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TMI Blog2017 (2) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... Term Capital Asset held by the Appellant was wrongly considered as Short Term Capital Asset and the same is unjustified, unwarranted and bad in law. That the Learned CIT (A) has erred in not considering the fact that the rights, title and interest in the property was itself acquired and held from the date of Allotment letter dated 11-04-2005 by the Appellant and as such the Period of Holding and indexation cost were not properly considered." 2. The solitary issue required to be addressed by us in this appeal is that whether the office unit (flat) sold by the assessee during the year on which long term capital gain was shown in the return was a 'long term capital asset' or 'short term capital asset' as per section 2(42A) of the Income-tax Act, 1961. The assessee claimed that it was a 'long term capital asset' and therefore gain arising there-from was long term capital gain whereas AO was of the view that the said property was 'short term capital asset' and thus it gave rise to short term capital gain. 3. The brief background as culled out from the orders of the lower authorities is that during the year assessee sold office unit located at Unit No.107, First Floor, Everest Gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xman 524 (Del HC) 7. CIT v. Panchand Gandhi (2005) 279 ITR52 (Guj HC) 8. CIT v. Anilaben Upendra Shah (2003) 262 ITR 657 (Guj) 9. Lahar Singh Siroya v. ACIT (2016) 138 DTR 331 (Kar-HC) 10. Vijay Harnilapurkar v. DCIT ITA No.6048/M/2013 11. ACIT v. Vandana Rana Roy ITA No.6173/M12011 12. Meena Hernnani vs ITO ITA No.5998/M/2010 13. Sneha Bimal Parekh v. CIT ITA No.5489/M/2015 14. Surnatichand Tolamal Gouti v.DCIT ITA No.2009/M/2013 15. Circular: No. 471, dated 15-10-1986 162 ITR(St)41 16. Circular : No. 672, dated 16-12-1993 205 ITR(St) 47 6. It was alternatively argued by the Ld. Counsel that in case holding period is to be computed from the transfer of the property, in that case, 'date of execution' of the sale agreement should be taken as date of transfer of the property because the document registered on a subsequent date operates from the 'date of execution' and not from the 'date of registration' in view of clear provisions of section 47 of Registration Act, 1908. Reliance was placed in this regard on the two judgments of Hon'ble Supreme Court in the case of Principal Secretary, Government of Karnataka vs Ragini Narayan (Civil Appeal No.8895 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held by an assessee for not more than thirty- six months immediately preceding the date of its transfer": Perusal of aforesaid definition shows that the legislature has used the expression 'held'. It is further noted by us that in various other allied or similar sections, the legislature has preferred to use the expression 'acquired' or 'purchased' e.g. in section 54 / 54F. Thus, it shows that the legislature was conscious while making use of this expression. The expressions like 'owned' has not been used for the purpose of determining the nature of asset as short term capital asset or long term capital asset. Thus, the intention of the legislature is clear that for the purpose of determining the nature of capital gain, the legislature was concerned with the period during which the asset was held by the assessee for all practical purposes on de facto basis. The legislature was apparently not concerned with absolute legal ownership of the asset for determining the holding period. Thus, we have to ascertain the point of time from which it can be said that assessee started holding the asset on de facto basis. 10. It is noted that the letter of allotment was issued to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer the privileges of ownership without transfer of title in the building and are common mode of acquiring flats particularly in multistoried constructions in big cities. The aforesaid new sub-clauses (v) and (vi) have been inserted in Section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. A person holding the Power of Attorney is authorized the powers of owner, including that of making construction though the legal ownership in such cases continues to be with the transferor. The intention of legislature is to treat even such transactions as transfers and the capital gain arising out of such transactions are brought to tax. Further, the Circular No.471 goes to the extent of clarifying that for the purpose of Income-tax Act, the allottee gets title to the property on the issuance of the allotment letter and the payment of installments is only a follow up action and taking the delivery of possession is only a formality. In case of construction agreements, the tentative cost of construction is already determined and the agreement provides for payment of cost of construction in installments subject to the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment, it is clear that for the purpose of holding an asset, it is not necessary that the assessee should be the owner of the asset based upon a registration of conveyance conferring title on him. 11. Similarly, in the case of Madhu Kaul (supra), the Hon'ble Punjab & Haryana High Court analysed various circulars and provisions of the Act that on allotment of flat and making first installment the assessee was conferred with a right to hold a flat which was later identified and possession delivered on later date. The mere fact that possession was delivered later, would not detract from the fact that assessee (allottee) was conferred a right to hold the property on issuance of an allotment letter. The payment of balance amount and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter upon the assessee. 13. In the case of Vinod Kumar Jain vs CIT 344 ITR 501 it was held by Hon'ble Punjab & Haryana High Court that conjoined reading of section 2(14), 2(29A) and 2(42A) clarifies that holding period of the assessee starts from the date of issuance of allotment letter. Since allottee gets title of the property on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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