2018 (8) TMI 918 - AT - Income Tax

Short term or long term capital gain - determination of period of holding of property - the assessee has purchased the long term capital assest being godown as per agreement dt. 24-04-2008 - assessee has paid the Stamp Duty on the said agreement dt 20/04/2008 - part payment was made at the time of agreement - substantial and remaining payment was made as on 11-07-2008 and property got registered with the registrar. Held that - In the instant case it is crystal clear that by virtue of agreement for sale dt. 24-04-2008, and making a part payment, the assessee has acquired irrevocable tight, title and interest including possession in the house property in the form of Godown. The registration of the property which was done subsequently on 11-07-2008 was only a formality. And therefore the period of 36 months of holding of long term capital Assets should be reckoned from 24-04-2008 and not from 11-07-2008 as wrongly adopted by the LD AO. - to be taxed as LTCG - benefit of exemption u/s 54 allowed - Decided in favor of assessee.

Summary

Issues Involved:
1. Computation of capital gain on the sale of property.
2. Determination of the period of holding for capital gain classification.
3. Applicability of long-term capital gain benefits and exemptions.

Issue-wise Detailed Analysis:

1. Computation of Capital Gain on the Sale of Property:
The primary grievance of the assessee was related to the computation of capital gain on the sale of a godown. The Assessing Officer (AO) computed the period of holding and concluded that the assessee had earned short-term capital gain, whereas the assessee contended that the property was held for more than 36 months, qualifying it as long-term capital gain.

2. Determination of the Period of Holding for Capital Gain Classification:
The facts of the case revealed that the assessee purchased the godown as per an agreement dated 24-04-2008, with an initial payment made on the same date. The transferor transferred all rights, titles, and interests to the assessee, with the registration of the property completed on 11-07-2008. The AO held that the period of holding should be reckoned from the date of registration (11-07-2008) and not from the date of the agreement (24-04-2008), thus classifying the gain as short-term. However, the tribunal observed that the agreement dated 24-04-2008, along with part payment, conferred irrevocable rights, title, and interest to the assessee, making the date of the agreement the relevant date for determining the holding period.

3. Applicability of Long-term Capital Gain Benefits and Exemptions:
The tribunal referred to various judicial pronouncements, including the Supreme Court's rulings in Poddar Cement and Mysore Minerals, which clarified that for the purpose of Section 2(47) of the Income Tax Act, transfer means de facto ownership and not necessarily legal ownership. The tribunal concluded that the period of holding should be computed from the date of the agreement (24-04-2008), making the holding period more than 36 months and thereby qualifying the gain as long-term capital gain. Consequently, the assessee was entitled to the benefit of cost indexation and deduction under Section 54F of the Act.

Conclusion:
The tribunal allowed the appeal of the assessee, holding that the property was held for more than 36 months, thus qualifying the capital gain as long-term. The tribunal directed that the benefit of cost indexation and exemption under Section 54F should be granted to the assessee. The order of the lower authorities was set aside, and the appeal was allowed in favor of the assessee.