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Issues Involved:
1. Classification of profit on the sale of an incomplete flat as long-term capital gain. 2. Taxation of discounted interest amount received from the National Housing Bank on an accrual basis instead of on a receipt basis. 3. Disallowance of brokerage paid for the sale of rights in a flat. Detailed Analysis: Issue 1: Classification of Profit on Sale of Incomplete Flat as Long-Term Capital Gain The revenue contended that the CIT(A) erred in treating the profit on the sale of an incomplete flat as a long-term capital gain. The assessee, an individual, booked a flat in 1981 and sold her right to occupy the flat before its completion in 1991. The Assessing Officer (AO) argued that the sale of the right to occupy the flat should be treated as income from other sources or short-term capital gain, as the flat was not in existence at the time of sale. The CIT(A) disagreed, holding that the assessee's interest in the property included the ownership of the land, which had appreciated over time, thus qualifying as a long-term capital gain. The Tribunal endorsed the CIT(A)'s findings, noting that the right to occupy a flat constitutes a capital asset held for more than 36 months, and hence, the transaction resulted in a long-term capital gain. Issue 2: Taxation of Discounted Interest Amount from National Housing Bank The AO taxed the entire discounted interest amount of Rs. 23,50,000 received by the assessee in the assessment year 1992-93, arguing that it should be taxed on a receipt basis. The CIT(A) deleted this addition, but the Tribunal overturned this decision, citing the Kerala High Court's ruling in CIT v. Varghese Mani, which held that the entire interest accrues in the accounting year when an option to receive interest at a discount rate is exercised. The Tribunal directed the AO to tax the entire discounted interest amount in the assessment year 1992-93, with instructions to rectify any double taxation in subsequent years. Issue 3: Disallowance of Brokerage Paid for Sale of Rights in Flat The assessee claimed a deduction for brokerage of Rs. 1,50,000 paid to brokers for selling the flat rights. The AO disallowed this claim due to insufficient evidence, as the brokers were not produced for examination, and the payment was made in cash without proper verification. The CIT(A) upheld the disallowance, and the Tribunal agreed, emphasizing the lack of substantiation for the brokerage payment and the absence of proof of services rendered by the brokers. The Tribunal concluded that the claim was non-genuine and justified the disallowance. Conclusion: The Tribunal partly allowed the revenue's appeal by treating the discounted interest amount as taxable in the year of receipt and dismissed the assessee's appeal regarding the brokerage disallowance. The Tribunal upheld the CIT(A)'s decision to classify the profit on the sale of the incomplete flat as a long-term capital gain.
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