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2013 (11) TMI 1635 - AT - Income TaxDeduction Sec.54 - Held that - The said apartments for a period of more than thirty-six months and the sale proceed out of its sale consideration were in the nature of LTCG and were invested for purchasing the new house property for residential purpose within a period of one year from the date of sale of property. Hence the assessee is eligible for deduction Sec.54 of the Act. But in the present case whether the assessee has invested the LTCG arising out of sale of these apartments in the new residential house or not has not been examined by the AO these need examination factually. Hence for factual examination we set aside this issue to the file of AO.
Issues Involved:
1. Determination of the date of acquisition for the purpose of computing Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG). 2. Eligibility of the assessee for deduction under Section 54 or Section 54F of the Income-tax Act, 1961. Issue-Wise Detailed Analysis: 1. Determination of the Date of Acquisition for Capital Gains Computation: The primary issue in these appeals, both by the assessee and the revenue, revolves around whether the date of allotment of flats by the developer through an allotment letter should be considered as the date of acquisition for the purpose of computing capital gains, i.e., LTCG or STCG. The assessee contended that the allotment letter dated 12.05.2004, following the initial booking payment on 04.02.2004, vested him with legal ownership rights over the flats. The assessee sold the flats on 12.09.2007 and claimed LTCG, arguing that he held the property since the date of allotment. The Assessing Officer (AO) rejected this claim, stating that mere allotment does not confer ownership. The AO emphasized that ownership includes the right to enjoy the property and possession, which the assessee did not have until the registration of the purchase agreement on 08.12.2006. Thus, the AO treated the gains as STCG. The CIT(A) allowed the assessee's claim, holding that the right in the property accrued from the date of the allotment letter, making it a long-term capital asset. The CIT(A) noted that the assessee had a vested right from the date of the initial payment and subsequent periodic payments, thus holding the property for more than 36 months. The Tribunal upheld the CIT(A)'s decision, emphasizing that the term "held" in Section 2(14) of the Act includes any right over a property. The Tribunal referred to the case of Praveen Gupta v. ACIT, where it was held that the benefit of indexation should be granted from the date of the allotment letter and initial payments, not from the date of the conveyance deed. The Tribunal concluded that the assessee's right over the property was a long-term capital asset, and the gains from its sale were LTCG. 2. Eligibility for Deduction under Section 54 or Section 54F: The second issue pertains to whether the assessee is entitled to deductions under Section 54 or Section 54F of the Act. The assessee claimed deduction under Section 54, stating that the sale proceeds from the flats were invested in purchasing a new flat. The AO rejected this claim, arguing that the assessee did not have ownership of the property as required under Section 54. The AO noted that the property was not a residential house at the time of transfer but merely a right to acquire a flat. The CIT(A) upheld the AO's decision, stating that the conditions of Section 54 were not fulfilled as the assessee had not become the owner of the property by any express or deemed provisions of law. The CIT(A) emphasized that the assessee's right was contingent upon fulfilling certain conditions, and there was no actual transfer of immovable property. The Tribunal, however, disagreed with the CIT(A) on this point. It referred to the Karnataka High Court's decision in the case of CIT v. Smt. K.G. Rukumini Amma, which held that the term "a residential house" should not be construed as singular. The Tribunal noted that the assessee had invested the LTCG in purchasing a new residential house within the stipulated period, making him eligible for deduction under Section 54. However, the Tribunal remanded the case to the AO for factual verification of the investment in the new residential house. Conclusion: The Tribunal concluded that the assessee's right over the flats, acquired through the allotment letter and subsequent payments, was a long-term capital asset. The gains from the sale of these rights were LTCG. The Tribunal also held that the assessee was eligible for deduction under Section 54, subject to factual verification by the AO. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes.
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