9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (7) TMI 216 - AT - Income TaxLong term capital gain or short term capital gain - transfer of the right to acquire property - computing the holding period - AO noted that assessee has sold the right to property conferred on the assessee by the allotment letter and not the property - HELD THAT - It is an undisputed fact that letter of allotment was issued by the builder to the assessee on 15.02.2010 by which a right to own the flat as identified by the assessee and builder in the project to be undertaken for construction had accrued on the assessee. The right which accrued to the assessee is the booking right, i.e., the right to purchase the flat and obtain the title. Whether booking right to the flat accrues to the assessee on the date of allotment of the flat by way of issuing the letter by the builder or on the date of execution and registration of the agreement to sell, i.e., the buyer s agreement ? - In our considered view, only that agreement which intends to convey these rights accruing to parties can be considered as the source of accrual of rights to the assessee. By virtue of the letter of allotment, some right to own a property is given by the builder to the assessee. A right in personam had been created in favour of the assessee in whose favour the letter of allotment had been issued and who has paid 20% of the total agreed consideration as advance - all other payments on various milestones identified in the said letter have been duly met by the assessee on subsequent dates, duly acknowledged by the builder. Undoubtedly, such contractual right arising out of the letter of allotment can be surrendered or neutralised by the parties through subsequent contract or conduct but such is not a case in hand before us. In the present case before us, assessee has been issued a letter of allotment by the builder setting out the terms and conditions for the construction of the flat to be undertaken by the builder and various milestones listed for making payment by the assessee. There are other restrictive covenants for both the parties as stated in the letter of allotment which would result into adverse consequences, if not met. We are also conscious of the proposition that transfer of the property is effective on registration of conveyance deed in view of section 54 of Transfer of Property Act. The absolute legal ownership of an immovable property takes place in terms of various provisions of Transfer of Property Act which needs to be read with provisions of section 2(47) of the Act for the purpose of computing tax liability arising on account of sale or purchase of immovable properties under the Act. However, the issue before us is different. The issue of transfer of ownership is not the issue to be decided here for computing the holding period. Thus we find that holding period should be computed from the date issue of allotment letter. Once this is considered, the holding period becomes more than 36 months and consequently the right to own the property transferred by the assessee would be a long-term capital asset in the hands of the assessee and the gain on transfer of the same would be taxable in the hands of the assessee as long-term capital gain. Ground no. 1 taken by the assessee is allowed. Denial of claim of deduction u/s. 54F - failure by the assessee to file revised return of income for claiming the said deduction - HELD THAT - As assessee has placed reliance on the decisions of Goetze (India) Ltd 2006 (3) TMI 75 - SUPREME COURT and Pruthvi Brokers 2012 (7) TMI 158 - BOMBAY HIGH COURT according to which nothing impinges on the powers of appellate authorities to entertain a claim made by the assessee before the appellate authorities. Considering these judicial precedents, we find it proper to accept the claim of deduction made by the assessee u/s. 54F Accordingly, for the limited purpose of verification, we remit this matter on claim of deduction u/s. 54F to the file of ld. Jurisdictional Assessing Officer (JAO), who shall allow the claim, if the verification is found to be in accordance with the provisions of the Act. Accordingly, we set aside ground No. 2 taken by the assessee in this respect and allow it for the statistical purposes.
Issues Involved
1. Classification of capital gains on the transfer of the right to acquire property as long-term or short-term. 2. Denial of exemption under Section 54F of the Income Tax Act due to the failure to file a revised return of income. Detailed Analysis Issue 1: Classification of Capital Gains The primary issue is whether the capital gain reported by the assessee on the transfer of the right to acquire property should be treated as long-term capital gain (LTCG) or short-term capital gain (STCG). The assessee was allotted a flat on 15.02.2010, with an agreement executed on 13.05.2014 and a subsequent sale of the right to the property on 28.08.2015. Arguments by the Assessee: - The assessee argued that the holding period should be computed from the date of the allotment letter (15.02.2010), which would classify the gain as LTCG since the period exceeds 36 months. - The right to own the property was created at the time of the allotment letter, and the subsequent agreement was merely a formalization of this right. Arguments by the Assessing Officer: - The Assessing Officer treated the gain as STCG, considering the date of the registered agreement (13.05.2014) as the start of the holding period. - The capital gain was computed as STCG since the period between the agreement and the sale was less than 36 months. Tribunal’s Findings: - The Tribunal held that the right to own the property was created when the allotment letter was issued, not when the agreement was registered. - Citing judicial precedents, the Tribunal concluded that the holding period should be computed from the date of the allotment letter, making the gain LTCG. - The Tribunal directed that the capital gain on the transfer of the right to own the property be treated as LTCG. Issue 2: Denial of Exemption under Section 54F The second issue pertains to the denial of exemption under Section 54F due to the assessee's failure to file a revised return of income. Arguments by the Assessee: - The assessee initially claimed a deduction under Section 54, which was incorrect, and later sought to claim under Section 54F during the assessment proceedings. - The assessee relied on judicial precedents to argue that appellate authorities have the power to entertain such claims even if a revised return was not filed. Arguments by the Assessing Officer: - The claim under Section 54F was denied because the assessee did not file a revised return to correct the initial claim under Section 54. Tribunal’s Findings: - The Tribunal held that the appellate authorities could entertain the claim under Section 54F, even if a revised return was not filed, based on the decisions of the Supreme Court in Goetze (India) Ltd. and Pruthvi Brokers and Shareholders. - The Tribunal remitted the matter to the Jurisdictional Assessing Officer (JAO) for verification of the computation provided by the assessee and directed that the claim under Section 54F be allowed if found correct. Conclusion The Tribunal ruled in favor of the assessee on both issues. The capital gain on the transfer of the right to acquire the property was classified as long-term, and the claim for deduction under Section 54F was allowed, subject to verification by the JAO. The appeal was thus allowed in its entirety.
|
