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2023 (1) TMI 1002 - AT - Income TaxCapital gain computation - date of acquisition of the right over the property by the assessee - benefit of indexation on the cost - Whether NFAC erred in denying the Appellant the benefit of indexation on the cost by holding that the capital gains earned by the Appellant from the transfer was not long term capital gains but short term capital gains? - HELD THAT - As per the record submitted before us from the books of Bharat Diamond Bourse clearly indicates that assessee has been allotted office space and subsequently made several payments commencing from 31.08.1999 as per ledger extract. It is brought to our notice in the similar facts and grounds of appeal raised in appeal before Coordinate Bench in M/s. Suresh Brothers 2019 (10) TMI 1544 - ITAT MUMBAI Respectfully following the above said decision since the issue is exactly similar and facts are also identical we are of the view that date of acquisition of the property was to be reckoned from the date of the allotment i.e in the F.Y. 1998-99. Respectfully following the above decision we allow the ground raised by the assessee.
Issues Involved:
1. Determination of whether the capital gain from the sale of office premises is short-term or long-term. 2. Eligibility for indexation benefits on the cost of acquisition. 3. Validity of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Determination of whether the capital gain from the sale of office premises is short-term or long-term: The primary issue revolves around whether the capital gain from the sale of office premises should be classified as short-term or long-term. The assessee claimed that the property was a long-term capital asset since the right to the property was created in the financial year 1998-99, and thus, the holding period exceeded 36 months. The Assessing Officer (AO) disagreed, stating that the actual allotment of the office premises occurred on 29.07.2010, making the asset a short-term capital asset as it was sold on 19.05.2012, within 36 months of allotment. The AO's position was that no right was created in the property at the time of the initial payments since the office space did not exist, and the complex itself was leased by Bharat Diamond Bourse from MMRDA only on 31.03.2010. Therefore, the AO treated the capital gain as short-term and initiated penalty proceedings under Section 271(1)(c) for concealment of income. The assessee, however, argued that the right to the property was created in 1998-99, citing various judicial precedents, including the Bombay High Court's decision in CIT vs Tata Teleservice Ltd, which held that a right to obtain office premises is considered "property" under Section 2(14) of the Income Tax Act. The assessee also referenced multiple tribunal decisions supporting the view that the date of allotment should be considered the date of acquisition. 2. Eligibility for indexation benefits on the cost of acquisition: The eligibility for indexation benefits was contingent on whether the capital gain was classified as long-term. The assessee claimed indexation benefits from the financial year 1998-99, arguing that the right to the property was acquired then. The AO, having classified the gain as short-term, denied these benefits. The assessee cited the Mumbai Tribunal's decision in the case of Smt. Lata G. Rohra, which allowed indexation from the date of the initial agreement, regardless of the actual payment dates. The assessee also referenced the Delhi ITAT's decision in Praveen Gupta vs ACIT, which supported indexation based on the payment dates. However, the assessee preferred the Mumbai Tribunal's judgment, as it was more relevant and beneficial. 3. Validity of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961: The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee requested the penalty be dropped, referencing the ITAT's decision in The DCIT vs Tristar Jewellery Exports Pvt. Ltd., which held that penalty is not leviable on additions made on an estimation basis and where it is not confirmed that the assessee willfully submitted inaccurate particulars. Tribunal's Decision: The Tribunal examined the facts, submissions, and judicial precedents. It noted that the assessee was allotted office space and made payments starting from 31.08.1999, as evidenced by the ledger extract from Bharat Diamond Bourse. The Tribunal found that the right to the property was created in 1998-99, making the capital gain long-term. The Tribunal relied on its earlier decision in M/s. Suresh Brothers vs ACIT, where it was held that the date of acquisition should be reckoned from the date of allotment. The Tribunal also referenced the Bombay High Court's decision in PCIT vs Vembo Vaidyanathan, which supported the view that the date of allotment is the relevant date for capital gains tax purposes. Conclusion: The Tribunal concluded that the capital gain from the sale of office premises was long-term, allowing the assessee's claim for indexation benefits. Consequently, the Tribunal allowed the appeal filed by the assessee and directed the AO to treat the capital gain as long-term. The Tribunal did not explicitly address the penalty proceedings, but the outcome suggests that the penalty may not be sustainable given the reclassification of the capital gain. Order: The appeal filed by the assessee is allowed.
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