2016 (2) TMI 346 - AT - Income Tax

Taxability of the sale of property as Short Term Capital Gains OR long Term Capital Gains - denial of exemption claimed u/s 54F - Held that - Possession of the flat was given subsequently. The assessee then sold the flat on 05/07/1989. In the return of income the assessee disclosed the capital gain arising from the sale of flat as LTCG. The authorities below treated the capital gain arising there from as STCG. Their Lordships held that the capital gains arising from the sale was LTCG. At para 7 thereof, their Lordships have observed that when the assessee paid the first installment on 04/07/1986 after allotment on 07/06/1986, this act conferred upon the assessee a right to hold the flat. The mere fact that possession of the flat was delivered later does not detract from the fact that the allotment was conferred with a right to hold the property on issuance of an allotment letter. The payment of balance installments and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter. In this view of the matter, the transaction was held to LTCG. Capital gains arising from sale of the said Flat No. 702, Mumbai Central, Mumbai by the assessee is to computed as LTCG as the period of 36 months is to be taken from 18/10/2005, i.e. the date of allotment to 11/12/2009 i.e. the date of sale. We accordingly uphold the order of the Ld.CIT (A) on this issue and dismiss the grounds raised by Revenue in this regard. As regards revenue averments that the assessee is not entitled to exemption u/s 54F of the Act since the claim by the assessee was made u/s 54 of the Act. We have heard both parties and perused the record and the judicial decisions and CBDT Circular No.14 (XI-35) of 1955 dt. 11/04/55 cited by the assessee. On an appreciation of the same, we concur with the view of the Ld. CIT (A) that there are a number of judicial pronouncements wherein it has been held that it is obligatory on the part of the AO to draw the assessee s attention to the lawful relief available and that if such exemption /deduction was otherwise available to the assessee, the same should be allowed. Finding no reason to interfere with the order of the Ld. CIT (A) in the matter, we dismiss the ground raised by Revenue. - Decided in favour of assessee

Summary

Issues:
1. Determination of Long Term Capital Gains (LTCG) and exemption u/s 54F of the Income Tax Act.

Analysis:
The appeal before the Tribunal was against the order of the CIT(Appeals)-27, Mumbai for the Assessment Year 2010-11. The assessee declared a total income of Rs. 5,05,170, which was later determined at Rs. 60,85,170 by the assessing officer. The CIT(A) allowed the relief claimed by the assessee, treating the sale of a property as LTCG and granting exemption u/s 54F of the Act. The revenue challenged this decision, questioning the treatment of the property sale as LTCG and the allowance of exemption under section 54 of the Act despite the property being held for less than 36 months, a mandatory requirement for claiming the exemption.

The revenue contended that the property was held for less than 36 months, making it liable for Short Term Capital Gains (STCG) instead of LTCG. The assessing officer rejected the assessee's computation of LTCG and denied the exemption under section 54F. However, the assessee argued that the period of holding should be reckoned from the date of allotment, not the agreement date with the builder. The assessee cited judicial precedents and relevant facts to support their claim.

The Tribunal carefully considered the material on record and the arguments presented. It noted that the date of purchase for the purpose of calculating the 36-month period before the sale was crucial. The assessee provided evidence of the allotment letter issued by the builder, confirming the reservation of the property and the payment made by the assessee. The Tribunal referred to a similar case decided by the ITAT Delhi Bench and a judgment by the Punjab & Haryana High Court to support the assessee's position.

Based on the precedents and facts of the case, the Tribunal upheld the CIT(A)'s order, treating the capital gains as LTCG and allowing the exemption under section 54F. It emphasized the importance of considering the date of allotment for calculating the holding period. The Tribunal dismissed the revenue's appeal for the Assessment Year 2010-11, affirming the decision in favor of the assessee.

In conclusion, the Tribunal's detailed analysis and reliance on judicial precedents established the correct treatment of the property sale as LTCG and the eligibility for exemption u/s 54F. The judgment underscored the significance of the date of allotment in determining the holding period for capital gains tax purposes, ultimately ruling in favor of the assessee and dismissing the revenue's appeal.