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2015 (12) TMI 1421 - HC - Income TaxEntitlement to the benefit of long term capital gains u/s 54 - Held that - Providing for short term and long term capital gains is a beneficial piece of legislation, whereby certain benefit in taxation is given to the assessee on fulfillment of certain conditions. Every such legislation is to be construed liberally in favour of the assessee, as it is for the benefit of the assessee. When the purpose is to give a benefit, then technicalities in law should not come in the way of such benefit being given. In the facts of the present case, applying the ratio of the decision of the Apex Court in the case of Sanjeev Lal (2014 (7) TMI 99 - SUPREME COURT ), in our opinion, the assessee would be entitled to the benefit of long term capital gain. - Decided in favour of the assessee
Issues Involved:
1. Determination of the nature of capital gains (short-term or long-term). 2. Application of Section 2(42A) and Section 2(29A) of the Income Tax Act. 3. Impact of litigation and agreement date on capital gains assessment. Detailed Analysis: 1. Determination of the Nature of Capital Gains (Short-term or Long-term): The primary issue in this case is whether the income from the sale of 27 guntas of land should be treated as short-term capital gains or long-term capital gains. The appellant/assessee had entered into an agreement to purchase land on 1.4.1995, paid an advance of Rs. 40 lakhs, and due to litigation, the sale deed was executed on 5.12.2002. The land was later sold on 20.05.2005. The Assessing Officer, CIT (A), and the Tribunal treated the gains as short-term, arguing that the sale occurred within 36 months of the execution of the sale deed. However, the appellant contended that the date of the agreement (1.4.1995) should be considered for determining the capital gains, as the property was held from that date. 2. Application of Section 2(42A) and Section 2(29A) of the Income Tax Act: The appellant argued that under Section 2(42A) of the Act, the land was held by the assessee since the agreement date (1.4.1995), and hence, it qualifies as a long-term capital asset. The appellant relied on the Supreme Court's decision in SANJEEV LAL vs COMMISSIONER OF INCOME-TAX AND ANOTHER, which held that the date of the agreement to sell should be considered as the date of transfer for capital gains purposes if the agreement creates a right in personam. 3. Impact of Litigation and Agreement Date on Capital Gains Assessment: The appellant's counsel argued that the litigation prevented the execution of the sale deed until 5.12.2002, but the possession and substantial payment were made shortly after the agreement in 1995. The respondent's counsel maintained that the sale deed date should be the basis for capital gains assessment, as the agreement did not mention the possession date explicitly. Judgment: The court, after examining the facts and the precedent set by the Supreme Court in the Sanjeev Lal case, concluded that the appellant is entitled to the benefit of long-term capital gains. The court noted that in the Sanjeev Lal case, the Supreme Court considered the agreement date as the transfer date due to pending litigation preventing immediate execution of the sale deed. The court emphasized that beneficial legislation like capital gains tax provisions should be construed liberally in favor of the assessee. Therefore, the court held that the date of the agreement (1.4.1995) should be considered for determining the capital gains, allowing the appellant to claim long-term capital gains. Conclusion: The court answered the question of law in favor of the assessee, determining that the income should be treated as long-term capital gains. The appeal was allowed, and no order as to costs was made.
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