2019 (3) TMI 534 - AT - Income Tax

Short Term Capital Gain V/S long term capital gain - correct date of acquisition of asset - acquiring an identifiable right in a specific property - CIT(A) treating date of full payment as date of acquisition and gain as nature of Short Term Capital Gain - HELD THAT - The assessee had acquired the right in the property pursuant to allotment letter dated 10/03/2008. The assessee has made the full payment of ₹ 83.30 Lacs by 25/06/2008. The said fact is duly supported by the bank statements as placed on record from where the payments were made by the assessee. The above stated fact demonstrates that the assessee had acquired a identifiable right in a specific property and also made the full payment thereof by 25/06/2008. The registration of purchase documents, in such a case, was to convey the ownership rights to the assessee which already existed in assessee s favor by way of allotment letter dated 10/03/2008. As undisputed fact that the same property has been sold by the assessee during impugned AY. This being the case, we have no hesitation in concurring with the stand of CIT(A), in this regard. Maintainability of appeal - Monetary limit - AO added entire sale consideration in the hands of the assessee without deducting there-from the cost of acquisition, which is clearly erroneous - HELD THAT - The computations as placed on record by AR reveal that if the cost of acquisition is allowed to the assessee, the tax effect of the impugned additions shall be below ₹ 20 Lacs and the same is squarely covered by the recent low tax effect circular No. 03/2018 dated 11/07/2018 issued by the CBDT and keeping in view of the same, the appeal of the revenue is otherwise not maintainable.

Summary

Issues:
Nature of capital gain from sale of a flat - Short Term Capital Gain or Long Term Capital Gain.
Date of acquisition for tax purposes - Date of full payment or date of registered document.

Nature of Capital Gain:
The dispute in this case revolves around the nature of capital gain arising from the sale of a flat by the assessee. The assessee claimed Long Term Capital Gain, considering the holding period from the date of allotment and final payment to be more than three years. However, the Assessing Officer (AO) determined it as Short Term Capital Gain, calculating the holding period from the registered purchase document to the sale document, which was less than three years. The AO also denied the benefit of indexation to the assessee. The Commissioner of Income-Tax (Appeals) [CIT(A)] ruled in favor of the assessee, considering the holding period to be more than three years and directing the AO to allow the cost of land and determine the correct amount of gain as per the provisions of the Act.

Date of Acquisition for Tax Purposes:
The primary issue regarding the date of acquisition for tax purposes was whether the date of full payment or the date of the registered document should be considered. The AO considered the date of the registered purchase agreement as the date of acquisition, leading to a holding period of less than three years. In contrast, the CIT(A) accepted the dates of allotment and full payment as the relevant dates for acquisition, resulting in a holding period of more than three years. The Appellate Tribunal concurred with the CIT(A)'s decision, emphasizing that the assessee had acquired an identifiable right in the property upon full payment before the registration of the purchase document. The Tribunal also noted the erroneous addition of the entire sale consideration by the AO without deducting the cost of acquisition, which was rectified by the CIT(A). The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision.

This detailed analysis of the judgment highlights the key issues of the nature of capital gain and the date of acquisition for tax purposes, providing a comprehensive understanding of the legal reasoning and decisions made by the authorities involved in the case.