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TMI Blog2013 (11) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 54 or 54F of the Act or not? For this, assessee in ITA No. 473/K/2012 has raised following relevant grounds nos. 2 and 3: "2. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the order of the AO in disallowing the claim of deduction u/s. 54 of the Income-tax Act, 1961. 3. On the facts and in the circumstances of the case, the learned CIT(A) should have alternatively held that the appellant was entitled to relief u/s 54F of the Act and should have directed the AO accordingly." The revenue in ITA No. 613/K/2012 has raised following five grounds: "1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in holding that the assessee had got only the right in the property when the two flat were allotted to him on 04.02.2004 by the developers and it was not the property but the right in property which has got transferred and that this transfer of asset being held for a period of more than 36 months is in the nature of Long-Term Capital Gains? 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in holding the transfer of assets [two flats] to be in the nature of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the booking and subsequently, allotted flat by issuing allotment letter dated 12.05.2004. The flats allotted were apartment nos. 1103 & 1104 on 11th floor, Tower-A of Ashoka Tower, Parel, Mumbai. According to assessee, the allotment letter issued by the Developer i.e. Peninsula Land Ltd. in exchange of initial payment with periodic payments between the period 29.05.2004 to 07.09.2007, thereby giving effect to the agreed balance payment, the assessee had been vested with legal right of ownership over the identified properties i.e. two flats. No doubt the assessee paid initial booking amount on 04.02.2004 and the Developer issued allotment letter on 12.05.2004 starting with the initial booking payment and thereafter followed up by periodic payments between 29.05.2004 to 07.09.2007. The contract for transfer of the immovable property being flat nos. 1103 and 1104, on 11th floor, Tower-A of Ashoka Tower, Parel, Mumbai entered between the assessee and the Developer for a consideration of Rs. 1,12,11,892/- for both flats paid individually by assessee. The assessee contended that with the date of allotment of flats vide letter dated 12.05.2004 i.e. allotment letter the assessee became le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable in case of the assessee. The fact that the assessee can have recourse to filling of suit in case of non delivery of flat was stated by assessee. However, no documentary evidence has been filed in support of such claim. The inference by assessees A/R in letter dated 09.12.10 is not from any documents, agreements placed on record. It appears that the points in circular no.471 has been stated by the assessee to highlight as if the circular is applicable to it." 4. And for rejecting the claim of deduction u/s. 54 of the Act the AO observed at pages 2 & 3 as under: "Section 54 of the Act states that the asset shall be buildings or lands appurtenant thereto and being a residential house. the income of which is chargeable under the head "Income from House Property". Income from house property is defined in section 22 of the Act. Income from house property. The annual value of property consisting of any buildings or lands appurtenant thereto of which assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .05.2004 to the appellant. The acknowledgment receipt and allotment letter served on 12.05.2004 were for Apartment No. 1103 and 1104 on 11th floor, Tower 'A' of Asoka Tower, Parel Mumbai with the intention of buying them. The builder in exchange of the token amount received had vested upon the appellant legal rights over the flats to be constructed with the agreement for balance payment and on fulfilling the other conditions. The appellant has submitted that from the date of booking ie., 4.4.2004 the property has been identified and held by the appellant for a period of more than 36 months are right in the property has arisen to the assessee from the date of booking of the flat. As per the appellant, he has been holding its right over the said property for a period of more than 36 months. 8. Section 2(42A) defines a short term capital asset as follows: 2(42A) "short-term capital asset" means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer: Provided that in the case of a share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntingent contract of the appellant with the builder. The right to own the flat will come in existence only if the flat is ready free from legal disputes, the appellant pays entire money of its transfer and registered thereafter with the Tehsildar etc. Therefore, there is no right in the immovable property given to the assessee till the date of the sale of its right to get a flat upon fulfilling certain conditions. The period of three years is to be counted from the initial date of payment for the booking of flat because that right came into existence from the date of issuance of allotment letter. Therefore, it can be said that the assessee has got LTCG on the transfer of its rights by registration of agreement between the appellant and the buyer. The provisions of section 48 apply for indexed cost of acquisition since the asset/flat has been held by the assessee till its disposal as right in the property to be constructed although the said property was no in his possession. 12. As per the definition of capital asset a right has accrued to the assessee on the date of payment of the first installment which is a long term capital asset after expiry of three years from the date of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right of an immovable property without actual delivery by the appellant. 15. The conditions of section 54 are not fulfilled. The appellant has never become owner of the property by any express or deemed provisions of the law including section 53A of Transfer of property Act. The appellant does not qualify to be the owner of the House Property as per section 27 of the I.T, Act, i1 981. The owner of a House Property is a person who has got the valid legal right of the property registered in his own name under the Transfer of property Act, 1882 or deemed owner as per provision of section 53A of Transfer of Property Act, 1882. The appellant has acquired a right on the date of booking of the flat by way of an agreement w.e.f. 4.2.2004 which is still to be constructed. Therefore, the appellant is not entitled to the benefits u/s 54 of Income Tax Act, 1961. Therefore, the order of the Assessing Officer is upheld and appeal of the assessee is dismissed. 16. In this case there is no land or building on the date of transfer and it is merely a right to get a fiat in future which (right) is being sold by the appellant. The appellant has booked two flats although in the joint name of his wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered by the assessee on 08-12-2006 and not on the date of booking of property on 04-02-2004 or allotment letter issued by the builder/developer on 12-05-2004. According to AO, the mere allotment letter was not a legal right and as per Section 54 & 55 of the Transfer Property Act legal title over a property does not pass unless there is a deed of conveyance duly registered. Accordingly, AO assessed the entire receipt of sale proceeds amounting to Rs. 2,78,56,224/- as STCG in the hands of the assessee. Now we have to go through the term "ownership" which is not connotative of having possession over a property. The word "ownership" implies domain and control over a property. Capital asset includes every kind of property as generally understood. The definition of 'capital asset' under the Act, referring to 'property of any kind'' carries no words of limitation. The definition is of wide amplitude to include every possible interest that a person may hold and enjoy. The definition of 'capital asset' refers to property of any kind 'held' by an assessee. In contradistinction to the word 'owner' or 'owned' definition uses the phrase 'held'. This view is also confirmed by Hon'ble Madras H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his business or profession, but does not include -" The above stated two apartments do not fall under any of the exclusion clauses as is given in Section 2(14) of the Act. The definition of LTCG is provided in Section 2(29A) of the Act as reads as under:- "(29A) " long-term capital asset" means a capital asset which is not a short-term capital asset ;" Further, the definition of STC asset as provided in Section 2(42A) of the Act reads as under:- "(42A) [short-term capital asset" means a capital asset held by an assessee for not more than (thirty-six) months immediately preceding the date of its transfer]; The explanation to Section 2(48) of the Act reads as under:- "Mode of computation. 48. (iii) "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later;" 8. From the above provisions it implies that any capital asset held by the assessee for more than a period of thirty-six months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder. The AO is directed to provide the benefit of indexation to the assessee. It was concluded by saying that "Assessee can be said to have held the flat when he made the payment to the builder and received the allotment letter and, therefore, benefit of indexation of cost of acquisition of the flat has to be granted to the assessee from the date (1995) when he started making payments to the builder and not from the date of execution of conveyance deed in 2001." 9. Further, Board's Circular No. 471 dated 15-10-1986, has also been considered by Hon'ble Bombay High Court in the case of CIT v. Hilla J.B. Wadia 216 ITR 376 (Bom), it was held that Section 54 of the Act has to be construed in the context of the manner in which residential properties are now being constructed in a city like Bombay where, looking to the cost of the land, co-operative housing societies are being formed for constructing a building in which flats are allotted to members. This must also be viewed as a method of constructing residential tenements. What we have to see is whether the assessee has acquired a right to a specific flat in such a builder which is being constructed by the society and whether he has m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of transfer and was not in the nature of house property. The CIT(A) vide his order has opined (which is summarized) as under:- "That the conditions of section 54of the Act were not fulfilled by the assessee. The assessee had never become owner of the property by any express or deemed provisions of the law including section 53A of the Transfer of property Act. That the assessee doesn't qualify to be the owner of the House property as per Section 27 of the act, as the owner of House Property is a person who has got the valid legal right of the property registered in his own name under the Transfer of property Act, 1882 or deemed owner as per proviso of section 53A of Transfer of Property Act. That the assessee had only acquired a right on the date of booking of the flat by way of an agreement w.e.f. 4.2.2004 which was still to be constructed. That in this concerned case there is no land or building on the date of transfer and it merely was a right to get a flat in future which was sold by the assessee. That the assessee had booked two flats although in joint name; the entire amount was paid by him from his own account and entire gain belongs to him only. Therefore, right of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an indefinite article, the said expression should be read in consonance with the other words 'buildings' and 'lands' and, therefore, the singular 'a residential house' also permits use of plural by virtue of section 13(2) of the General Clauses Act. In the present case before us, it is clear that the builder/developer has carried out construction of a residential scheme and he constructed residential apartments. Even the property identified and held by assessee was in the nature of house property and the said property was for the use of the assessee's residential purpose. But from the facts, it is clear that there are two flats i.e. namely No.1103 & 1104 in Ashoka Tower, Parel, Mumbai and these two flats were purchased by assessee for the purpose that the same could be used by him and his wife as a single residential premises but these are actually two residential apartments built by builder-cum-developer. According to us, the assessee became the owner of property u/s. 53A of the Transfer of Property Act in terms of CBDT Circular No. 471 dated 15-10-1986. Here, we are in agreement with the argument of Ld. Counsel for the assessee that assessee was owning legal rights over the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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