2017 (6) TMI 1076 - AT - Income Tax

Treatment to capital gain - long term capital gain OR short term capital gain - period of holding of the capital assets - AO has taken the date of purchase which was in the purchase deed - CIT(A) has taken the date of purchase which is based on the allotment letter issued by the West Bengal Housing Board - Held that - In the instant case letter of allotment is on 28.09.2000 and accordingly the right was acquired on that date. The assessee sold the property which was acquired by way of letter of allotment dated on 11.05.2005. Accordingly, the period of holding exceeds 36 months in the present case. So the period of holding in the instant case exceeds 36 months and income arising on the sale of said property will be treated as LTCG. No reason to interfere with the findings arrived by the Ld. CIT(A). Under the circumstances, this issue of Revenue s appeal is dismissed. Value determined by the ld CIT(A) under the provisions of section 50C - Held that - In the instant case, we find that both the lower authorities have taken a different deemed sale consideration as provided under section 50C of the Act. None of the lower authorities has confirmed the same by issuing a notice u/s 133(6) of the Act to Stamp Valuation Authorities to determine the actual stamp valuation. In the absence of any confirmation from the Stamp Valuation Authorities, we are inclined to restore this issue to the file of AO for fresh adjudication in accordance with law and in the light of above stated discussion. Hence, this ground of Revenue s appeal is allowed for statistical purposes. Allowing interest pertaining to earlier financial years as part of the cost of acquisition under the head capital gain - Held that - There is no doubt that the interest in question is indeed a expenditure in acquiring the asset. Therefore, the assessee in the instant case is certainly entitled to include the interest amount at the time of computing capital gains u/s 48 of the Act. Therefore, the Ld CIT(A) has rightly accepted the assessee s contention and deleted the addition made by the AO. Hence, qua this ground, we uphold the order of the Ld. CIT(A).

Issues Involved:
1. Classification of capital gain as long-term or short-term.
2. Determination of the valuation of the property under section 50C of the Income Tax Act.
3. Inclusion of interest paid in the cost of acquisition for capital gain calculation.

Issue-wise Detailed Analysis:

1. Classification of Capital Gain as Long-Term or Short-Term:

The primary issue raised by the Revenue was whether the capital gain from the sale of a flat should be treated as long-term or short-term. The Assessing Officer (AO) treated the gain as short-term capital gain (STCG) based on the date of purchase mentioned in the purchase deed (14th March 2005) and the date of sale (11th May 2005). The assessee contended that the flat was acquired in September 2000 as per the allotment letter from the West Bengal Housing Board, thus qualifying it as a long-term capital gain (LTCG).

The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's argument, stating that the date of allotment (28th September 2000) should be considered as the date of acquisition. The CIT(A) referenced several case laws, including CIT vs. Jindas Panchand Gandhi, and concluded that the date of allotment conferred the right to hold the property, making the gain long-term.

The Appellate Tribunal upheld the CIT(A)’s decision, citing consistent judicial precedents and the principle that if two reasonable constructions of a taxing provision are possible, the one favoring the assessee should be adopted (CIT vs. Vegetable Products Ltd.). Therefore, the capital gain was classified as long-term.

2. Determination of the Valuation of the Property under Section 50C:

The second issue involved the valuation of the property for capital gains purposes under section 50C of the Income Tax Act. The AO adopted a valuation of ?59.28 lakh determined by the Additional District Sub-Registrar (ADSR), while the assessee claimed the sale value was ?33 lakh as per the sale deed.

The CIT(A) agreed with the assessee, noting that section 50C requires the adoption of the stamp duty valuation, not the market value. The CIT(A) referenced a letter from the Registrar of Assurances confirming the stamp duty valuation at ?33 lakh and directed the AO to adopt this value for capital gain computation.

The Tribunal found that neither the AO nor the CIT(A) had confirmed the valuation with the Stamp Valuation Authorities. Consequently, the Tribunal restored the issue to the AO for fresh adjudication, instructing the AO to verify the actual stamp valuation.

3. Inclusion of Interest Paid in the Cost of Acquisition:

The third issue concerned whether the interest paid on a loan for purchasing the property should be included in the cost of acquisition for capital gain calculation. The assessee included an interest amount of ?5,15,010 in the cost of acquisition.

The CIT(A) accepted the assessee's claim, stating that the interest paid is an expenditure incurred in acquiring the asset, thus allowable under section 48 of the Income Tax Act.

The Tribunal upheld the CIT(A)’s decision, affirming that the interest amount is indeed a legitimate expenditure in acquiring the asset and should be included in the cost of acquisition for capital gain computation.

Conclusion:

The Tribunal dismissed the Revenue's appeal regarding the classification of capital gain and inclusion of interest in the cost of acquisition. However, it allowed the appeal for statistical purposes concerning the valuation of the property under section 50C, directing the AO to re-evaluate the stamp duty valuation. The overall appeal by the Revenue was thus partly allowed for statistical purposes.

← Previous Next →