2019 (4) TMI 1657 - AT - Income Tax

Gain on sale of property - LTCG OR STCG - Whether Date of allotment of property could be reckoned as a specified date as against date of possession / registration of the property for the purpose of determining the period of holding of property? - benefit of exemption u/s.54F - HELD THAT - As decided in VEMBU VAIDYANATHAN 2019 (1) TMI 1361 - BOMBAY HIGH COURT the date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by D.D.A.. In that view of the matter, CIT appeals of the Tribunal correctly held that the assessee had acquired the property in question on 31st December, 2004 on which the allotment letter was issued. Respectfully, following the same, we confirm the stand of first appellate authority to the extent that the resultant gains were Long-Term Capital Gains in nature. Eligibility to claim deduction u/s 54F - the assessee has made the payment within stipulated time as envisaged by Section 54F and the allotment in a specific property has been obtained by the assessee on 14/04/2012 which is evident from allotment letter as placed. Therefore, since all the conditions of Section 54F was fulfilled by the assessee, there could be no occasion to deny the benefit of deduction to the assessee - Decided against revenue

Summary

Issues Involved:
1. Determination of the date of acquisition of property for capital gains tax purposes.
2. Classification of the gain as long-term or short-term capital gain.
3. Eligibility for exemption under Section 54F of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Determination of the Date of Acquisition of Property for Capital Gains Tax Purposes:
The primary issue was whether the date of allotment or the date of possession/registration should be considered for determining the period of holding of the property. The assessee argued that the date of allotment in 2007 should be the specified date, while the Assessing Officer (AO) contended that the date of possession in 2012 should be used. The CIT(A) and ITAT both held that the date of allotment should be considered, referencing CBDT Circulars No. 471 and 672, and various judicial precedents, including the Mumbai ITAT decision in Anita D. Kanjani Vs. ACIT and the Indore Bench of ITAT in ACIT vs. Sanjay Kumath. The ITAT confirmed that the date of allotment is the relevant date for determining the period of holding.

2. Classification of the Gain as Long-Term or Short-Term Capital Gain:
Based on the determination that the date of allotment in 2007 was the acquisition date, the holding period exceeded 36 months, thus classifying the gain as long-term capital gain. The AO had initially classified the gain as short-term because he considered the possession date in 2012. The CIT(A) and ITAT rejected this, stating that the holding period should be computed from the date of allotment, making the gain long-term. This was further supported by the Hon’ble Bombay High Court decision in Pr. Commissioner of Income Tax vs. Vembu Vaidyanathan, which emphasized that the date of allotment confers effective rights over the property.

3. Eligibility for Exemption under Section 54F of the Income Tax Act, 1961:
The AO denied the exemption under Section 54F, arguing that the assessee did not hold the property for the required period and had not made the necessary investments within the stipulated time. The CIT(A) and ITAT found that the assessee had indeed made the requisite investments in a new residential property within the prescribed time, making her eligible for the exemption. The ITAT cited the case of ACIT vs. Shri Keyur Hemant Shah, where similar facts led to the conclusion that the date of allotment should be considered for the holding period, thus allowing the exemption under Section 54F.

Conclusion:
The ITAT upheld the CIT(A)’s decision to treat the gains as long-term capital gains based on the date of allotment and granted the benefit of exemption under Section 54F. The appeal by the revenue was dismissed, affirming that the date of allotment is the relevant date for determining the period of holding and eligibility for long-term capital gains tax treatment and related exemptions.