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2021 (3) TMI 679 - AT - Income TaxCapital gains on sale of Flat - LTCG v/s STCG - Date on getting title of property - purpose of holding an asset - whether the sale of impugned flat has resulted in LTCG or STCG? - Entitlement to deduction u/s 54 - HELD THAT - Assessee gets a right to the impugned property on the date of allotment letter, i.e., on 22.02.2006 and payment of instalment as per the terms is only a follow up action and taking delivery of possession is only a formality. Therefore, reckoning the period from 22.02.2006, i.e. the date of allotment, we hold that the sale of impugned flat give raise to long term capital gains and not short term capital gains as held by the authorities below. Claim of deduction u/s 54 - The assessee has furnished the details of payments on reinvestment filed by the assessee on 18.03.2021. On perusal of same, prima facie, we are of the view that reinvestment has made within the period specified u/s 54 of the I.T.Act. However, since the Assessing Officer and the CIT(A) had held that income arising on sale of impugned flat is short term capital gains, they did not have an occasion to consider / examine the claim of deduction u/s 54 of the I.T.Act on reinvestment. Therefore, we restore the case to the A.O. for the limited purpose for examining whether the assessee is entitled to deduction u/s 54 of the I.T.Act.
Issues Involved:
1. Reopening of assessment 2. Classification of capital gains as long-term or short-term 3. Eligibility for deduction under Section 54 of the Income Tax Act Issue-wise Detailed Analysis: 1. Reopening of Assessment: Grounds 2 and 3 pertained to the issue of reopening the assessment. However, as no arguments were raised regarding this issue, these grounds were dismissed. 2. Classification of Capital Gains: The primary issue was whether the capital gains from the sale of Flat No. 304, Buttercup, Hiranandani Meadows, Thane, should be classified as long-term or short-term capital gains. The assessee claimed it as long-term capital gains (LTCG) and sought deduction under Section 54 of the Income Tax Act. The Assessing Officer (A.O.) and the CIT(A) classified it as short-term capital gains (STCG) based on the date of the registered sale agreement. Key Facts and Arguments: - The assessee argued that the flat was allotted on 22.02.2006, and substantial payments were made thereafter, thus holding the asset since that date. - The A.O. contended that the flat was purchased on 06.03.2009, and sold on 26.09.2009, thus not meeting the 36-month holding period required for LTCG. Legal Provisions and Analysis: - Section 2(42A) defines "short-term capital asset" as one held for not more than 36 months preceding the date of transfer. - Section 2(47) defines "transfer" and includes rights acquired through agreements or arrangements. - Circular No. 471 and Circular No. 672 by the CBDT clarified that the date of allotment is considered the date of acquisition for capital gains purposes. Judicial Precedents: - The Karnataka High Court in CIT vs. A Suresh Rao emphasized that the term "held" does not necessitate legal ownership but rather possession and control. - The Punjab & Haryana High Court in Mrs. Madhu Kaul v. CIT and Vinod Kumar Jain v. CIT held that the allotment letter confers the right to hold the property, and subsequent payments and possession are formalities. - The Bombay High Court in CIT v. Tata Services Limited and Principal CIT v. Vembu Vaidyanathan reiterated that the allotment letter date is crucial for determining the holding period. Conclusion: Based on the allotment letter dated 22.02.2006 and the judicial precedents, the Tribunal concluded that the assessee held the flat since the allotment date. Therefore, the sale resulted in long-term capital gains. 3. Eligibility for Deduction under Section 54: The assessee claimed deduction under Section 54 for reinvestment in another property. Since the A.O. and CIT(A) classified the gains as STCG, they did not examine the deduction claim. Tribunal's Direction: The Tribunal restored the case to the A.O. to examine the eligibility for deduction under Section 54, considering the reinvestment details provided by the assessee. Final Order: The appeal was allowed for statistical purposes, and the case was remanded to the A.O. for the limited purpose of examining the deduction claim under Section 54. Order Pronouncement: The order was pronounced on 16th March 2021.
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