2017 (10) TMI 1551 - AT - Income Tax

Long term capital - contentions of the assessee that what was transferred was booking rights and not immovable property in the form of a flat - Section u/s 50C applicability - HELD THAT - A perusal of the paper book filed by the assessee demonstrates that the possession was never taken by the assessee. Recitals at para-9 of the conveyance deed executed by the builder M/s. Idle Heights Pvt. Ltd in favour of Mr.Mohan Lal Dugar and Mr. Abhishek Kumar Dugar and Shri M.K.Singhania, demonstrates that the possession was handed over by the developer to these purchasers on 26.03.2013. Hence this proves that the assessee has never received possession of this property. The asset acquired was rights in the property, by way of an agreement and what was transferred was there rights. These rights are capital asset. The finding of the ld. CIT(A) that the asset is a long term capital and liable to long term capital gain. As what is sold is not an immovable property, section 50C does not apply. Result the appeal of the revenue is dismissed.

Summary

Issues:
1. Interpretation of Section 50C of the Income Tax Act regarding the applicability to booking rights.
2. Determination of whether the booking rights constitute a long-term capital asset.
3. Assessment of capital gains tax on the transfer of booking rights.
4. Consideration of possession and transfer dates in relation to capital gains computation.

Analysis:
1. The primary issue in this case revolves around the interpretation of Section 50C of the Income Tax Act concerning the applicability of the provision to booking rights. The appellant contested the decision of the Commissioner of Income Tax-(A)-9, Kolkata, arguing that the order was arbitrary, illegal, perverse, and bad in law. The contention focused on the erred judgment of the CIT(A) in not applying Section 50C to the booking rights, resulting in a discrepancy in the sale consideration amount.

2. The second issue pertains to determining whether the booking rights held by the assessee constitute a long-term capital asset. The appellant claimed that the booking rights were held for more than 36 months, warranting treatment as a long-term capital asset. The CIT(A) supported this claim and directed the treatment of income from the transfer of the property as Long Term Capital Gains, allowing the benefit of indexation as per Section 48 of the Income Tax Act.

3. The assessment of capital gains tax on the transfer of booking rights was a crucial aspect of the case. The appellant's contention regarding the reduction of the returned income was a point of dispute. The Assessing Officer treated the transaction as a short-term capital gain, applying Section 50C of the Act to substitute the sale consideration. However, the CIT(A) disagreed and directed the AO to treat the transfer as long-term capital gain, leading to the appeal by the revenue.

4. The final issue involved the consideration of possession and transfer dates in relation to the computation of capital gains tax. The facts of the case highlighted the sequence of events from the booking of the flat to the transfer of booking rights. The possession date, transfer date, and other key dates were crucial in determining the nature of the transaction and the applicability of capital gains tax. The Hon'ble ITAT Kolkata analyzed the dates and facts presented, ultimately upholding the finding of the CIT(A) that the asset was a long-term capital asset, thereby dismissing the appeal of the revenue.

In conclusion, the judgment by the ITAT Kolkata upheld the decision of the CIT(A) regarding the treatment of booking rights as a long-term capital asset, thereby dismissing the appeal of the revenue and providing a detailed analysis of the issues involved in the case.