2020 (4) TMI 294 - AT - Income Tax

Capital gain - LTCG or STCG - Period of holding of asset - right acquired on signing of JDA - HELD THAT - The Occupancy certificate issued by BBMP is dated 30.03.2016. Hence in the present year i.e. F. Y. 2014 15 relevant to A. Y. 2015 16, the Building was not complete and therefore, what is sold cannot be flat but only right in the flat. Hence, it is seen that in the facts of the present case, capital Asset in question is not the flats but right to obtain flats from the builder. This right has accrued to the assessee on 16.12.2010 itself on signing of JDA itself and the assessee is holding it since then because nothing more was required to be done in this regard. In our considered opinion, this right was held by the assessee for more than 36 months because it was acquired on 16.12.2010 and sold in F. Y. 2014 15. Hence, the capital gain in question is LTCG and not STCG. On this issue, we find no infirmity in the order of CIT (A). Allowability of deduction u/s 54 - new asset was acquired by the assessee on 10.01.2014 but the assets were transferred by way of sale deed executed on or after 16.01.2015 and therefore, as per the AO, the new asset was acquired prior to one year before the date of sale of flats - whether date of sale agreement should be considered or date of sale deed should be considered for the purpose of counting the period of one year before the date of sale as provided in section 54? - HELD THAT - Latest date of Agreement and Date of possession/transfer is 27.11.2014. Even if we consider this date as the date of sale, the acquisition of the new asset acquired by the assessee on 10.01.2014 is not prior to one year before the date of sale of flats. As relying on SH. SANJEEV LAL ETC. VERSUS COMMISSIONER OF INCOME TAX ANOTHER 2014 (7) TMI 99 - SUPREME COURT we decline to interfere in the order of CIT (A) on this issue also because as per this judgment, date of sale agreement has to be considered as date of sale because some rights of the vendor gets extinguished and the vendee acquires some rights in the property in question on the date of the sale agreement coupled with part payment. - Decided against revenue.

Summary

Issues Involved:
1. Classification of capital gain as Long-Term Capital Gain (LTCG) or Short-Term Capital Gain (STCG).
2. Allowability of deduction under Section 54 of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Classification of Capital Gain:
The primary issue was whether the capital gain from the sale of 23 flats should be classified as LTCG or STCG. The Assessing Officer (AO) considered it as STCG, while the assessee claimed it as LTCG, supported by the CIT (A). The AO argued that since the possession of the flats was taken in FY 2013-14 and sold in FY 2014-15, the asset was a short-term capital asset under Section 2(42A) of the Income Tax Act. However, the assessee contended that the right to acquire the built-up area arose on 16.12.2010 with the signing of the Joint Development Agreement (JDA), thus making it a long-term asset. The Tribunal found that the right to obtain flats was acquired on 16.12.2010, and since it was held for more than 36 months before being sold, it should be classified as LTCG. The Tribunal upheld the CIT (A)'s decision, confirming that the capital gain in question is LTCG.

2. Allowability of Deduction under Section 54:
The second issue was the allowability of deduction under Section 54 of the Income Tax Act. The AO objected to the deduction, stating that the new asset was acquired on 10.01.2014, which was prior to one year before the date of sale of the flats (16.01.2015 and 23.01.2015). The CIT (A) noted that the sale agreements were executed during FY 2013-14 and 2014-15, and the latest date of agreement and possession/transfer was 27.11.2014. The Tribunal referred to the Supreme Court's judgment in the case of Sanjeev Lal & Smt. Shail Moti Lal, which established that the date of the sale agreement should be considered for counting the period of one year before the date of sale. Following this judgment, the Tribunal concluded that the acquisition of the new asset on 10.01.2014 was within the permissible period, thus allowing the deduction under Section 54. The Tribunal upheld the CIT (A)'s decision on this issue as well.

Conclusion:
The appeal filed by the revenue was dismissed. The Tribunal confirmed that the capital gain in question is LTCG and upheld the allowability of deduction under Section 54, based on the date of the sale agreement rather than the sale deed. The order was pronounced in the open court.