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2017 (9) TMI 644 - AT - Income TaxSale of residential property - Long Term Capital Gain OR Short Term Capital Gain - period of holding - deduction claimed under section 54EC and 54F - Held that - The date of execution of agreement to sale of flat (16.11.2006) should be treated as date of acquisition of capital asset. The assessee sold the capital asset by agreement dated 18.11.2009, to Mr & Mrs Soni. The objection of the revenue that the assessee intentionally waited for mechanical lapse of 36 months and deliberately put the date on agreement as 18.11.2009 to avoid the payment of tax is not tenable. Every individual has a right to deal his asset as per his own choice and convenience and the revenue cannot dictate any particular way unless otherwise the transaction is prohibited by law. Thus, in our considered view the assessee acquired the capital asset on 16.11.2006 and transferred it on 18.11.2009. Hence, qualified for Longterm Capital Gain (LTCG). We may make it clear that the assessee would be entitled for the benefit of indexation from 16.11.2006 only for the purpose of calculation the LTCG. The assessing officer is further directed to allow the deduction/benefit of ₹ 50,00,000/- under Section 54EC and 54F after verification of facts. Thus the grounds of appeal raised by assessee are allowed.
Issues Involved:
1. Treatment of Long Term Capital Gain (LTCG) as Short Term Capital Gain (STCG) on sale of residential property. 2. Eligibility for deductions under sections 54EC and 54F of the Income Tax Act. Detailed Analysis: Issue 1: Treatment of Long Term Capital Gain (LTCG) as Short Term Capital Gain (STCG) on sale of residential property The primary issue revolves around whether the capital gain from the sale of residential property should be treated as Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG). The assessee declared the gain as LTCG, whereas the Assessing Officer (AO) treated it as STCG, a decision upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that the date of booking (12.05.2004) should be considered the date of acquisition, thus qualifying the gain as LTCG. The AO contended that the assessee only acquired the right in the property upon receiving the Occupancy Certificate on 22.06.2009, making the gain STCG. The CIT(A) supported the AO's view, emphasizing that the assessee intentionally waited for the lapse of 36 months to avoid tax. The Tribunal considered the rival contentions and the decision of the Hon’ble Delhi High Court in Gulshan Malik Vs CIT, which dealt with the date of acquisition of a capital asset. The Tribunal concluded that the date of execution of the agreement to sale (16.11.2006) should be treated as the date of acquisition of the capital asset. The Tribunal noted that the assessee sold the asset on 18.11.2009, satisfying the conditions for LTCG, as the holding period exceeded 36 months. Issue 2: Eligibility for deductions under sections 54EC and 54F of the Income Tax Act The second issue pertains to the eligibility for deductions under sections 54EC and 54F. The AO disallowed these deductions, treating the gain as STCG. The Tribunal, having established that the gain qualifies as LTCG, directed the AO to allow the deductions after verifying the facts. The Tribunal emphasized that every individual has the right to deal with their assets as per their choice and convenience, and the revenue cannot dictate otherwise unless prohibited by law. Consequently, the Tribunal allowed the appeal, granting the benefit of indexation from 16.11.2006 and directing the AO to allow the deductions under sections 54EC and 54F. Conclusion: The Tribunal ruled in favor of the assessee, treating the capital gain as LTCG and allowing the deductions under sections 54EC and 54F. The appeal filed by the assessee was allowed, with the order pronounced in the open court on 18th August 2017.
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