed by the Revenue against the order of the CIT(A)-33, Mumbai dated 17.03.2016 for A.Y. 2012-13. 2. The various grounds raised by the Revenue are as under: - 1. 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. in .....

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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 the assessee is not eligible to get benefit of exemption u/s. 54 of the Income-tax Act, 1961. 4. 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 the assessee is not eligible to get benefit of exemption u/s. 54 of the Income-tax Act, 1961. 5 .....

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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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assessee as sales expenses. After going through the reply received in response to notice under Section 133(6) of the Act, the AO noticed that possession of the property, i.e. 1807 in Tower D of Ashok Towers was given to the assessee on 19.01,2011 and thus the AO concluded that the assessee has received physical possession of the property on 19.01.2011 and sold the same on 11.05.2011. According to the AO the property was held only for a period of four months by the assessee and therefore he came .....

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3) of the Act vide order dated 09.02.2015. 4. Aggrieved by the order of the AO assessee preferred appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee by holding as under:- 11. I have carefully considered the impugned assessment order, submissions of the appellant, paper book and material available on record. My observations are as under:- 12. The main question to be decided is whether the property being Residential flat no. 1807. Ashok Towers, Mumbai sold by the assessee on 1 .....

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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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hence the holding period is less than 36 months i.e., short term capital gain. 14. However, I do not agree with the AO and his approach to the issue under consideration. When a letter of allotment is issued by a builder to the allottee or agreement to purchase is executed between the allottee and the builder, the allottee gets valuable rights in the units to be constructed and these nights are irrevocable and will continue till the allottee complies with the conditions mentioned in allotment let .....

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ase are duly signed by both the parties and registered, these are legally enforceable and represent contract creating rights in favour of both parties in terms of Sec. 2(47) of the IT. Act rws 53A of the Transfer of Property Act, 1882. This, agreement to purchase was duly confirmed by the appellant by making various payments subsequently. 15. As per the provisions of Section 2(47)(ii). Transfer in relation to capital assets includes the extinguishment of any right therein. 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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llotment or the agreement for allotment invariably gets transferred to the purchaser under the sale deed executed for transfer of the premises. 16. In coming to the above conclusion, I rely upon the following judgments, which are on the issue under consideration. 1. ITO vs. Smt. Kashmiraben M. Parikh, 44 TTJ 68(Ahd.) The Hon'ble Tribunal held that since the right in the flat was acquired at the time of booking the right in the property was held for more than three years before its transfer a .....

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me and for which payment was also made according to the latter of allotment. …………….. This allotment letter was duly confirmed by the assessee by making various payment as narrated above. Out of total payment of ₹ 33.15 lakhs, the assessee made payment of ₹ 6.23 lakhs in the month of allotment itself i.e. January, 2005. Subsequent payments were also made as per the terms agreed with the builder. Only after receipt of entire amount, the builder has ex .....

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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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an, 48 taxmann.com 55 (Del.) The Hon'ble High Court has held that it was date of allotment which was relevant for purpose of computing holding period and not the date of conveyance deed. 5. Vinod Kumar Jain v. CIT 344 ITR 501 (P & H) The Hon'ble Punjab & Haryana High Court allowed the claim of the assessee by holding that the assessee acquired rights under the letter of allotment which were to be treated as capital asset u/s. 2(14) of the Act by relying on the circular no. 471 dt .....

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d by the term 'held' used in both the provisions and not the ownership of the property which was distinct and different. For the purpose of an asset to be treated as a long term capital asset u/s. 2(29A), it was sufficient that the asset was held for the prescribed period. The Court held that on issue letter of allotment, a property was held by the assessee and therefore the period of holding commenced with the date of issue of such letter of allotment. Importantly, the court held in par .....

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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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ghts had to give 55% share of the built-up area apart from ₹ 61 lakh. The land owner had considered the transfer of the land rights to the extent of 45% in A.Y. 2002-03 and had accordingly, given capital gain with reference thereto. The builder had constructed the premises from 2002 to 2005 and had given possession of flats to the land owner on 24-2-2005. The land owner thereafter sold the flats in April /May, 2006. In these circumstances the issue arose whether the period of holding of fl .....

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builder with the intention to acquire the same. Moreover, that decision was in respect of development cum sale agreement which cannot be applied in the instant case of purchase of a flat from a builder with the intention to acquire the same. Hence, it is concluded that the said decision relied by the AO does not apply to the facts of the present case and hence distinguishable. 18. In the light of the discussion made in the preceding paragraphs, it is concluded that for the purpose of transfer of .....

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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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