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2005 (8) TMI 314 - AT - Income TaxComputation of Capital Gains - Computation of holding period of capital assets - whether the assessee's income from sale of Flat, is to be assessed a long-term capital gain or short-term capital gain ? - HELD THAT - We are of the considered opinion that the assessees got the legal possession of the property on 10th July, 1990 in case of Shri Sharad Thadani and Shri Manav Thadani and in case of Ms. Mrinalini Thadani on the date when her name was also included as per the request of Shri Gullu Thadani. Admittedly, if these dates are taken as the date of possession, there is no dispute that the capital asset sold was a long-term capital asset. Whether this would have been covered within the purview of capital gain or not needs to be addressed to in view of the definition of capital asset as per s. 2(14). It cannot be denied that the allotment letter per se was a valuable right vested in the assessees and therefore, when they transferred the same, it would have been subjected to capital gains tax. Therefore, when the flat as such was sold, this right also got extinguished and therefore, it will be liable for long-term capital gain. The Revenue can raise one more plea that in the present case the capital asset transferred was not the right to obtain conveyance of the flat itself. This argument, in our opinion, will not hold good because of the definition of capital asset as per which property of any kind held by an assessee is a capital asset. The flat in its physical form at best can be said to have additional rights added to the rights originally held by the assessees flowing from the original agreement. Thus, we confirm the order of the learned CIT(A) in all the three cases. In the result, all the three appeals filed by the Revenue are dismissed.
Issues Involved:
1. Classification of income from the sale of property as long-term capital gain or short-term capital gain. Issue-Wise Detailed Analysis: 1. Classification of Income from Sale of Property: The primary issue in these appeals is whether the income from the sale of Flat No. 707, Adishwar Apartment, 34, Firoz Shah Road, New Delhi, should be assessed as long-term capital gain or short-term capital gain. Factual Background: - The flat was owned by three assessees: Ms. Mrinalini Thadani (50%), Shri Sharad Thadani (25%), and Shri Manav Thadani (25%). The flat was sold during the assessment year 1996-97. - The assessees claimed exemption under sections 54/54F, treating the income as long-term capital gain. - The Assessing Officer (AO) obtained information from the builder, who confirmed that the possession certificate was given on 6th Dec., 1994, leading the AO to classify it as a short-term capital asset. Arguments and Evidence: - The assessees argued that the flat was owned by them since 8th Feb., 1988, based on an agreement entered by their father, Late Shri Gullu Thadani. - They contended that possession for interior work was given on 3rd March, 1992, and thus it was a long-term capital asset. - The AO, however, concluded that the possession was transferred on 6th Dec., 1994, and payments were made majorly after 3rd March, 1992, implying a short-term capital asset. Legal Interpretations and Case Laws: - The CIT(A) and the assessees relied on the definition of "capital asset" under section 2(14), which includes "property of any kind held by an assessee." - The term "property" was argued to have the widest import, including rights, titles, or interests in the property. - Various case laws were cited, including: - Ahmed G.H. Ariff vs. CWT: Defined "property" as a term of the widest import. - CIT vs. Tata Services Ltd.: Held that the right to obtain conveyance of immovable property is property under section 2(14). - Sunil Siddharthbhai vs. CIT: Discussed the transfer of property rights. - CIT vs. Anilaben Upendra Shah: Held that shares in a co-operative housing society are long-term capital assets if held for more than 36 months. Tribunal's Analysis and Decision: - The Tribunal considered the rival submissions and the definition of "capital asset" under section 2(14), which includes property of any kind held by an assessee. - It was noted that the term "property" includes the right to obtain conveyance, which is a valuable right. - The Tribunal concluded that the assessees acquired the right to obtain conveyance on 8th Feb., 1988, or latest by 10th July, 1990, on the death of Shri Gullu Thadani. - The Tribunal emphasized that the right to obtain conveyance is a capital asset, and its extinguishment on the sale of the flat constitutes a long-term capital gain. - The Tribunal upheld the CIT(A)'s decision to compute the income as long-term capital gain instead of short-term capital gain. Conclusion: - The Tribunal dismissed all three appeals filed by the Revenue, confirming that the income from the sale of the flat should be assessed as long-term capital gain. Result: - All three appeals filed by the Revenue are dismissed.
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