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2017 (1) TMI 559 - AT - Income TaxComputation of capital gain - LTCG or STCG - Held that - The date of allotment should be taken as the date for computing the holding period for computing capital gains. In the case on hand, the date of allotment as per letter of allotment is 29.03.2006 and the date of sale of the said property/flat at Torino Building is 23.10.2009 and therefore it is clear that the holding period is more than 36 months. The assessee paid the first instalment on 29.03.2006, thereby conferring a right to hold a flat, which was identified and the possession of which was given on a later date. In the factual matrix the capital gains earned by the assessee on sale of the said flat has to be treated as LTCG. We hold that the capital gains of ₹ 1,82,01,530/- arising to the assessee on sale of the said flat at Torino Building is to be assessed as LTCG and not as STCG as held by the authorities below. Consequent to our holding that the capital gains of ₹ 1,87,01,530/- arising to the assessee on sale of the said flat at Torino Building is to be treated as LTCG, we hold that the assessee is entitled to be allowed exemption of ₹ 64,92,50/- under section 54 of the Act in respect of investment made by him in the purchase/construction of new flat at Amanda B , Hiranandani Meadows, Thane as worked out by the AO at para 4.3 of the order of assessment as against the assessee s claim of ₹ 73,72,315/-. Consequently, grounds 1 to 3 of the assessee s appeal are partly allowed as indicated above.
Issues Involved:
1. Classification of capital gains on the sale of a flat as Short Term Capital Gains (STCG) versus Long Term Capital Gains (LTCG). 2. Eligibility for exemption under section 54 of the Income Tax Act, 1961. 3. Allowance of indexed cost and other deductions related to the sale and purchase of properties. 4. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Classification of Capital Gains: The primary issue was whether the capital gains from the sale of a flat in Torino Building should be classified as STCG or LTCG. The assessee claimed it as LTCG based on the date of allotment (29.03.2006), while the Assessing Officer (AO) treated it as STCG, considering the date of agreement/registration (28.10.2006/30.10.2006). The Tribunal referred to the case of Richa Bagrodia vs. DCIT and other judicial precedents, concluding that the date of allotment should be considered for computing the holding period. Since the flat was sold on 23.10.2009, the holding period exceeded 36 months, qualifying it as LTCG. Consequently, the Tribunal held that the capital gains of ?1,82,01,530/- should be assessed as LTCG. 2. Eligibility for Exemption under Section 54: The assessee claimed an exemption under section 54 for the investment of ?73,72,315/- in a new flat at Amanda CHS Ltd., Thane. The AO had restricted this exemption to ?64,92,50/-. Since the Tribunal concluded that the gains were LTCG, the assessee was entitled to the exemption under section 54. The Tribunal upheld the AO’s computation of the exemption amount but allowed the exemption under section 54. 3. Allowance of Indexed Cost and Other Deductions: The Tribunal did not specifically address the indexed cost and other deductions in detail, as the primary focus was on the classification of capital gains and the related exemption under section 54. However, it implicitly upheld the AO's calculations related to the indexed cost and other deductions as the grounds related to these issues were not pressed by the assessee. 4. Initiation of Penalty Proceedings: The Tribunal did not provide a detailed discussion on the initiation of penalty proceedings under section 271(1)(c). The assessee had raised this as a ground, but it was not a focal point of the Tribunal's decision. The Tribunal's decision primarily revolved around the classification of capital gains and the related exemptions. Conclusion: The Tribunal partly allowed the appeal, concluding that the capital gains from the sale of the flat should be classified as LTCG based on the date of allotment. Consequently, the assessee was entitled to the exemption under section 54 for the investment made in the new flat. Other grounds raised by the assessee were either not pressed or deemed infructuous. The Tribunal's decision was pronounced on 4th November 2016.
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