2017 (8) TMI 328 - AT - Income Tax

Profit and sale of allotment right - income from other sources or capital gain - elibibility of claim made before AO - Held that - The claim made before the Assessing Officer during the course of assessment proceedings is well within the law and held by the hon ble jurisdictional High Court in the case of CIT v. Sam Global Securities Ltd. 2013 (9) TMI 876 - DELHI HIGH COURT . As more than 90 per cent. of the payments made for the said property will tantamount to a right which is transferable arid will be termed as a capital asset. The total payment having been made for ₹ 89,50,000 whereas on transfer the assessee received ₹ 1,19,32,000 fetching about ₹ 30 lakhs profit which has been offered under the head Capital gains . See CIT v. Tata Services Ltd. reported in 1979 (1) TMI 26 - BOMBAY High Court . The findings of the learned Commissioner of Income-tax (Appeals) cannot be approved and therefore ground of the assessee are allowed.

Summary

Issues:
Assessment of capital gains on sale of property allotment right, validity of indexation benefit claim, interpretation of capital asset definition.

Analysis:
1. The appeal involved the assessment of capital gains on the sale of a property allotment right for the assessment year 2010-11. The assessee contested the denial of indexation benefit and the classification of the transaction as a capital asset.

2. The main contentions raised by the assessee focused on the rejection of the claim for treating the sale as capital gains and allowing indexation benefit. The Commissioner of Income-tax (Appeals) upheld the Assessing Officer's decision based on the fact that the flat was not possessed, the full cost was not paid, and allotment of a flat did not fall under the definition of a capital asset.

3. The Tribunal analyzed the legal aspects of the case, considering the claim made by the assessee during assessment proceedings. The counsel for the assessee cited relevant case law, specifically referring to the decision of the jurisdictional High Court in CIT v. Sam Global Securities Ltd. The Tribunal found the claim to be valid based on the legal precedents presented.

4. The Tribunal further examined whether the right to receive the flat was a property falling under the definition of a capital asset. Referring to the judgment of the Bombay High Court in CIT v. Tata Services Ltd., it was established that a right to obtain conveyance of immovable property constituted property under the Income-tax Act. The Tribunal also referenced a Tribunal decision supporting the transferability of such rights as capital assets.

5. Based on the legal interpretations and precedents cited, the Tribunal concluded that the allotment right in question qualified as a capital asset, and the profit from its sale should be treated as capital gains. Consequently, the Tribunal allowed the appeal of the assessee, overturning the decisions of the lower authorities.

6. The judgment highlighted the importance of legal interpretations and precedents in determining the tax treatment of transactions involving property rights. The decision emphasized the broad scope of the definition of capital assets and the need to consider specific circumstances and legal principles in such assessments.