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TMI Blog2015 (11) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... r computing capital gains. Thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals) on the issue in hand - Decided against revenue. Deduction in respect of interest paid on borrowed capital to acquire capital asset - CIT(A) allowed the claim - there is no provision for such deduction, therefore, the conclusion drawn in the assessment order was defended - Held that:- Section 48, which is meant for capital gains clearly envisages allowbility of such expenditure which is incurred wholly and exclusively in connection with such transfer and for the purpose of cost of acquisition of the asset as deduction from the full value of consideration received or accrued as a result of transfer of capital asset, which is chargeable under the head capital gain. The words ‘in connection with’ used in section 48 (i) are very wide in their ambit and hence there is no warrant for importing a restriction that to qualify for deduction the expenditure must necessarily have been incurred prior to the passing of title. The Hon’ble Karnataka High Court in Commissioner Of Income-Tax, Karnataka II Versus Maithreyi Pai (1983 (11) TMI 43 - KARNATAKA High Court ) held that inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement and Transfer Act 1963) and not the date of allotment of letter. 2.1. During hearing, the ld. DR, Shri B. Yadagiri, advanced his arguments which is identical to the ground raised by defending the conclusion arrived at in the assessment order by further submitting that while granting relief to the assessee, the ld. Commissioner of Income Tax (Appeals) did not appreciate the fact that the agreement for purchase was entered in 2006 and the date of sale was in 2008. 2.2. On the other hand, the ld. counsel for the assessee, Shri Vijay C. Kothari, defended the conclusion arrived at in the impugned order by contending that the assessee received allotment letters on 31/12/2004 and the agreement for purchase of the flats was entered into vide agreement dated 02/11/2006 and the MOU for sale of these flats was entered into on 24/04/2008 by explaining that the agreement of sale was executed on 17/05/2008 for flat no.1901 and 1902 and for flat no.1907 & 1908 on 18/07/2008. 2.3. We have considered the rival submissions and perused the material available on record. On the basis of material available on record, we note that the ld. Assessing Officer has discussed the issue in para 5.1.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, under the facts available on record, the basic question to be adjudicated is whether the gain arising on transfer of capital asset is long term capital gain or short term capital gain. We are of the considered opinion that assessee got his right over the capital asset on the date of allotment of letter in respect of flats booked by the assessee. Therefore, the subsequent action of registration of sale agreement is merely an assignment of rights in the property of the assessee with Act of registration under the Stamp Duty Act. Our view is fortified by the decisions of the Tribunal/Hon'ble High Courts in following cases:- a. Praveen Gupta vs ACIT (137 TTJ 307)(ITAT Delhi) b. CIT vs Laxmi devi Ratani (2005) 198 CTR (MP) 336 c. CIT vs Tata Services ltd. 122 ITR 594 d. CIT vs Vijay Flexible Containers 186 ITR 693 (Bom.) e. CIT vs Mormasji Man Charji Vaid 168 CTR (Guj.)(FB) 565 f. Arundhati Balkrishna vs CIT (1982) 29 CTR (Guj.) 85. 2.6. In view of the above, we are usefully quoting the relevant portion from the decision from Hon'ble jurisdictional High Court (122 ITR 594) (supra):- Quote:- "What is a capital asset is defined in section 2(14) of the I.T. Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery conceivable things, right or interest or liability. The definition of capital asset, under the Income Tax Act referring to 'property of any kind' carries no words of limitation, because it is a wide amplitude and includes every possible interest that a person may hold and enjoy. Our view is fortified by the following decisions:- a. Syndicate Bank Ltd. vs Addl. CIT 155 ITR 681 (Kerala), b. Madthil Brothers vs DCIT (2008) 301 ITR 345 (Madr.) c. CIT vs Tata Services ltd. 122 ITR 594 (Bom.) d. Bafna Charitable Trust vs CIT 230 ITR 864 (Bom.) e. V. Rangaswamy Naidu vs CIT 31 ITR 711 (Mad.) f. Addl. CIT vs Ganpati Raju 119 ITR 715 (AP) g. S. Vaidyanathna Swamy vs CIT 119 ITR 369 (Mad.) h. P. J. Mathew vs ITO 323 ITR 592 (Ker.) In the light of the above, it can be said that the interest of the assessee accrued right from the date of allotment itself. The claim of the assessee is further supported by CBDT Circular No.672 and 471 dated 16/12/1993 and 15/10/1986 respectively clarifying that "the allotee gets title to the property on the issuance of allotment letter and the payment of installments is only a follow of action and taking the delivery of possession is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly and exclusively in connection with such transfer and for the purpose of cost of acquisition of the asset as deduction from the full value of consideration received or accrued as a result of transfer of capital asset, which is chargeable under the head capital gain. The words 'in connection with' used in section 48 (i) are very wide in their ambit and hence there is no warrant for importing a restriction that to qualify for deduction the expenditure must necessarily have been incurred prior to the passing of title. The Hon'ble Karnataka High Court in 152 ITR 247 (supra) held that interest on borrows is deductible only if is not allowed u/s 57 of the Act, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) on this issue also, therefore, dismissed. 4. The next ground pertains to deleting the additions made by the Assessing Officer invoking the provisions of section 50C of the Act. The crux of argument on behalf of the Revenue is that while coming to a particular conclusion, the ld. Commissioner of Income Tax (Appeals) did not appreciate the fact that the provisions of section 50C of the Act, the Assessing Officer is bound to take th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee defended the conclusion arrived at in the impugned order by submitting that all the payments of interior work were made through account payee cheque/from the bank account of the assessee and list of vendors, to whom the impugned payments totaling ₹ 53,11,335/- were made, along with cheque number, date of cheque issued and copy of invoices were furnished by the assessee. 5.1. We have considered the rival submissions and perused the material available on record. Uncontrovertedly, the impugned payments were made through account payee cheque and the assessee furnished the complete list of vendors to whom the payments were made (through cheque), Cheque No., copy of invoices for the impugned amount were produced before the authorities. Admittedly, without interior work, largely kitchen, carpentry, ceiling and flooring the apartment cannot be come usable, thus, such investment was rightly held to be investment in the residential property, thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals), therefore, we find no merit in the impugned ground, raised by the Revenue, consequently, dismissed. 6. The last ground pertains to allowing deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner as under: 24-7-72 Agreement of original purchaser K.K. Gopaldas booking flat from Malabar Inds. P. Ltd. 22-10-77 Agreement to purchase from K.K. Gopaldas. 24-10-77 Date of payment of ₹ 42,780 7-12-77 Date of payment of ₹ 2,15,941 29-12-77 Letter from Builder agreeing to transfer from name of K.K. Gopaldas to the name of the assessee. 24-3-79 Date of payment of ₹ 20,780. 23-4-79 Pate of payment of last instalment. 16-5-79 Municipal conditional letter of NOC for occupation. 24-11-79 Date of offer for possession. 9-4-80 Letter from Builder for readiness for completion certificate. 13-5-80 Date of possession. 3. Before the ITO, the assessee contended that though agreement for purchase of a flat was entered on 22-10-77 and payment was also made earlier, only the date when the new flat is ready for occupation should be taken as date of purchase by the assessee. The ITO rejected the above contention with the following observation in para 5 of his order: I have considered the assessee';s contention the agreement for purchase of a new flat was entered into in 1977, payments were made in 1977, and even the last insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property, at best, can be said to be a purchase of residential property. He stressed that even after construction of the building, the flat is not immediately available for residence to the assessee unless it is cleared by the municipal/corporation authorities. Therefore, he submitted that only when the flat construction was completed and available for residence and was actually allotted by the builder to the buyer in compliance with the agreement of sale entered upon by the builder earlier, it could be taken as ready for occupation and that was the date material for the purpose of counting period of one year within the meaning of section 54 of the IT Act, 1961. He finally submitted that 9-4-1980, on which date the builder agreed to give possession of the flat would be taken as the date on which the assessee has purchased the property for the purpose of residence within the meaning of section 54 of the IT Act, 1961. Till such time, he had only the right to purchase house property, he added. He relied on the following decisions: (1) CWT v. K.B. Pradhan (1981) 130 ITR 393(Ori.) (2) K.P. Varghese v. ITO (1981) 131 ITR 597(SC) (3) CIT v. Mrs. Shahzada Begum (1988)173 ITR 397/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joyment of the flat. At what point of time he became owner of the house property will decide the fate of his exemption. 7. In identical issue in Purushottam Govind Bhat';s case (supra) the Tribunal held as under: The right the assessee has got is a peculiar type of right which certainly cannot be classified as ownership. To say, therefore, that the assessee. has purchased the property would in law be erroneous. On the contrary, that the assessee has an interest in this flat as much as that of a full owner cannot be denied. The purpose of the assessee getting the flat allotted was to have the benefit of residential accommodation entirely in his control as if he was the full owner. Except, therefore, for a few technical requirements, the assessee can be said to be the full owner of the property. As a matter of fact, if not in law, therefore, it would be correct to say that the assessee has purchased a residential property. If the meaning of the word ';purchase'; is pushed to its technical sense, perhaps, the owner of a flat as above would not get the benefit of section 54. Even so, it would be against the very object and purpose of section 54 if such a flat owner is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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