TMI Blog2021 (3) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.03.2012. Since the assessee was handed over the possession of the new flat only in November 2011, that date should be considered for all practical purposes, the date of acquisition of new flat for claiming deduction u/s 54 - As mentioned earlier, window of purchase of new asset is available to the assessee from 24.05.2011 to 24.05.2014. Therefore, handing over possession of new asset being in the month of November 2011 falls within the period of window mentioned above. Hence, hold that the assessee is entitled to deduction u/s 54 of the I.T.Act on purchase of new asset - Decided in favour of the assessee. - ITA No.31/Bang/2021 - - - Dated:- 19-3-2021 - Shri George George K, Judicial Member For the Appellant : Sri.K.S.Hanumantha Rao, Advocate For the Respondent : Sri.Ganesh B.Ghale, Standing Counsel ORDER This appeal at the instance of the assessee is directed against CIT s order dated 19.01.2021 passed u/s 263 of the I.T.Act. The relevant assessment year is 2013-2014. 2. Seven grounds are raised. Ground Nos.1, 2, 3, 6 and 7 are regarding the issue on jurisdiction of CIT to invoking revisionary powers u/s 263 of the I.T.Act. Ground Nos.4 and 5 are regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in para 6 above. 4. Aggrieved by the order of the CIT, passed u/s 263 of the I.T.Act, the assessee has preferred this appeal before the Tribunal. The assessee has filed a paper book comprising of 156 pages inter alia enclosing therein copy of the return of income along with computation of income for the relevant assessment year, copy of the notices issued u/s 142(1) of the I.T.Act, copies of the replies filed by the assessee to the notices issued u/s 142(1) of the I.T.Act, copies of the sale deeds executed by the assessee for purchase of original asset, copy of the sale deed when assessee sold the original asset, copy of the purchase deed with regard to investment of flat, copy of the assessment order, notice issued u/s 154 of the I.T.Act by the A.O., confirmation issued by the builder of the new asset (flat), submissions to the notice issued u/s 263 of the I.T.Act, etc. The assessee appeared in person and argued the case at length. He raised arguments both on the validity / jurisdiction of the CIT to invoke revisionary powers u/s 263 of the I.T.Act, and on merits, which I shall narrate in the course of adjudicating each of the issues raised. I shall first adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 2(42A) of the I.T.Act, which reads as follow:- Section 2(42A) in the Income-Tax Act, 1961 (42A) short-term capital asset means a capital asset held by an assessee for more than thirty-six months immediately preceding the date of its transfer . 5.2.1 The term transfer is defined under Section 2(47) of the I.T.Act. This provision has undergone substantial amendment by Finance Act, 1987, which came into effect from 1.4.1988, whereunder clauses (v) and (vi) were introduced. In the definition of short-term capital asset prior to the amendment, by Finance Act No.2 of 1977, which came into effect from 1.4.1978, the period prescribed was 60 months. By Finance Act, 1977, it was amended reducing the period to 36 months. In the memorandum explaining the provisions in the Finance (No.2) Bill, 1977, the reasons for enlargement of the scope of long-term capital gains is set out as hereunder: 'Enlarging the scope of long-term capital gains . Any profits or gains arising from the transfer of any capital asset held by a taxpayer for not more than 60 months immediately preceding the date of its transfer are treated as capital gains relating to a short-term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , including that of making construction. The legal ownership in such cases continues to be with the transferor. 11.3 These amendments shall come into force with effect from 1-4- 1988 and will accordingly apply to the assessment year 1988-89 and subsequent years.' 5.2.3 Subsequent to the amendment, the Central Board of Direct Taxes issued a Circular No.471 dated 15.10.1986 explaining how capital gains from long-term capital asset is to be calculated in cases where the allottee gets title to the property on the issuance of allotment letter and the payment of instalments though possession is not delivered and registered deed of conveyance is not disputed. It reads as under: 474. Capital gains from long-term capital asset Investment in a flat under the self-financing scheme of the Delhi Development Authority Whether to be treated as construction for the purposes of capital gains 1. Sections 54 and 54-F provide that capital gains arising on transfer of a long-term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature was conscious while making use of this expression. The expressions like 'owned' has not been used for the purpose of determining the nature of asset as short term capital asset or long term capital asset. Thus, the intention of the legislature is clear that for the purpose of determining the nature of capital gain, the legislature was concerned with the period during which the asset was held by the assessee for all practical purposes on de facto basis. The legislature was apparently not concerned with absolute legal ownership of the asset for determining the holding period. Thus, we have to ascertain the point of time from which it can be said that assessee started holding the asset on de facto basis. 5.2.5 In the instant case, the assessee had purchased the ground floor for a total consideration of ₹ 55,00,000 by executing a sale deed dated 29.10.2009. However, the assessee had entered into an oral agreement, whereby advance of ₹ 5,00,000 was paid on 28.06.2008 itself for purchase of above mentioned property. The details of entire payment of ₹ 55,00,000 as mentioned in the sale deed dated 29.10.2009 is reproduced below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floor of residential unit579, in Jayanagar) which is also assignable. Therefore, payment of balance amount and delivery of possession are consequential acts that relate back to and arise from the rights conferred on the payment of advance i.e., on 28.06.2008. The Hon ble Hon'ble Karnataka High Court in the case of CIT vs A Suresh Rao 223 Taxmann 228 (Kar) has analysed the significance of the expression 'held' used by the legislature. The Hon'ble High Court examined the provisions of the Act pertaining to computation of capital gain under various situations and also circulars issued by the CBDT on this issue. The relevant portion of the observation of the Hon ble Karnataka High Court (supra), is reproduced hereunder:- 12. The definition as contained in Section 2 (42A) of the Act, though uses the words, 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 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the fact that the amount was allowed to be paid in installments does not affect the legal position 5.2.7 Thus, from the aforesaid judgment, it is clear that for the purpose of holding an asset, it is not necessary that the assessee should be the owner of the asset based upon a registration of conveyance conferring title on him. 5.2.8 Similarly, in the case of Mrs.Madhu Kaul v. CIT Anr. [(2014) 363 ITR 54 (P H)], the Hon'ble Punjab Haryana High Court analysed various circulars and provisions of the Act that on allotment of flat and making first installment the assessee was conferred with a right to hold a flat which was later identified and possession delivered on later date. The mere fact that possession was delivered later, would not detract from the fact that assessee (allottee) was conferred a right to hold the property on issuance of an allotment letter. The payment of balance amount and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter upon the assessee. 5.2.9 In the case of Vinod Kumar Jain v CIT Ors. [(2012) 344 ITR 501 (P H)] it was held by Hon'ble Punjab Harya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain conveyance of immovable property, was clearly property as contemplated by s. 2(14) of the I.T. Act, 1961. 5.2.11 The Hon ble Bombay High Court in the case of Principal CIT v. Vembu Vaidyanathan [(2019) 413 ITR 248 (Bom.)] following the Hon ble Bombay High Court judgment in the case of CIT v. Tata Services Limited (supra), had held that the assessee gets title of property on the basis of allotment letter and payment of instalment was only a follow up action and taking delivery of possession is only a formality. The relevant finding of the Hon ble Bombay High Court in the case of Pr.CIT v. Vembu Vaidyanathan (supra) , reads as follow:- 3. The Commissioner of Income-tax (Appeals) and the Tribunal held the issue in favour of the assessee relying on various judgments of different High Courts including the judgment of this court in the case of CIT v. Tata Services Ltd. [1980] 122 ITR 594 (Bom). Reliance was also placed on the Central Board of Direct Taxes circulars. 4. Having heard learned counsel for the parties, we notice that the Central Board of Direct Taxes in its Circular No. 471, dated October 15, 1986 ([1986] 162 ITR (St.) 41 ) had clarified this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the allotment letter was issued. 5.2.12 In view of the aforesaid reasoning and the judicial pronouncements cited supra, we hold that the assessee gets a right to the impugned property on the date of payment of advance, i.e., on 28.06.2008 and payment of balance amounts is only a follow up action and taking delivery of possession is only a formality. Therefore, reckoning the period from 28.06.2008, i.e. the date of advance, I hold that the sale of ground floor give raise to long term capital gains and not short term capital gains as held by the CIT. Ground 5 : Whether assessee is entitled to deduction u/s 54 of the I.T.Act 6. The discussion of facts, submission and the findings of the CIT on above issue are reproduced below:- 5. The second issue in this case is the claim of deduction u/s 54 of IT Act 1961 in respect of investment made in the new asset, i.e., Apartment No.201, 2nd Floor of Kay Arr Herald. If the assessee and his wife invest in the new asset by way of purchasing a new asset, then the assessee and his wife should purchase it within a period of 1 year before 24.05.2012 or within 2 years after 24.05.2012. The window of purchase of new asset is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and his wife is from 24.05.2011 to 24.05.2014. The CIT considered the absolute sale deed dated 06.04.2011 as the date of purchase of new assets. Therefore, according to the CIT, the purchase of new asset was one year prior to the date of sale of the original asset (sale of original asset was on 24.05.2012) and hence was not entitled to deduction u/s 54 of the I.T.Act. The assessee had submitted a confirmation of builder of the new asset (flat) stating that at the time of registration of sale deed, the apartment was not completed and after finishing all the work in apartment, the same was handed over possession to the assessee only in the month of November 2011. A copy of letter of the builder is placed at page 94 of the paper book. A copy of the invitation extended on the occasion of gruhapravesham of new flat which was performed on 12.03.2012 is also placed on record at page 95 of the paper book. It is the contention of the assessee that the registration process was completed earlier because it was expected that there would be increase in stamp duty rates. This contention of the assessee cannot be brushed aside as untrue. In many cases, before the completion of flat the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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