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2019 (4) TMI 358 - AT - Income TaxLTCG - sale of apartment - right to own / obtain conveyance of immoveable property - possession v/s acquisition - commencement certificate itself for construction of flat sold was issued by MCGM to builder only 08.04.2009 and the purchase agreement was registered in December 2009 - part performance u/s 53A of the property Act - HELD THAT - Whatever rights were obtained by the assessee vide reservation of allotment letter dated 16/03/2005, the same rights have been transferred during the impugned AY as against the argument of revenue that the rights first got converted into new asset upon execution of agreement between the assessee and the builder which has been sold subsequently. In our opinion, the execution of stated agreement in assessee s favor was nothing but mere improvements in the assessee s existing rights in the property. Undisputedly, the right to own / obtain conveyance of immoveable property was a capital asset in terms of judgment of CIT Vs Tata Services Ltd. 1979 (1) TMI 26 - BOMBAY HIGH COURT and CIT Vs Sterling Investment Corporation Ltd. 1979 (2) TMI 19 - BOMBAY HIGH COURT . Therefore, the conclusion drawn by first appellate authority that the gains were Long-Term Capital Gains in nature as counted from 16/03/2005 would require no interference on our part. The appeal stands dismissed to that extent. Manner of computation of the gains - indexation benefit against the cost of acquisition - assessee has paid upfront payment to the extent of 5% upon allotment and the balance payment has been spread over by way of installment during the year 2005 to 2010 - HELD THAT - Assessee has paid upfront payment to the extent of 5% upon allotment and the balance payment has been spread over by way of installment during the year 2005 to 2010. As against the same, the assessee has sought indexation of full cost on the basis of index for 2005, which, in our considered opinion, is not justified. Logically, the indexation was to be done by applying the indexes of the respective years in which the payments were actually made by the assessee which is in line with the decision of this Tribunal rendered in Lakshman M.Charanjiva Vs ITO 2014 (3) TMI 181 - KERALA HIGH COURT . Therefore, taking the same view rendered in Nirmal Kumar Seth Vs CIT 2011 (10) TMI 7 - ALLAHABAD HIGH COURT , we direct Ld. AO to work out the indexed cost after applying indexes of the respective years in which the payments has actually been made by the assessee. Short term capital gain - sale of additional garage - bifurcation of sale - HELD THAT - Additional garage has been purchased by the assessee only during November, 2009 which establishes that is was capable of being transacted separately and therefore, constitute a separate capital asset in the hands of the assessee. Therefore, the gain from transfer of this additional garage would be short-term capital gains only. Since the sale consideration is composite one, Ld. AO, with assistance of the assessee, is directed to bifurcate the sale consideration on some reasonable basis to work out the resultant gains.
Issues Involved:
1. Classification of capital gains as Long-Term Capital Gains (LTCG) or Short-Term Capital Gains (STCG). 2. Applicability of the Bombay High Court decision in Chaturbhuj Dwarkadas Kapadia. 3. Date of acquisition based on the payment of advance. 4. Alleged acceptance of STCG classification by the assessee. 5. Indexation of cost of acquisition from different financial years. Detailed Analysis: 1. Classification of Capital Gains as LTCG or STCG: The primary issue was whether the capital gain earned by the assessee on the sale of a flat in July 2010 should be classified as LTCG or STCG. The CIT(A) held that the capital gain was LTCG, considering the date of the first advance payment in 2005 as the date of acquisition. The revenue argued that the period of holding should start from December 2009, when the purchase agreement was registered, thus classifying the gain as STCG. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee acquired rights in the property in 2005, and these rights were sold in 2010, thus qualifying as LTCG. 2. Applicability of the Bombay High Court Decision in Chaturbhuj Dwarkadas Kapadia: The revenue contended that the CIT(A) failed to apply the ratio of the Bombay High Court decision in Chaturbhuj Dwarkadas Kapadia, which considers the date of transfer as the date when part performance u/s 53A of the Property Act is made and possession is given. The Tribunal noted that the rights in the property were acquired in 2005 and sold in 2010, and the possession was never taken by the assessee. Hence, the Tribunal found no merit in the revenue's argument and upheld the CIT(A)'s decision. 3. Date of Acquisition Based on the Payment of Advance: The revenue argued that the CIT(A) erred in considering the date of making a small advance payment (less than 6% of the total cost) as the date of acquisition. The Tribunal observed that the assessee acquired specific rights in the property in 2005, and these rights were not conditional or uncertain. Therefore, the date of acquisition was correctly considered as 16/03/2005, when the first advance payment was made. 4. Alleged Acceptance of STCG Classification by the Assessee: The revenue claimed that the assessee had accepted the STCG classification during the assessment proceedings. The Tribunal noted that there is no estoppel against the law, and the revenue could not benefit from the assessee's ignorance or submissions. The Tribunal upheld the CIT(A)'s decision to classify the gains as LTCG. 5. Indexation of Cost of Acquisition from Different Financial Years: The revenue argued that the CIT(A) erred in allowing the indexation of the cost of acquisition from F.Y. 2004-05, as payments were made from 2005 to 2010. The Tribunal agreed with the revenue's contention that indexation should be done based on the respective years in which payments were made. The Tribunal directed the AO to work out the indexed cost after applying the indexes of the respective years in which the payments were made by the assessee. Additional Garage: The Tribunal noted that the additional garage was purchased separately in November 2009 and constituted a separate capital asset. Therefore, the gain from the transfer of the garage would be classified as STCG. The AO was directed to bifurcate the sale consideration reasonably to work out the resultant gains. Conclusion: The Tribunal partly allowed the revenue's appeal by directing the AO to compute the indexed cost of acquisition based on the respective years of payment and classify the gain from the additional garage as STCG. The Tribunal upheld the CIT(A)'s decision to classify the gains from the sale of the flat as LTCG.
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