2016 (11) TMI 1151 - AT - Income Tax

Allowability of deduction u/s 54 - calculation of holding period - Held that - It is evident that the date of booking being the date where rights on the flat arose to the assessee and the same constitutes a starting date for calculating the holding period of the asset for the purpose of section 54 of the Act. Accordingly, in this case, the date 30.3.2005 should be the relevant date. AO is directed to compute the holding period accordingly. Benefit of self occupied property - Held that - We are of the opinion that the assessee is, in principle, entitled for one self occupied property. The aspects relating to the merger of two flats into one requires detailed examination by the Assessing Officer. If the AO comes to the conclusion that the flats no.901 and 902 constitutes one functional residential unit, AO should decide accordingly and allow the entire property as self occupied property. Alternatively, if the merger of flats is not borne out of flats, assessee, in any case, is entitled to one of the two merger flats as self occupied flats. AO shall pass a speaking order on this issue after granting a reasonable opportunity of being heard to the assessee

Summary

Issues Involved:
1. Allowability of deduction under Section 54 of the Act with reference to the computation of the holding period based on the date of allotment of the flat.
2. Allowing the benefit of one self-occupied property.
3. Charging of mandatory interest related issues.

Issue-wise Detailed Analysis:

1. Allowability of Deduction under Section 54:
The primary contention was whether the date of allotment or the date of possession should be considered for computing the holding period for long-term capital gains. The assessee argued that the holding period should start from the date of booking the flat (30.03.2005), supported by a letter of allotment, rather than the date of possession (30.03.2009). The Assessing Officer (AO) considered the date of possession for computing the holding period, resulting in short-term capital gains and denial of Section 54 benefits. The tribunal referred to multiple precedents, including the Mumbai Bench's decision in Richa Bagrodia vs. DCIT and the Gujarat High Court's judgment in CIT vs. Anilaben Upendra Shah, concluding that the date of allotment should be the starting point for computing the holding period. Thus, the tribunal directed the AO to compute the holding period from the date of allotment (30.03.2005), allowing the assessee's claim for long-term capital gains and the benefits under Section 54.

2. Allowing the Benefit of One Self-Occupied Property:
The assessee owned three residential properties in Thane, Surat, and Navi Mumbai. The tribunal directed the AO to re-examine the computation of the Annual Letting Value (ALV) of the Surat property in light of the jurisdictional High Court's judgment in CIT vs. Tip Top Typography. Regarding the Thane property, which resulted from merging two flats (901 and 902), the tribunal acknowledged the assessee's claim that it was used sporadically and not let out. The tribunal directed the AO to determine whether the merged flats constituted a single functional residential unit. If so, the entire property should be treated as self-occupied; otherwise, one of the two merged flats should be considered self-occupied. The AO was instructed to pass a speaking order after providing a reasonable opportunity for the assessee to be heard.

3. Charging of Mandatory Interest Related Issues:
The tribunal noted that the CIT (A) had mistakenly dismissed the interest-related issues as consequential without proper adjudication. The assessee highlighted the need for adjudication concerning interest calculations under Sections 234A, 234B, and 234C of the Act, and mentioned a pending rectification application. The tribunal found the CIT (A)'s order deficient and directed the CIT (A) to adjudicate all aspects of this ground by passing a speaking order after granting the assessee a reasonable opportunity to be heard. Consequently, this ground was allowed for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes. The tribunal directed the AO to compute the holding period from the date of allotment for Section 54 benefits, re-examine the ALV of the Surat property, and determine the self-occupied status of the Thane property. Additionally, the CIT (A) was instructed to properly adjudicate the interest-related issues. The order was pronounced in the open court on 23rd September 2016.