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TMI Blog2021 (3) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... ng term capital gains when the appellant was eligible to get the deduction u/s.54(1) in respect of the investment made in the apartment at "Sapphire Heights", the appellant having satisfied all the conditions. 5. On the facts the learned CIT(A) ought to have appreciated the explanation and refrained from treating the capital gains as short term capital gains by declining the benefit u/s 54 of the Act." 3. The brief facts of the case are as follow: The assessee is an individual, who is deriving income from salary. For the assessment year 2010-2011, the return of income was filed on 02.08.2011, declaring total income of Rs. 7,48,390. The assessment u/s 143(3) was completed on 28.03.2013 by making addition to the salary income declared by the assessee. Subsequently, the assessment was reopened by issuance of notice u/s 148 of the I.T.Act for the reason that the assessee had sold a flat in Mumbai (Flat No.304, Buttercup, Hiranandani Meadows, situated at Thane (West Mumbai) on 26.09.2009 for a consideration of Rs. 62,91,500 and this flat, according to the A.O., was purchased by the assessee vide a registered sale agreement only on 06.03.2009 for a consideration of Rs. 29,08,950. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the I.T.Act, submissions made before the CIT(A), allotment letter dated 22.02.2006 of the builder, bank statement detailing the payments made for the purchase of the impugned flat, loan account of the assessee with ICICI Bank, etc. The learned AR reiterated the submissions that the impugned flat was allotted to the assessee on 22.02.2006 and substantial payments were made towards the purchase of the impugned flat by availing ICICI Bank loan. The learned AR submitted that since the assessee had paid advance on allotment date and paid balance consideration as per the terms of the agreement, the assessee is deemed to have held the right in the said property since February 2006. 5. The learned Departmental Representative relying on the judgment of the Hon'ble Apex Court in the case of CIT v. Balbir Singh Maini [(2017) 398 ITR 531 (SC)] submitted that the sale agreement not registered does not give any legal efficacy and it cannot be stated that the impugned flat was held by the assessee from the date of allotment of flat. It was further submitted by the learned DR that the permission to construct the impugned flat has been issued by Thane Municipal Corporation only on 17.11.2006 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which reads as under: '11.1 The existing definition of the word "transfer" in section 2(47) does not include transfer of certain rights accruing to a purchaser, by way of becoming a member of or acquiring shares in a co-operative society, company, or association of persons or by way of any agreement or any arrangement whereby such person acquires any right in any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangement confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multistoreyed constructions in big cities. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in section 53A of the Transfer of Property Act, 1882. 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. 11.2 The newly inserted sub-clause (vi) of section 2(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow-up action and taking the delivery of possession is only a formality. If there is a failure on the part of the D.D.A. to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession. 3. The Board have been advised that under the above circumstances, the inference that can be drawn is that the, D.D.A. takes up the construction work on behalf of the allottee and that true transaction involved is not a sale. Under the scheme the tentative cost of construction is already determined and the D.D.A. facilitates the payment of the cost of construction in instalments subject to the condition that the allottee has to bear the increase, if any, in the cost of construction. Therefore, for the purpose of capital gains tax the cost of the new asset is the tentative cost of construction and the fact that the amount was allowed to be paid in instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of flats under the Self-Financing Scheme of the D.D.A. shall be treated as cases of construction for the purpose of capital gains." 6.4 Perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set, with a registered deed of conveyance conferring title on him. In the light of the expanded definition as contained in Section 2(47), even when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction the assessee is put in possession of an immovable property or he retained the same in part performance of the contract under Section 53-A of the Transfer of Property Act, it amounts to transfer. No registered deed of sale is required to constitute a transfer. Similarly, any transaction whether by way of becoming a member of or acquiring shares in a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of any immovable property, also constitutes transfer and the assessee is said to hold the said property for the purpose of the definition of 'short-term capital gain'. In fact, the Circular No.495 makes it clear that transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the assessee. 6.8 In the case of Vinod Kumar Jain v CIT & Ors. [(2012) 344 ITR 501 (P&H)] 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 issuance of allotment letter and payment of first installment is only a consequential action upon which delivery of possession flows. Even if the sale deed or agreement to sell is executed or registered subsequently but the assessee always had a right in the property since the date of issuance of allotment letter. Therefore, it can be said that assessee held the property immediately from the date of allotment letter. 6.9 As mentioned earlier, in the instant case, the assessee was allotted the impugned flat vide letter of the builder dated 22.02.2006 on which date the assessee paid earnest money of Rs. 1 lakh. Based on the allotment letter, the assessee was given permission to mortgage the impugned flat with ICICI Bank for availing bank loan. The relevant portion of the letter issued by the builder permitting the assessee to avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein or the compulsory acquisition thereof under any law. The word " property ", used in s. 2(14) of the I.T. Act, is a word of the widest amplitude and the definition has re-emphasised this by use of the words " of any kind ". Thus, any right which can be called property will be included in the definition of " capital asset ". A contract for sale of land is capable of specific performance. It is also assignable. (See Hochat Kizhakke Madathil Venkateswara Aiyar v. Kallor Illath Raman Nambudhri, AIR 1917 Mad 358). Therefore, in our view, a right to obtain conveyance of immovable property, was clearly " property " as contemplated by s. 2(14) of the I.T. Act, 1961." 6.11 The Hon'ble Bombay High Court in the case of Principal CIT v. Vembu Vaidyanathan [(2019) 413 ITR 248 (Bom.)] following the Hon'ble Bombay High Court judgment in the case of CIT v. Tata Services Limited (supra), had held that the assessee gets title of property on the basis of allotment letter and payment of instalment was only a follow up action and taking delivery of possession is only a formality. The relevant finding of the Hon'ble Bombay High Court in the case of Pr.CIT v. Vembu Vaidyanathan (supra), reads as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by the Delhi Development Authority. In that view of the matter, the Commissioner of Income-tax (Appeals) or the Tribunal correctly held that the assessee had acquired the property in question on December 31, 2004 on which the allotment letter was issued." 6.12 In view of the aforesaid reasoning and the judicial pronouncements cited supra, we hold that the assessee gets a right to the impugned property on the date of allotment letter, i.e., on 22.02.2006 and payment of instalment as per the terms is only a follow up action and taking delivery of possession is only a formality. Therefore, reckoning the period from 22.02.2006, i.e. the date of allotment, we hold that the sale of impugned flat give raise to long term capital gains and not short term capital gains as held by the authorities below. As regards the claim of deduction u/s 54 of the I.T.Act, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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