2016 (11) TMI 386 - AT - Income Tax

Long term capital gain - Entitlement to indexation computed with respect to the date of actual payments of installments slab wise - date on which assessee acquired rights, title and interest in the flat - Held that - The assessee has made the installment payments slab wise from time to time over a period of time. However, we have observed that the assessee has written a letter to the Builder Apex Hotels Enterprises Private Limited dated 10-03-2008 whereby it was stated that a beneficial right and interest in the flat was acquired by the assesssee under the allotment letter dated 01-08- 1994 issued by the Builder with respect to flat bearing No. 601 in 6th floor in the building known as Pujit Plaza situated at plot No. 67, Sector 11, Belapur, Navi Mumbai, which is now proposed to be sold by the assessee in March 2008 . The said letter dated 10-03-2008 addressed to the Builder is placed on record in paper book/page 22/25 filed by the assessee. However, the assessee has not placed the said allotment letter dated 01-08-1994 on record in the paper book filed with the Tribunal for our study and perusal to determine whether in fact the assessee acquired rights, title and interest in the flat vide the said allotment letter dated 01-08-1994. The order of the AO did mention about this allotment letter dated 01-08-1994. CBDT Circular No. 471 dated 15th October 1986 and also CBDT circular no. 672 dated 16-12-1993 stipulates that in case of allotment of flat under self financing scheme of Delhi Development Authority(DDA) and co-operative societies , the date of allotment shall be the date of construction for the purpose of Section 54/54F of the Act. Thus, by virtue of allotment letter dated 01-08-1994 , prima facie it appears that the assessee has acquired the interest , rights and title in the property but the said allotment letter dated 01-08-1994 is not placed on record by the assesssee to enable us to study detailed terms and conditions. The matter in our considered view, need to be set aside and restored to the file of the AO for re-determination of the issue on merits by the AO after examining the terms and conditions of allotment letter dated 01-08-1994 to enable the AO to determine whether the assessee has in-fact acquired rights , title and interest in the said flat by virtue of the said allotment letter dated 01-08-1994 . The assessee has sold the flat in March 2008 and hence if it is held by the AO that the assessee acquired rights, title and interest in the flat w.e.f. 01-08- 1994 i.e. the date of allotment, the gains shall be brought to tax as long term capital gains - Decided in favour of assessee for statistical purposes

Issues Involved:
1. Classification of the office as a short-term or long-term capital asset.
2. Disallowance of indexed cost of acquisition.
3. Levy of interest under Section 234.
4. Initiation of penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Classification of the Office as Short-term or Long-term Capital Asset:
The primary issue was whether the office sold by the assessee should be treated as a short-term or long-term capital asset. The assessee claimed it as a long-term capital asset, arguing that the right to the property was acquired in 1992 based on a letter of allotment. However, the Assessing Officer (AO) contended that the property was acquired after 1987, as the plot was allotted to the builder in 1986, and the property could not have been constructed before that. The CIT(A) observed that the allotment letter dated 26th July 1992 did not confer ownership rights but only a "right of specific performance" or "right to obtain conveyance of immovable property." Therefore, the CIT(A) concluded that the property was a short-term capital asset as the ownership right was not acquired until a later date, which was not clearly established by the assessee.

2. Disallowance of Indexed Cost of Acquisition:
The AO disallowed the indexed cost of acquisition claimed by the assessee, as there was no verifiable evidence of the actual date of purchase. The assessee argued that the property was booked in 1992, but the AO found that the property was likely acquired after 1994 based on correspondence with the builder. The CIT(A) upheld the AO's decision, noting that the capital asset came to be held by the assessee only upon acquiring ownership rights, which was not clearly proven to be in 1986. The Tribunal directed the AO to re-examine the terms of the allotment letter dated 1st August 1994 to determine the actual date of acquisition and compute the indexed cost accordingly.

3. Levy of Interest under Section 234:
The AO levied interest under Section 234, which was contested by the assessee. The Tribunal's order did not specifically address this issue, as the primary focus was on the classification of the asset and the indexed cost of acquisition.

4. Initiation of Penalty under Section 271(1)(c):
The AO initiated penalty proceedings under Section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars. The Tribunal's order did not specifically address this issue, as the primary focus was on the classification of the asset and the indexed cost of acquisition.

Conclusion:
The Tribunal set aside the matter to the AO for re-determination, directing the AO to examine the terms of the allotment letter dated 1st August 1994 to ascertain the actual date of acquisition. The AO was instructed to provide the assessee with an opportunity to submit necessary evidence and explanations. The AO was also directed to compute the indexed cost based on the actual payments made by the assessee over time, rather than the total cost from the date of allotment. The appeal was allowed for statistical purposes.

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