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2021 (5) TMI 567 - AT - Income TaxLong Term Capital Gain OR Short Term Capital - period of holding - assessee was already tenant in the property much prior to execution of the agreement to sale April 1993 - purchase agreement was made in 1993 - conveyance deed was executed as on 08.05.2017 after making payment of final installment as on 27.5.2005 - As per the deed, possession was handed over on 15.7.2006 - HELD THAT - The Hon ble Punjab Haryana High Court in CIT Vs Ved Prakash sons (HUF) 1993 (7) TMI 45 - PUNJAB AND HARYANA HIGH COURT held from the bare reading of section 2(42A), the word 'owner' has by design not been used by the Legislature. The word 'held' as per dictionary meaning means to possess, be the owner, holder or tenant of property, stock, land, etc. Thus, a person could be said to be holding the property as an owner, as a lessee, as a mortgagee or on account of part of performance of agreement, etc. Conversely, all such other persons who may be termed as lessees, mortgagees with possession or persons in possession as part performance of the contract would not in strict parlance come within the purview of an 'owner'. As per Shorter Oxford Dictionary, 'owner' means one who owns or holds something; one who has the right of claim or title to a thing. In view of the aforesaid factual and legal discussions, we are of the considered view that the assessee was occupying the asset for more than the qualifying period of 36 months and on assigning the right in the property, the gain earned is certainly qualified for LTCG. The submissions of revenue that the assessee was not in possession of the asset or that the right to specific performance accrued only in the year 2005 is not correct being contrary to the contents of various clauses the agreements to sale dated 06.04.1994 and the conveyance deed dated 08th May 2007, which we have discussed above. The assessee possessed the property since long and not from the date of making balance payment in the year 2005. It is settled legal position that the contents of documents should not be read in isolation but as a whole. Grounds of appeal raised by the assessee is allowed.
Issues Involved:
1. Treatment of Long Term Capital Gain (LTCG) as Short Term Capital Gain (STCG). Detailed Analysis: 1. Treatment of Long Term Capital Gain as Short Term Capital Gain: The primary issue in this case is whether the capital gain earned by the assessee on the transfer of the asset should be treated as Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG). The assessee contended that the gain should be treated as LTCG, while the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] treated it as STCG. Facts and Proceedings: - The original assessment was completed on 03.11.2010, and the assessee showed an income of ?19,34,420/-. The AO made an addition on account of LTCG based on a sale consideration of ?2 Crores shown in the conveyance deed dated 08.05.2007. - The case was reopened based on information that the Stamp Valuation Authority valued the property at ?4,67,51,985/-. The AO issued a notice u/s 148 on 26.03.2014 and proceeded with reassessment, treating the stamp value of ?4.6 Crores as the sale consideration. - The assessee contended that the stamp duty value was excessive and appointed an independent registered valuer. The AO referred the case to the District Valuation Officer (DVO), but the DVO's report was not received before the assessment order was passed, which led to the AO adopting the stamp value. CIT(A) Decision: - The CIT(A) received the DVO's report valuing the property at ?2.30 Crores and directed the AO to adopt this value. - The CIT(A) examined the agreements to sale dated 06.04.1993 and the conveyance deed dated 08.05.2007 and concluded that the possession of the land was handed over to the assessee on 15.07.2006, and the right to specific performance accrued on 27.05.2005 when the full payment was made. - The CIT(A) held that the transfer of land to the assessee within the meaning of section 2(47) took place on 15.07.2006, and thus, the capital gain should be treated as STCG. Tribunal's Analysis: - The Tribunal noted that the assessee was in possession of the property since 1993, as acknowledged in the agreement to sale and the conveyance deed. - The Tribunal found ambiguity in the clause stating that possession was handed over on 15.07.2006. It concluded that the assessee was holding possession and had rights in the property since 1993. - The Tribunal relied on various judgments, including CIT v. Tata Services Ltd., CIT v. Vijay Flexible Containers, and CIT v. H. Anil Kumar, which supported the view that giving up a right to specific performance amounts to relinquishment of a capital asset and qualifies for LTCG. - The Tribunal held that the gain earned by the assessee was LTCG and not STCG, as the assessee possessed the property for more than the qualifying period of 36 months. Conclusion: The Tribunal allowed the appeal, ruling that the capital gain earned by the assessee on the transfer of the asset should be treated as Long Term Capital Gain (LTCG). The Tribunal emphasized that the assessee's possession and rights in the property since 1993 qualified the gain as LTCG, contrary to the CIT(A)'s decision to treat it as STCG. Order: The grounds of appeal raised by the assessee were allowed, and the order was announced on 22/10/2020.
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