2019 (6) TMI 1052 - AT - Income Tax

Exemption u/s 54F - AO treated the capital gain on sale of the said plot of land as Short Term Capital Gain on the premise that such property was held by the assessee for less than 36 months - whether holding period of a capital asset is to be reckoned from the date of allotment or from the date of possession ? - HELD THAT - As relying on ANILABEN UPENDRA SHAH. 2001 (10) TMI 13 - GUJARAT HIGH COURT issue decided in favour of the assessee for the asset for more than 36 months from the date of allotment of the property we find no justification in the order passed by the authorities below in such capital gain as short term capital gain by considering the holding period from the date of registration of the property as on 30.09.2009 instead of date of allotment on 15.02.2007. In our considered opinion the assessee held the property for more than three year w.e.f 15.02.2007 when the allotment letter was issued in the name of the assessee till the date of subsequent sale of the said property on 04.08.2010. In that view of the matter the capital gain is to be treated as long term capital gain arising out of the sale of the said long term capital asset and the assessee is entitled to the exemption u/s 54F as claimed in her return. We therefore find no merit in such addition made by the authorities below. The addition is therefore deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Determination of the "holding period" of a capital asset.
2. Eligibility for exemption under section 54F of the Income Tax Act, 1961.
3. Classification of capital gain as Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG).

Issue-Wise Detailed Analysis:

1. Determination of the "holding period" of a capital asset:
The primary issue in this case is whether the "holding period" of a capital asset should be calculated from the "date of allotment" or from the "date of possession." The assessee argued that the holding period should start from the date of allotment (15.02.2007) and not from the date of possession (30.09.2009). The property was sold on 04.08.2010. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) determined the holding period from the date of possession, treating the asset as held for less than 36 months, thereby classifying the gain as Short Term Capital Gain (STCG).

2. Eligibility for exemption under section 54F of the Income Tax Act, 1961:
The assessee claimed exemption under section 54F of the Act, arguing that the property was held for more than 36 months, thereby qualifying as a Long Term Capital Asset. The AO rejected this claim, as the holding period was considered from the date of possession, making the asset a Short Term Capital Asset. The Tribunal, however, concluded that the holding period should be reckoned from the date of allotment, thus making the asset a Long Term Capital Asset and allowing the exemption under section 54F.

3. Classification of capital gain as Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG):
The Tribunal referred to various judgments, including those of the Mumbai Tribunal and the Gujarat High Court, which supported the view that the holding period should be calculated from the date of allotment. The Tribunal cited the case of Anita D. Kanjani vs. ACIT and the Gujarat High Court's decision in CIT vs. Anilaben Upendra Shah, which established that the holding period starts from the date of allotment. Consequently, the Tribunal determined that the property was held for more than 36 months, classifying the gain as Long Term Capital Gain (LTCG) and allowing the exemption under section 54F.

Conclusion:
The Tribunal concluded that the holding period of the capital asset should be reckoned from the date of allotment (15.02.2007) and not from the date of possession (30.09.2009). Therefore, the property was held for more than 36 months, classifying the gain as Long Term Capital Gain (LTCG). The assessee was entitled to the exemption under section 54F of the Income Tax Act, 1961. The addition made by the authorities below was deleted, and the appeal of the assessee was allowed.