2017 (12) TMI 647 - AT - Income Tax

Capital gain on sale of land - LTCG OR STCG - Held that - The assessee claims that the payment towards acquisition of land was made in October-1996 as evidenced from the formal purchase-deed dated 04/01/2007. The formal purchase-deed has been executed which merely ratifies earlier act of acquisition and possession. Thus when accounted from the date of possession vouched by payment of consideration we find no rationale in the appeal of the Revenue. The CIT(A) in our view has come to a rightful conclusion while holding the Asset sold to be Long Term Capital Asset. We do not find any error in the process of reasoning adopted by the CIT(A). - Decided against revenue

Summary

Issues:
1. Determination of capital gain as short term or long term.
2. Validity of claim of exemption u/s.54EC.
3. Possession and ownership of the land in question.

Analysis:

Issue 1: Determination of capital gain as short term or long term:
The Revenue challenged the order of the CIT(A) regarding the treatment of long term capital gain as short term capital gain. The AO contended that the land was held for less than 36 months based on purchase and sale deeds. The CIT(A) reversed the AO's decision, emphasizing that the possession of the land was with the assessee since 2002, even though the purchase deed was executed in 2007. The CIT(A) highlighted that registration is not mandatory for recognition of transfer and cited relevant legal precedents. The Tribunal upheld the CIT(A)'s decision, stating that the asset was held for more than 36 months, and the gain should be treated as long term capital gain.

Issue 2: Validity of claim of exemption u/s.54EC:
The Revenue also disputed the CIT(A)'s allowance of exemption u/s.54EC. The CIT(A) granted the deduction as the land transfer resulted in long term capital gain. The Tribunal affirmed this decision, stating that since the gain was considered long term, the assessee was eligible for the deduction u/s.54EC. Consequently, the addition of the capital gain and relief to the appellant were upheld.

Issue 3: Possession and ownership of the land in question:
The dispute revolved around the possession and ownership of the land. The AO argued that possession was handed over to the assessee only in 2007 based on the purchase deed. However, the CIT(A) and the Tribunal found that the possession was with the assessee since 2002, supported by payment details from 1996. The Tribunal held that the possession date should be considered from the actual payment date, not the formal purchase deed date. The Tribunal dismissed the Revenue's appeal, affirming the holding of the land as a long term capital asset.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision regarding the treatment of capital gain, validity of exemption claim, and possession of the land. The judgment emphasized the importance of actual possession and payment dates in determining the holding period for capital gain tax purposes.