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2021 (3) TMI 829 - AT - Income TaxRevision u/s 263 - Sale of ground floor of residential unit - whether it give rise to long term capital gains or short term capital gains - Computation from period of holding from the date of getting right in the property or from the date of taking the possession - as per CIT assets sold (ground floor of residential site) as short term capital gains and the assessee is entitled to deduction u/s 54 on investment of new asset (flat) - HELD THAT - Assessee gets a right to the impugned property on the date of payment of advance, i.e., on 28.06.2008 and payment of balance amounts is only a follow up action and taking delivery of possession is only a formality. Therefore, reckoning the period from 28.06.2008, i.e. the date of advance, thus hold that the sale of ground floor give raise to long term capital gains and not short term capital gains as held by the CIT. Whether assessee is entitled to deduction u/s 54? - HELD THAT - Admittedly, the assessee is handed over possession of new flat in the month of November 2011 and gruhapravesham was completed on 12.03.2012. Since the assessee was handed over the possession of the new flat only in November 2011, that date should be considered for all practical purposes, the date of acquisition of new flat for claiming deduction u/s 54 - As mentioned earlier, window of purchase of new asset is available to the assessee from 24.05.2011 to 24.05.2014. Therefore, handing over possession of new asset being in the month of November 2011 falls within the period of window mentioned above. Hence, hold that the assessee is entitled to deduction u/s 54 of the I.T.Act on purchase of new asset - Decided in favour of the assessee.
Issues Involved:
1. Jurisdiction of CIT to invoke revisionary powers under Section 263 of the I.T. Act. 2. Determination of whether the sale of the ground floor of a residential unit gives rise to long-term or short-term capital gains. 3. Entitlement of the assessee to deduction under Section 54 of the I.T. Act for investment in a new asset. Detailed Analysis: 1. Jurisdiction of CIT to Invoke Revisionary Powers Under Section 263 of the I.T. Act: The assessee challenged the jurisdiction of the CIT to invoke revisionary powers under Section 263 of the I.T. Act. However, the Tribunal chose to first adjudicate the issues on merits before addressing the jurisdictional challenge. 2. Determination of Whether the Sale of the Ground Floor of a Residential Unit Gives Rise to Long-Term or Short-Term Capital Gains: - Facts and CIT's Findings: - The assessee sold a residential unit in Jayanagar on 24.05.2012 for ?3,69,00,000, declaring the gains as long-term capital gains. - The first and second floors were purchased in 1989 and constructed in 1992-1993, respectively. The ground floor was purchased on 29.10.2009 for ?55,00,000. - The CIT held that the sale of the ground floor, purchased on 29.10.2009 and sold on 24.05.2012, resulted in short-term capital gains as it was held for less than 36 months. - Assessee's Contention: - The assessee argued that the holding period should be reckoned from 28.06.2008, the date of an oral agreement and initial payment, making it a long-term capital asset. - Tribunal's Analysis: - The Tribunal reviewed Section 2(42A) and Section 2(47) of the I.T. Act, relevant case laws, and CBDT circulars. - It concluded that for determining the nature of the asset, the holding period starts from the date when the assessee acquired a de facto right in the property. - The Tribunal held that the assessee acquired the right to the property on 28.06.2008, when the initial payment was made, and thus, the sale of the ground floor resulted in long-term capital gains. 3. Entitlement of the Assessee to Deduction Under Section 54 of the I.T. Act for Investment in a New Asset: - Facts and CIT's Findings: - The assessee entered into a sale agreement for a new flat on 06.04.2011, with payments made on 25.03.2010, 02.02.2010, and 06.04.2011. - The CIT held that the purchase date of the new asset was 06.04.2011, which was more than one year before the sale of the original asset on 24.05.2012, thus disqualifying the assessee from deduction under Section 54. - Assessee's Contention: - The assessee argued that the flat was not completed and possession was handed over only in November 2011, supported by a builder's certificate and evidence of gruhapravesham on 12.03.2012. - Tribunal's Analysis: - The Tribunal accepted the assessee's contention, noting that the possession date (November 2011) should be considered the acquisition date for claiming deduction under Section 54. - Since the possession date fell within the permissible window (24.05.2011 to 24.05.2014), the assessee was entitled to the deduction. Conclusion: The Tribunal adjudicated the issues on merits, ruling in favor of the assessee on both counts: 1. The sale of the ground floor resulted in long-term capital gains. 2. The assessee was entitled to deduction under Section 54 for the new asset. Since the issues on merits were decided favorably for the assessee, the Tribunal did not address the jurisdictional challenge under Section 263. The appeal was partly allowed.
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