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TMI Blog2017 (3) TMI 1717X X X X Extracts X X X X X X X X Extracts X X X X ..... period for computing the capital gains and for allowing deduction u/s 54/54F should be the date of allotment letter or the date of registration of the property in the name of the Assessee is to be adopted. 3. The facts are that the Assessee purchased a flat at Sarvodaya Co-operative Housing Society Ltd. (CHSL) through allotment letter dated 18.06.2006 issued by the builder which was later on got registered in the name of the Assessee on 23.10.2008. Similarly, Assessee also purchased shop 10B at JS Towers through allotment letter dated 29.12.2006 which was later got registered in the name of the Assessee on 12.02.2008. The Assessee has taken the holding period for computing the long term capital gains, the date of allotment letter issued by the builder and since the holding period was more than 3 years from the date of allotment letter, Assessee computed the long term capital gains from sale of these two properties and also claimed deduction u/s 54/54F on such properties when they were sold later and invested in residential house. The Assessee before the Assessing Officer contended that the basic requirement of section 54F is that the Assessee has to purchase residential house and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purchase deed, but not by the allotment letters issued by the builder. The Assessing Officer further in respect of the property situated in JS Towers held that since this property is depreciable asset, provisions of section 50 have been attracted and therefore only shot term capital gains is to be computed and thus he held that Assessee is not entitled for exemption u/s 54F claimed by the Assessee. On appeal, the Ld. CIT (Appeals) allowed the claims of the Assessee against which the revenue is in appeal before us. 6. The Ld. DR vehemently supported the orders of the Assessing Officer in holding that the sale proceeds of these two properties are to be assessed as short term capital gains and not as long term capital gain. Placing reliance on the decision of the Delhi High Court in the case of Gulshan Malik vs. CIT [43 taxmann.com 200], the Ld. DR vehemently supports that the Delhi High Court held that in terms of section 2(42A) of the Act, the period of 36 months in respect of booking rights of apartment with a builder has to be counted from the date of execution of agreement to sell and not based on the provisional allotment letter issued by the builder. Therefore, he submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flat. The Assessee contended before the Assessing Officer that the date of allotment should be taken for computing the period of 36 months and if the date of allotment is taken, the period of holding is more than 36 months therefore the capital gains should be considered as long term capital gains. It was also contended that since the entire sale proceeds have been invested in the new flat, Assessee is entitled for exemption u/s 54F of the Act. The Assessing Officer denied the claim of the Assessee holding that the period of holding for the purpose of computing the capital gains should be considered from the date of purchase deed or the date of entering into agreement and not the date of provisional allotment issued by the builder. The Ld. CIT (Appeals) agreed with the submissions of the Assessee and allowed the claim. 9. Now the issue required to be addressed before us is as to whether the holding period of the properties for the purpose of computing capital gains should be considered from the date of allotment of properties by the builder or from the date of purchase agreement entered into by the Assessee. We find that an identical issue has been considered by the Coordinate Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of immovable properties. Accordingly, the AO computed the period of holding of the asset from the date of registration of the agreement with the office of Sub Registrar and found that the said property was 'short term capital asset'. Consequently, the resultant gain was assessed as short term capital gain. 4. Being aggrieved, assessee filed appeal before Ld. CIT(A) and made detailed submissions to argue the point that the impugned property was held for more than 36 months as per law, therefore, it should be held as 'long term capital asset'. Ld. CIT(A) did not agree with the submissions of the assessee and confirmed the action of the AO. Still being aggrieved, assessee filed appeal before the Tribunal. 5. During the course of hearing, the Ld. Counsel of the assessee made detailed arguments. Twofold arguments were made by him before us. It was firstly argued that period of holding should be computed from the date of allotment of the property as per section 2(42A). In support of his claim, reliance was placed on the following judgments:- 1. Madhu Kaul v. CIT (2014) 363 ITR 54 (P&H HC) 2. CIT v. K Ramakrishnan (2014) 363 ITR 59 (Del HC) 3. CIT v. S R Jeyashankar (2015) 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of signing of the agreement to sell - 28-12-2007 3. Date of registration of the aforesaid property with the Registrar - 24-04-2008 4. Date of sale of aforesaid property - 11-03-2011 The AO has computed the holding period from the date of registration, i.e. 24-04-2008 and accordingly it was held that when the property was sold on 11-03-2011 it was held for less than 36 months and, therefore, it was 'short term capital asset'. On the other hand, assessee has claimed that the property was held by the assessee since when allotment letter was issued to the assessee of the said property, i.e. on 11-04-2005; when the property was duly identified and part payment was made. It was alternatively argued that in any case, if the date of transfer of property is to be taken as the beginning point of holding period, then the date of signing of the agreement i.e. 28-12-2007 should be taken into account and not the date of registration of the agreement in terms of section 47 of Registration Act, 1908 as has also been clarified by the Hon'ble Supreme Court in the above mentioned two judgements. 9. With a view to resolve this dispute, we have firstly analysed the provisions of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a capital asset held an assessee for not more than thirty-six months immediately preceding the date of its transfer", for the purpose of holding an asset, it is not necessary that, he should be the owner of the asset, with a registered deed of conveyance conferring title on him. In the light of the expanded definition as contained in Section 2(47), even when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction the assessee is put in possession of an immovable property or he retained the same in part performance of the contract under Section 53-A of the Transfer of Property Act, it amounts to transfer. No registered deed of sale is required to constitute a transfer. Similarly, any transaction whether by way of becoming a member of or acquiring shares in a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of any immovable property, also constitutes transfer and the assessee is said to hold the said property for the purpose of the definition of 'short-term capital gain'. In fact, the Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreted and justly administered...............Courts should, whenever possible unless prevented by the express language by any section or compelling circumstances of any particular case, make a benevolent and justice oriented inference. Facts must be viewed in the social milieu of a country." Therefore, keeping the aforesaid principles in mind, when we look at Section 48, the language employed is unambiguous. The intention is very clear. When a capital asset is transferred, in order to determine the capital gain from such transfer, what is to be seen is, out of full value of the consideration received or accruing, the cost of acquisition of the asset, the cost of improvement and any expenditure wholly or exclusively incurred in connection with such transfer is to be deducted. What remains thereafter is the capital gain. It is not necessary that after payment of cost of acquisition, a title deed is to be executed in favour of the assessee. Even in the absence of a title deed, the assessee holds that property and therefore, it is the point of time at which he holds the property, which is to be taken into consideration in determining the period between the date of acquisition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in earlier part of our order. 15. In the assessment order, the Ld. AO has placed reliance upon the judgment of Hon'ble Supreme Court in the case of Suraj Lamps & Industries Pvt Ltd (supra) for the proposition that transfer of a property shall be effective only on registration of conveyance deed in view of section 54 of Transfer of Property Act. In our view, it is a settled proposition of law and there is no dispute on that. The absolute legal ownership of an immovable property shall take place in terms of various provisions of Transfer of Property Act which needs to be read with provisions of section 2(47) of Income-tax Act, 1961 for the purpose of computing tax liability arising on account of sale / purchase of immovable properties under Income-tax Act. But the issue here before us is different. As discussed earlier, the holding period is to be determined in terms of section 2(42A) of the Act which has been reproduced and discussed above. The issue of transfer of ownership is not the issue to be decided here for computing the holding period. Therefore, we find that application of the ratio of aforesaid judgment would not be appropriate here. 16. Thus, respectfully followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion in favour of the Assessee as under. " Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to deduction under section 54E in respect of the capital gain arising on the transfer of a capital asset on which depreciation has been allowed and which is deemed as short term capital gain under section 50 of the Income-tax Act, 1961" "23. The question required to be considered in the present case is, whether the deeming fiction created under Section 50 is restricted to section 50 only or is it applicable to section 54E of the Income Tax Act as well ? In other words, the question is, where the long term capital gain arises on transfer of a depreciable long term capital asset, whether the assessee can be denied exemption under section 54E merely because, section 50 provides that the computation of such capital gains should be done as if arising from the transfer of short term capital asset ? 24. Section 54E of the Income Tax Act grants exemption from payment of capital gains tax, where the whole or part of the net consideration received from the transfer of a long term capital asset is invested or deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.Act cannot be denied to the assessee on account of the fiction created in section 50. 26. It is true that section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions. In other words, where the long term capital asset has availed depreciation, then the capital gain has to be computed in the manner prescribed under Section 50 and the capital gains tax will be charged as if such capital gain has arisen out of a short term capital asset but if such capital gain is invested in the manner prescribed in Section 54E, then the capital gain shall not be charged under Section 45 of the Income Tax Act. To put it simply, the benefit of section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either under sections 48 & 49 or under section 50. The contention of the revenue that by amendment to section 50 the long term capital asset has been converted into to short term capital asset is also without any merit. As stated hereinabove, the legal fiction created by the statute is to deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at about 50 scripts were almost all held for a period of more than 3-4 years was furnished. The Assessee also furnished that he has received substantial dividend income in the assessment years 2008-09 to 2012-13. The Assessee also submitted that its main income is from the business of real estate agency and the details of income was also furnished before the Assessing Officer. Therefore, it was submitted that the intention of the Assessee is not making any profit by trading them in the market and therefore income from sale of scripts cannot be treated under the head income from business but has to be considered under the head income from capital gains only. Not convinced with the reply submitted by the Assessee, the Assessing Officer treated the entire short term capital gains of Rs. 50,51,020/- and long term capital gains of Rs. 10,33,849/- reported by the Assessee was assessed as income from business. On appeal, the Ld. CIT (Appeals) held that transactions where shares are held for less than 30 days are to be treated as business income and transactions where the shares are held for more than 30 days but less than one year should be treated as short term capital gains and more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as long term capital gains. The fact that the treatment of the Assessing Officer in assessing the gain on shares as business income is only in this year and no such assessment treating the income on sale of shares was made in earlier years or in subsequent years is not controverted. The reason for the Assessing Officer in treating the gain on sale of shares appears to be that the Assessee made frequent transactions in purchase and selling. The holding period is low and therefore the Assessing Officer concluded that intention of purchase is not for an investment and the intention was to do business in dealing in shares. The Ld. CIT (Appeals) considering the averments of the Assessing Officer and the submissions of the Assessee concluded that gain on transactions where holding period was less than 30 days should be considered as short term capital gain observing as under : The appellant is an estate agent and also a director in a company. The appellant engages in investing in shares as a investor in his free time. While no doubt the sequence of trade in shares is high however the fact of the being high in absolute term also cannot be the factors to treat the portfolio as busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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