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TMI Blog2024 (7) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... that agreement which intends to convey these rights accruing to parties can be considered as the source of accrual of rights to the assessee. By virtue of the letter of allotment, some right to own a property is given by the builder to the assessee. A right in personam had been created in favour of the assessee in whose favour the letter of allotment had been issued and who has paid 20% of the total agreed consideration as advance - all other payments on various milestones identified in the said letter have been duly met by the assessee on subsequent dates, duly acknowledged by the builder. Undoubtedly, such contractual right arising out of the letter of allotment can be surrendered or neutralised by the parties through subsequent contract or conduct but such is not a case in hand before us. In the present case before us, assessee has been issued a letter of allotment by the builder setting out the terms and conditions for the construction of the flat to be undertaken by the builder and various milestones listed for making payment by the assessee. There are other restrictive covenants for both the parties as stated in the letter of allotment which would result into adverse consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. ITBA/APL/S/250/2023-24/1056964999(1) dated 11.10.2023 passed against the assessment order by the Income Tax Officer, Ward 3(3)(1), Mumbai, u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 26.12.2018 for AY 2016-17. 2. Grounds taken by the assessee are reproduced as under: 1. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals), hereinafter referred to as the CIT (A), has erred in confirming the action of the assessing officer in treating the long term capital gains on transfer of right to acquire the property, computed at Rs. 35,33,059/- applying indexation, as short term capital gains of Rs. 64,89,545/-. 2. The CIT (A) has erred in confirming the order of the assessing officer, denying the exemption u/s. 54F of the Act against the long term capital gains on transfer of right to acquire the property for the reason of the failure on the part of the appellant to file a revised return of income to claim the said exemption. 3. The CIT (A) has erred in confirming the addition of Rs. 16,00,100/- made u/s. 69A of the Act in respect of cash deposited by the appellant in her bank account during the financial year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he builder for the identified flat allotted to the assessee, total consideration is stated to be ₹83,34,155/-. In addition to this consideration, assessee had agreed and accepted to pay and discharge the amount towards stamp duty, registration charges and charges for society formation, maintenance charges, charges for electricity connection and metre, legal charges and various other charges as required under this agreement. Further, this agreement states the various milestones and amounts which the assessee is required to pay to the builder against the consideration for the flat so allotted. Time for the payment of each instalment is the essence of the agreement as stated therein. From the recitals as contained in this agreement, they all relate to the execution of the project in which the assessee has been allotted the identified said flat. All these recitals are indeed in future tense, in other words, to be executed in the times to come, based on various milestones agreed between the two parties. Registration of this agreement took place on 15.05.2014 which is pursuant to the letter of allotment issued by the builder to the assessee dated 15.02.2010. There is a time gap bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the capital gain on the sale of right to own the property is Short Term Capital Gain and is worked out as below: Full value of consideration : Rs. 1,55,00,000 Less: Agreement value : Rs. 83,34,155/- Stamp duty Regn : Rs. 6,76,300/- : Rs. 90,10,455/- Short Term Capital Gain : Rs. 64,89,545/- The Short Term Capital Gain of Rs. 64,89,545 is added to the total income of the assessee. 8.1. Further, since Ld. Assessing Officer noted that the long-term capital gain is not on account of sale of residential house property therefore, claim of deduction under section 54 is not allowable. Also, since capital gain is the short-term capital gain, he disallowed the deduction under section 54 of ₹45,81,300 as claimed by the assessee. For the purpose of not entertaining the claim of assessee made during the course of assessment for deduction under section 54F, Ld. Assessing Officer noted that assessee has not filed any revised return of income and therefore such a claim is not permissible. Assessment was completed, against which assessee went in appeal before the Ld. CIT(A). 9. Ld. CIT(A) noted that despite giving sufficient opportunities to represent the case, assessee did not fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has rightfully computed long-term capital gain on the transfer of the right assessee held for owning a property in terms of the letter of allotment issued on him with an identified flat in the project by the builder. 10.2. However, under a mistaken belief assessee had claimed deduction u/s. 54 instead of section 54F, since it is a case of transfer of right to own a property and not a case of transfer of a house property. From the assessment stage, assessee has claimed the deduction u/s. 54F upon realising the mistake he made in the return but the same was denied since assessee did not file the revised return of income for claiming deduction under the correct section of 54F. To this effect, Ld. counsel placed strong reliance on the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT in 284 ITR 323 and CIT vs. Pruthvi Brokers and Shareholders in 349 ITR 336 (Bom) to submit that nothing impinges on the power of the appellate authorities to entertain such a claim of the assessee. 11. Per contra, Ld. Sr. DR referred to para 4.4 of the assessment order to submit that the registered agreement dated 13.05.2014 has created the right or interest in an immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 13,00,000 2 2010-11 11,25,838 3 2011-12 18,73,980 4 2012-13 19,72,343 5 2013-14 7,14,240 6 2013-14: Stamp Duty and Registration 6,76,300 7 2015-16 13,47,754 90,10,455 14. In the light of above stated facts and narrations, let us understand the effect of letter of allotment issued by the builder to the assessee for the identified flat in the building project. Consequence of issuance of letter of allotment for the flat signifies a contractual arrangement between the assessee and the builder by which a right in personam is created in favour of the assessee. When such a right is created in favour of the assessee, the builder is restrained from selling the said identified flat to someone else because the assessee in whose favour the right in personam is created, has a legitimate right to enforce specific performance in terms of the said letter of allotment, if the builder, for some reason is not executing and complying with the terms stated therein. Thus, by virtue of the letter of allotment, some right to own a property is given by the builder to the assessee. In real life, there are events when a person, even after holding such a letter of allotment issued by the builder, tries to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Kumar Jain vs. CIT in [2012] 344 ITR 501 wherein assessee was allotted a flat on 27.02.1982 on instalments under residential scheme of Delhi Development Authority (DDA). The possession of the said flat was, however, given to the assessee on 15.05.1986 and the letter issued in that behalf indicated the flat number and called upon the assessee-allottee to deposit the balance amount. The assessee sold the said flat on 06.01.1989 and claimed that capital gain arising on sale of said flat was long-term capital gain u/s. 2(29A) and as he had purchased another flat on 31.01.1989, such capital gain is set off u/s. 54. However, the assessing officer disallowed the claim of the assessee by taking the date of possession as 15.05.1986 by treating the capital gain as short-term capital gain. On these set of facts, Hon'ble Court referred to CBDT circular No. 471 dated 15.10.1996 whereby instructions were issued regarding treatment of capital gains tax, in case of a flat purchased under self financing scheme. In para 3 of the said circular, it was stated that it has been decided that cases of allotment of flats under the self financing scheme of the Delhi Development Authority shall be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us milestones listed for making payment by the assessee. There are other restrictive covenants for both the parties as stated in the letter of allotment which would result into adverse consequences, if not met. 17. We are also conscious of the proposition that transfer of the property is effective on registration of conveyance deed in view of section 54 of Transfer of Property Act. The absolute legal ownership of an immovable property takes place in terms of various provisions of Transfer of Property Act which needs to be read with provisions of section 2(47) of the Act for the purpose of computing tax liability arising on account of sale or purchase of immovable properties under the Act. However, the issue before us is different. The issue of transfer of ownership is not the issue to be decided here for computing the holding period. Under the present set of facts which have been discussed in detail in above paragraphs and taking into consideration the judicial precedents referred above, we find that holding period should be computed from the date issue of allotment letter. Once this is considered, the holding period becomes more than 36 months and consequently the right to own the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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