2013 (4) TMI 743 - AT - Income Tax

Summary

Issues Involved:
1. Whether the gain on sale of the property can be considered as Long Term Capital Gain (LTCG).
2. Whether the Assessee held the property from 1988 or from 2008 for the purpose of determining the nature of the capital gain.

Summary:

Issue 1: Consideration of Gain as Long Term Capital Gain (LTCG)

The dispute between the Assessee and the Revenue is whether the gain on sale of the property can be said to be a Long Term Capital Gain (LTCG). Under the Act, exemption from charge to tax on capital gain u/s 54EC and 54F is available only when the capital gain arises on transfer of a Long Term Capital Asset. The Assessee argued that the property was a long term capital asset as it was held from 1988 when the lease cum sale agreement was executed. The AO and CIT(A) rejected this argument, stating that the property was registered in the Assessee's name only in 2008, making it a Short Term Capital Gain (STCG).

Issue 2: Determination of Holding Period

The factual background involves the Assessee being allotted a site in 1988, which faced legal impediments preventing construction. The BDA eventually allotted a different site in 2008. The AO and CIT(A) concluded that the property held was different from the one allotted in 1988 and thus treated the gain as STCG. The Tribunal, however, considered that the title of the Assessee to the property can be traced to the original allotment and the lease cum sale agreement dated 25.8.1988. The Tribunal noted that the Assessee had paid the entire consideration in 1988 and had a vested right to the property since then. The Tribunal held that the expression "held by the Assessee" in Sec.2(42A) should be interpreted in light of the policy and object of the statute, which aims to provide exemption from levy of tax on capital gain for assets held for a long period. Therefore, the Tribunal accepted the Assessee's claim that the property was held from 1988 and treated the gain as LTCG.

Conclusion:

The Tribunal concluded that the capital gain in question should be treated as LTCG, allowing the Assessee to claim exemption from levy of tax on capital gain. The appeal of the Assessee was allowed.