2006 (12) TMI 258 - AT - Income Tax

Summary

Issues involved:
The judgment involves determining whether the capital asset sold should be treated as a long-term capital asset or a short-term capital asset u/s 143(3) of the Income-tax Act, 1961.

Details of the judgment:

Issue 1: Treatment of capital asset as long-term or short-term:
- The appellant, a partnership firm, sold its office premises and paid tax on long-term capital gain.
- The Assessing Officer treated the profit as short-term capital gain based on the timing of the transfer.
- The appellant contended that the sale was effective from an earlier date based on possession and enjoyment of the premises.
- The CIT(A) directed the Assessing Officer to treat the capital asset as a long-term asset u/s 2(47)(v) & 2(47)(vi) read with section 53A of the Transfer of Property Act, 1882.
- The CIT(A) emphasized the concept of "part performance" under section 53A and various court citations supporting the appellant's position.
- The Tribunal considered the submissions and held that the agreement was a proposed scheme subject to approval by the Charity Commissioner, not a sale agreement.
- The Tribunal found that the agreement did not confer ownership rights to the appellant until after approval, and the conditions were uncertain, leading to the restoration of the Assessing Officer's order treating the profit as short-term capital gain.

Conclusion:
The Tribunal allowed the revenue's appeal, quashing the CIT(A)'s order and restoring that of the Assessing Officer, thereby treating the capital asset sold as a short-term capital asset.