2017 (8) TMI 338 - AT - Income Tax

Short term capital gain - LTCG OR STCG - Held that - When the case of assessee was selected for scrutiny and statutory notices were issued, the assessee, by way of revised computations of income, inter alia, declared long term capital gain on the sale of property No. G-023, second Floor, Phase IV, DLF City, Gurgaon. This property was allotted by HUDA to the assessee by way of buyer s agreement on 27.12.2099, but transferred in the name of assessee by execution of sale deed on 29.01.2004. The assessee sold this property to one Sh. Mohit Sharma through registered sale deed on 09.06.2005 and accordingly computed the long-term capital gain taking the holding period of the asset for more than 36 months. The entire material available on record and we find that the issue involved in this appeal is squarely covered by the decision of Hon ble Jurisdictional High Court in the case of CIT vs. K. Ramakrishna (2014 (3) TMI 812 - DELHI HIGH COURT) wherein it has been that in order to determine taxability of capital gain arising from sale of property, it is date of allotment of property which is relevant for purpose of computing holding period and not date of registration of conveyance deed. - Appeal of the assessee is allowed.

Summary

Issues:
Determining short term vs. long term capital gain on property sale.

Analysis:
1. The appeal was filed against the CIT(A)'s order for the assessment year 2006-07. The primary issue was the computation of capital gains on the sale of a property, with the appellant claiming it to be long term capital gain, while the authorities calculated it as short term capital gain.

2. The appellant contended that the property was allotted in 1999, and substantial payments were made before the sale deed was registered in 2004. The appellant argued that the holding period for calculating capital gain should be from the date of allotment, not registration. Citing relevant case laws, the appellant sought deletion of the addition made by the authorities.

3. The Assessing Officer (AO) rejected the long-term capital gain computation, stating that the property was purchased in 2004 and sold in 2005, within three years of acquisition. The CIT(A) upheld this decision, relying on a Mumbai ITAT case. The appellant referenced various decisions supporting their stance.

4. The Tribunal reviewed the case and referred to a judgment by the Jurisdictional High Court, emphasizing that the date of property allotment, not registration, determines the holding period for capital gain calculation. Quoting the court's observations, the Tribunal favored the appellant's argument and ordered the deletion of the addition, allowing the appeal.

5. The decision highlighted the importance of the date of allotment in computing capital gains, aligning with previous court rulings. By emphasizing the legal significance of property allotment over registration, the Tribunal ruled in favor of the appellant, overturning the authorities' calculation of short term capital gain and allowing the appeal.