Smt. Malali Venugopala Umadevi, Bangalore V. Income Tax Officer (International Taxation), Ward- 2(1), Bangalore

ITA 1686/BANG/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6969 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 25-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GANESH R GHALE DEPT
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Capital asset; Principle of natural justice; Rule of consistency; Cost of acquisition; Capital Gains
• Section: 234B; 195; 250; 13

Judgement Text

ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER SMC ITA NO.1686/BANG/2019 ASSESSMENT YEAR: 2008-09 SMT. MALALI VENUGOPALA UMADEVI 4605, HIGH POINT IV 45, PALACE ROAD BENGALURU PAN NO : AAGPU9826N VS. ITO (INTERNATIONAL TAXATION) WARD-2(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI S.V. RAVI SHANKAR, A.R. RESPONDENT BY : SHRI GANESH R. GHALE, STANDING COUNSEL FOR DEPT. DATE OF HEARING : 08.04.2021 DATE OF PRONOUNCEMENT : 08.04.2021 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST ORDER OF THE CIT(A) DATED 17.5.2019. THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 12, BENGALURU, PASSED UNDER SECTION 250 OF THE INCOME T AX ACT, 1961 ('THE ACT'), IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 2 OF 20 2. THE APPELLANT DENIES HERSELF TO BE LIABLE TO BE ASS ESSED OVER AND ABOVE THE RETURNED INCOME OF RS. 18,656/- ON THE FACTS AND CI RCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN CO NSIDERING THE ORIGINAL ASSET SOLD BY THE APPELLANT AS SHORT TERM CAPITAL A SSET ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THA T THE ORIGINAL ASSET SOLD BY THE APPELLANT IS A LONG TERM CAPITAL ASSET AND ACCORDINGLY A SUM OF RS. 7,21,250/-COULD NOT HAVE BEEN TAXED AS S HORT TERM CAPITAL GAINS ON THE FACTS A CIRCUMSTANCES OF THE CASE. 5. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE RE EXISTED AN ORAL CONTRACT AND CERTAIN RIGHTS IN THE PROPERTY EXISTED FROM THE DATE OF THE ALLOTMENT OF THE PROPERTY AND ACCORDINGLY THE DATE OF ALLOTMENT OUGHT TO BE CONSIDERED FOR CALCULATING THE PERIOD OF HOLDING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE APPELLANT HAD PAID A SUBSTANTIAL PORTION OF THE COST OF THE ASSET AT THE TIME OF THE ALLOTMENT I.E. IN 1995-96 AND HENCE SUBSTANTIALLY FULFILLED H ER PART OF THE CONTRACT THEREBY CREATING SUBSTANTIAL RIGHTS IN THE ASSET ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE AUTHORITIES BELOW ERRED IN LAW IN DISALLOWING T HE CLAIM OF RS. 4,95,755/ - BEING EXPENSES INCURRED BY THE APPELLANT FOR PURCHA SE AND PROTECTION OF THE PROPERTY AND HENCE OUGHT TO BE ALLOWED AS COST OF A CQUISITION/IMPROVEMENT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE APPELLANT DENIES HERSELF LIABLE TO BE CHARGED I NTEREST UNDER SECTION 234B AND 234C OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SU BSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. 10. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 3 OF 20 2. THERE IS A SHORT DELAY OF 5 DAYS IN FILING THIS APPEAL, WHICH IS CONDONED. THE CRUX OF THE ABOVE GROUNDS ARE THAT O N SALE OF HOUSE PROPERTY, WHETHER IT RESULTED IN LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN? FACTS OF THE CASE ARE AS FOLLOWS: AS REGARD TO THE ADDITION ON ACCOUNT OF SHORT - TER M CAPITAL GAINS AMOUNTING TO RS. 7,21,250/- THE APPEL LANT HAS ELABORATELY DISCUSSED IN DETAIL IN THE STATEMENT OF FACTS AND THE SAME MAY KINDLY BE CONSIDERED. 2.1. IN ADDITION TO THE FACTS BROUGHT OUT IN THE ST ATEMENT OF FACTS THE APPELLANT WISHES TO SUBMIT THAT THE APPEL LANT HAD ENTERED INTO A CONTRACT OF TERMS TO PURCHASE THE FL AT FROM M/S. AZOFEN [11 LTD., IN THE YEAR 1995-96 TO BE PRECISE ON 29/03/1995. THE APPELLANT PURCHASED THE PROPERTY FO R A TOTAL CONSIDERATION OF RS. 22,53,255/- PAID ON VARIOUS DA TES AND STAGES. THE TOTAL COST OF ACQUISITION OF THE PROPER TY AMOUNTED TO RS.22,53,255/- AND FURTHER ALL THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. 2.2 IT IS SUBMITTED THAT THE LEARNED ASSESSING OFF ICER IN HER ORDER ASSESSMENT HAS CONSIDERED ONLY A SUM OF RS. 17,57,500/- BEING THE COST OF ACQUISITION OF THE SU BJECT MATTER OF THE PROPERTY WHICH WAS ALLOTTED TO THE AP PELLANT AND THE SAME BEING HAT NO. 602, 6 TH FLOOR, NO. D-4, 'LOK UPAVAN - PHASE - II', SMT. GLADYS ROAD, OFF POKHRAN ROAD N O. 2, LOKA UPAVANA, THANE (WEST) - 400 610. 2.3. IT IS SUBMITTED THAT THE APPELLANT ALONG WITH HER HUSBAND SOLD THE ABOVE MENTIONED PROPERTY TO ONE SR I. AJAY ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 4 OF 20 GOPALA RAO VIDE A REGISTERED SALE DEED DATED 15/06/ 2007. THE APPELLANT COMPUTED THE CAPITAL GAINS AND ARRIVE D AT A LOSS OF RS. 3,43,000/- BEING 50% OF THE TOTAL LOSS OF RS. 6,86,000/- AS HER SHARE OF LOSS FROM THE SALE OF TH E PROPERTY. 2.4. IT IS SUBMITTED THAT THE LEARNED ASSESSING OFF ICER HAS HELD THAT THE PROPERTY WAS ACQUIRED BY THE APPELLAN T ONLY AFTER RECEIVING THE POSSESSION OF THE PROPERTY. HEN CE THE PROPERTY IN QUESTION DO NOT BECOME A LONG TERM CAPI TAL ASSET AND TAXED THE ENTIRE SALE CONSIDERATION AS SHORT TE RM CAPITAL GAINS AS PER THE PROVISIONS OF SECTION 2(42A) OF TH E ACT. 2.5. FIRSTLY, IT IS SUBMITTED THAT THE LEARNED ASSE SSING FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAD MADE A TOTAL PAYMENT OF RS. 22,53,255/- AS AGAINST THE COST OF ACQUISITION ALLOWED BY THE LEARNED ASSESSING OFFICE R OF RS. 17,57,500/-. THE FOLLOWING IS THE CHART WHICH DEPIC TS THE CLEAR POSITION OF THE CLAIM OF COST OF ACQUISITION BY THE APPELLANT AMOUNTING TO RS. 22,53,255/-: YEAR_ AMOUNT PAID INDEXED COST INDEXED AMOUNT 50% SHARE 1995 - 96 16,75,900/- 281 32,86,195/- 2006 - 07 3,64,106/- 519 3,86,556/- 2007 - 08 2,13,249/- 551 2,13,249/- TOTAL COST OF ACQUISITION 22,53,255/- 38,86,000/- 19,43,000/- CONSIDERATION RECEIVED FROM SALE OF PROPERTY 32,00,000/- 32,00,000/- 6,00,000/- NET GAIN / LOSS 9,46,745/ - (6,86,000) (3,43,000) ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 5 OF 20 2.6 THE LEARNED ASSESSING OFFICER WITHOUT APPRECIATING THE ABOVE MENTIONED FACT HAS ADOPTED THE COST OF ACQUIS ITION OF THE PROPERTY AT RS. 17,57,500/- AS AGAINST THE ACTU AL AND TOTAL COST OF ACQUISITION OF THE SUBJECT MATTER OF PROPERTY WHICH WAS SOLD AT RS. 22,53,255/- THE PAYMENTS AMOU NTING TO RS. 3,64,106/- AND RS. 2,13,249/- WERE MADE SUBSEQUENTLY IN THE YEAR 2006-07 ET 2007-08 IN ADDI TION TO THE ADVANCE AMOUNT MADE BY THE APPELLANT OF RS. 16,75,900/- TOTALLING TO RS. 22,53,255/-. THE LEARN ED ASSESSING OFFICER OUGHT TO HAVE CONSIDERED FOR THE PURPOSE OF ARRIVING AT THE COST OF ACQUISITION FOR THE ADVA NCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. THE DETAILS AND BREAK -UP OF THE COST OF ACQUISITION AMOUNTING TO RS. 22,53,255/- IS AS UNDER: SI.NO. PARTICULARS DATE OF PAYMENT AMOUNT REMARKS A. TOTAL AMOUNTS PAID TOWARDS PURCHASE OF THE FLAT AT LOK UPAVAN FLAT AS PER SALE DEED DATED 11/08/2006 11/08 / 2006 17, 57,500/ - THE SAID AMOUNT IS MENTIONED IN THE REGISTERED SALE DEED DATED 11/08/2006. COPY ENCLOSED B. AMOUNT TOWARDS REGISTRATION CHARGES. 11/08/2006 1,06,4501- THE AMOUNT IS TOWARDS THE STAMP DUTY PAID TOWARDS THE REGISTRATION OF THE PROPERTY. C. AMOUNT TOWARDS OTHER ADMINISTRATIVE CHARGES FOR THE PURPOSE OF REGISTRATION. 11/08/2006 25,710/ - THE AMOUNT HAS BEEN PAID TO THE SUB-REGISTRAR OFFICE, THANE. D. OTHER EXPENSES INCURRED AT THE SUB-REGISTRAR OFFICE. 11/08/2006 22,995/- GENERAL EXPENSES ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 6 OF 20 E. PAYMENT MADE TOWARDS PARING SPACE 09/01/1997 40,000/- RECEIPT RECEIVED FROM AZOFEN LTD., I.E. THE DEVELOPER, VIDE NOC POSSESSION DATED 14/08/2005. COPY ENCLOSED. F. PAYMENT MADE TOWARDS CORPUS FUND TO LOK UPVAN -II, BUILDING SOCIETY WELFARE ASSOCIATION (P) 22/07/2006 33,250/- RECEIPT RECEIVED FROM THE SAID ASSOCIATION AND RECEIPT NO.420. COPY ENCLOSED. G. PAYMENT MADE TOWARDS DUE TO THE SOCIETY LOK UPVAN II, BUILDING SOCIETY WELFARE ASSOCIATION (P) 12/06/2007 1,44,024/- STATEMENT REFLECTING THE PAYMENT BEING DD TAKEN IN FAVOUR OF LOK UPAVAN I BLDG 34D4 CO=OPERTIVE HOUSING SOCIETY. COPY OF BANK STATEMENT ENCLOSED. H. COMMISSION PAID TO MS. KAMALA VENKATARAMAN 19/06/2007 64,000/- E - MAIL RECEIVED FROM MS. KAMALA VENKATARAMAN CLAIMING SERVICE CHARGES RS.64,000/- & BANK STATEMENT WHEREIN THE DEMAND DRAFT HAS BEEN ISSUED FROM THE ACCOUNT OF THE APPELLANT. COPY OF E- MAIL AND BANK STATEMENT ENCLOSED. I. COURIER, POSTAGE, TTK SERVICE CHARGES 19/06/2007 5,225/- J. POWER OF ATTORNEY CHARGES, TRAVELLING TO INDIAN CONSULATE FOR ATTESTATION. 2,475/- TOTAL COST OF ACQUISITION OF FLAT 22,53,255/- 2.7 IT IS SUBMITTED FURTHER THAT THE ABOVE MENTION ED PAYMENTS WHICH HAVE BEEN TABULATED IN THE ABOVE CHA RT ARE ALL ALLOWABLE EXPENDITURE AND WHICH HAS BEEN INCURRED I N CONNECTION TO THE FLAT OF THE APPELLANT. THE LEARNE D ASSESSING OFFICE ERRED IN NOT TREATING THE SAME FOR THE PURPO SE OF ARRIVING ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 7 OF 20 AT THE TOTAL COST OF ACQUISITION OF THE FLAT. THE A CT SPECIFICALLY ALLOWS THE APPELLANT TO CLAIM ANY EXPENDITURE INCUR RED AND INCIDENTAL TOWARDS PURCHASE OR SALE OF THE CAPITAL ASSET WHICH THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE. 2.8. AS REGARD TO THE ISSUE WHETHER THE SALE CONSID ERATION RECEIVED BY THE APPELLANT IS A LONG-TERM OR SHORT T ERM CAPITAL ASSET, IT IS SUBMITTED THAT THE PHYSICAL POSSESSION OF THE PROPERTY WAS GIVEN TO THE APPELLANT BY THE DEVELOPE R ONLY ON 14/08/2006 BUT WHEREAS THE LEARNED ASSESSING OFFICE R FAILED TO APPRECIATE THE FACT THAT APPELLANT HAD ENTERED INTO AGREEMENT IN THE YEAR 1995-96 ITSELF AND MAJOR PORTION OF THE PAYMENTS TOWARDS THE SAID AGREEMENT TOWARDS PURCHASE OF THE PROPERTY WERE MADE BY THE APPELLANT TO THE DEVELOPER ALONG W ITH HER HUSBAND JOINTLY. 2.9. WITHOUT PREJUDICE THE APPELLANT WISHES TO SUBM IT THAT THE LEARNED ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THE FACT THAT THE PROPERTY INCLUDES BUNDLE OF RIGHTS AND THE APPE LLANT HAD SPECIFIC PERFORMANCE, ASSIGNABLE RIGHT, FURTHER THE DEVELOPER IS PRECLUDED TO ALLOT OR SELL THE ALLOTTED UNITS TO AN Y OTHER PERSONS WHICH IS ALLOTTED TO THE APPELLANT, AND OTHER SUCH RESTRICTIONS ON THE BUILDER AND THE APPELLANT ACQUIRES CERTAIN VARI OUS RIGHTS BY ENTERING INTO AGREEMENT WITH THE DEVELOPER. OUT OF SALE CONSIDERATION THE APPELLANT WAS ENTITLED TO CLAIM P ROPORTIONATELY LONG TERM CAPITAL GAIN AS WELL SHORT TERM CAPITAL G AIN ON THE RIGHTS ACQUIRED THROUGH THE ARRANGEMENT AND FOR UND IVIDED PORTION OF LAND AS WELL TITLE RIGHT. IT IS SUBMITTE D FURTHER THAT THE LEARNED ASSESSING OFFICER OUGHT TO HAVE TO HAVE APP ORTIONED THE SALE CONSIDERATION RECEIVED BY THE APPELLANT BY SEL LING THE PROPERTY AND THE SAME SHOULD HAVE BEEN ATTRIBUTABLE TO LONG ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 8 OF 20 TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN. THE PRINCIPLE OF APPORTIONMENT IS WELL SETTLED IN TAX LAWS BY THE DE CISIONS OF THE HON'BLE APEX COURT IN THE CASE OF CONTINENTAL CONST RUCTION LTD VS. CIT (1992) 195 ITR 81 AND CIT VS. BEST AND CO. (PRIVATE) LTD (1966) 60 ITR 11. 2.10 THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD EXPLAINED THE ABOVE MENTIONED TRANS ACTION AND THE LEARNED ASSESSING OFFICER WITHOUT CONSIDERI NG AND BY NOT APPRECIATING THE ABOVE MENTIONED FACTS ARBITRAR ILY HELD THAT SINCE THE APPELLANT RECEIVED THE PROCESSION OF THE PROPERTY ONLY ON 14/08/2006 AS PER SECTION 2[47] OF THE ACT THE DATE OF ACQUISITION OF THE PROPERTY IS 14/08/20 06 AND THUS THE SALE CONSIDERATION RECEIVED OF RS. 32,00,000/- FROM THE SALE OF THE PROPERTY WHICH IS SOLD ON 15/06/2007 AM OUNTS TO SHORT TERM CAPITAL GAIN AND BROUGHT TO TAX. 2.11. THEREFORE, IN VIEW OF THE ABOVE THE APPELLANT HUMBLY PRAY BEFORE YOUR HONOUR TO KINDLY DIRECT THE LEARNED ASS ESSING OFFICER TO ADOPT THE TOTAL COST OF ACQUISITION OF T HE PROPERTY AT RS. 22,53,255/- AS AGAINST THE AMOUNT CONSIDERED BY THE LEARNED ASSESSING OFFICER OF RS. 17,57,500/- AND FU RTHER THE APPELLANT HUMBLY PRAYS THAT THE PROPERTY WHICH THE APPELLANT HAS SOLD ALONG WITH HER HUSBAND JOINTLY IS A LONG T ERM CAPITAL ASSET. THUS, THE APPELLANT HUMBLY PRAY BEFORE YOUR HONOUR TO DELETE THE ADDITION MADE BY THE LEARNED ASSESSING O FFICER OF RS. 7,21,250/- UNDER THE HEAD SHORT TERM CAPITAL GAINS FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 9 OF 20 3. THE OTHER GROUND IS GROUND NO.7 WITH REGARD TO I NCURRING EXPENDITURE BY ASSESSEE FOR PURCHASE AND PROTECTION OF THE PROPERTY SHOULD BE CONSIDERED AS A PART OF THE COST OF ACQUISITION. AT THIS TIME LD. A.R. HAS NOT PUT ANY SERIOUS OBJECTION ON THIS ISSUE. HOWEVER, SUBMITTED THAT P AYMENT OF COMMISSION BY 2% OF RS.16 LAKHS WORKED OUT TO RS.32 ,000/- ON SALE WHICH WAS INCURRED BY ASSESSEE TO BE REDUCED F ROM THE SALE CONSIDERATION. 4. LD. D.R. SUBMITTED THAT THERE WAS ONLY PAYMENT O F ADVANCE BY ASSESSEE FOR PURCHASE OF FLAT AND ASSESS EE ACTUALLY PURCHASED THE SAID PROPERTY VIDE SALE DEED DATED 11 .8.2006 AND THE A.O. HAS CONSIDERED THIS DATE AS DATE OF ACQUIS ITION AND FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN AND IF W E CONSIDER THIS DATE, THE A.O. IS JUSTIFIED IN DETERMINING THE INCOME ON SALE OF FLAT AS SHORT TERM CAPITAL GAIN ONLY. THE ADVAN CE PAYMENT OF MONEY TOWARDS THE PURCHASE OF PROPERTY UNDER CREDIT IN INTEREST IN LONG TERM CAPITAL ASSET BEING AN ADVANCE PAYMENT . 5. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE PRESENT CASE, ASSESSEE M ADE SUBSTANTIAL PAYMENT TOWARDS PURCHASE OF FLAT BEFORE 27.12.1996 BY WHICH HE HAS PAID RS.16,91,954/- TOWA RDS THE PROPERTY AND RS.40,000/- TOWARDS PARKING PLACE. HO WEVER, THE ACTUAL SALE AGREEMENT WAS EXECUTED IN FAVOUR OF THE ASSESSEE ON 11.8.2006. THE A.O. WAS OF THE OPINION THAT ASS ESSEE ACQUIRED THE SAID PROPERTY W.E.F. 11.8.2006 AND NOT FROM JUNE, 1997 SINCE THE ASSESSEE HAS NOT GOT TRANSFERRED, TH E PROPERTY IN FAVOUR OF HIM IN TERMS OF SECTION 2(47)(V) R.W.S . 53A OF THE T.P. ACT. ACCORDING TO THE LD. D.R., THE PROPERTY WAS ACQUIRED ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 10 OF 20 BY ASSESSEE ON 14.8.2006 AND SOLD BY HER ON 15.6.20 07. THE RESULTANT GAIN IS SHORT TERM CAPITAL GAIN. HOWEVER , AS SEEN FROM THE PAYMENT DETAILS, THE ASSESSEE MADE SUBSTANTIAL PAYMENT OF RS.16,91,954/- BEFORE 27.12.1996 AND ALL FORMALITIE S RELATING TO ACQUISITION OF PROPERTY WERE ALREADY COMPLETED. ONLY FORMAL REGISTRATION OF SALE DEED WAS PENDING AND IT WAS EX ECUTED ON 11.8.2006. NOW THE CONTENTION OF THE ASSESSEE IS T HAT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN INDEXATION C OST OF ACQUISITION TO BE MADE FROM THE DATE OF MAKING SUBS TANTIAL PAYMENT AND NOT FROM THE ACTUAL DATE OF SALE DEED. NOW THE ISSUE BEFORE US IS WHETHER DATE OF SUBSTANTIAL PAYM ENT TOWARDS ACQUISITION OF FLAT TO BE CONSIDERED AS A DATE OF A CQUISITION OR THE DATE OF SALE AGREEMENT TO BE CONSIDERED AS A DA TE OF ACQUISITION OF THE SAID PROPERTY. THIS CONTROVERSY WAS SETTLED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF A. SURESH RAO 223 TAXMAN 228 IN WHICH HONBLE HIGH COURT ANAL YSED VARIOUS PROVISIONS OF THE ACT PERTAINING TO COMPUTA TION OF CAPITAL GAIN UNDER VARIOUS SITUATIONS AND ALSO CIRC ULARS ISSUED BY THE CBDT ON THIS ISSUE. RELEVANT PORTION OF THE OBSERVATION WHEREIN THE ISSUE BEFORE US HAS BEEN PROPERLY ANALY SED IS REPRODUCED HEREUNDER: THE DEFINITION AS CONTAINED IN SECTION 2 (42A) OF THE ACT, THOUGH USES THE WORDS, 'A CAPITAL ASSET HELD AN ASSESSEE FOR NOT MO RE THAN THIRTY-SIX MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSF ER', FOR THE PURPOSE OF HOLDING AN ASSET, IT IS NOT NECESSARY THAT, HE SHOU LD BE THE OWNER OF THE ASSET, WITH A REGISTERED DEED OF CONVEYANCE CONFERR ING TITLE ON HIM. IN THE LIGHT OF THE EXPANDED DEFINITION AS CONTAINED IN SE CTION 2(47), EVEN WHEN A SALE, EXCHANGE, OR RELINQUISHMENT OR EXTINGUISHME NT 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 CO- OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MA NNER WHATSOEVER, ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 11 OF 20 WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING T HE ENJOYMENT OF ANY IMMOVABLE PROPERTY, ALSO CONSTITUTES TRANSFER AND T HE ASSESSEE IS SAID TO HOLD THE SAID PROPERTY FOR THE PURPOSE OF THE DEFIN ITION 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 TH E PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE IN THE BUILDING AND ARE COMMON MODE OF ACQUIRING FLATS PARTICULARLY IN MULTISTORIED CON STRUCTIONS IN BIG CITIES. THE AFORESAID NEW SUB-CLAUSES (V) AND (VI) HAVE BEE N INSERTED IN SECTION 2(47) TO PREVENT AVOIDANCE OF CAPITAL GAINS LIABILI TY 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, INCLUDI NG THAT OF MAKING CONSTRUCTION THOUGH THE LEGAL OWNERSHIP IN SUCH CAS ES CONTINUES TO BE WITH THE TRANSFEROR. THE INTENTION OF LEGISLATURE IS TO TREAT EVEN SUCH TRANSACTIONS AS TRANSFERS AND THE CAPITAL GAIN ARIS ING OUT OF SUCH TRANSACTIONS ARE BROUGHT TO TAX. FURTHER, THE CIRCU LAR NO. 4 71 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 ALLOTM ENT LETTER AND THE PAYMENT OF INSTALLMENTS IS ONLY A FOLLOW UP ACTION AND TAKI NG THE DELIVERY OF POSSESSION IS ONLY A FORMALITY. IN CASE OF CONSTRUC TION AGREEMENTS, THE TENTATIVE COST OF CONSTRUCTION IS ALREADY DETERMINE D AND THE AGREEMENT PROVIDES FOR PAYMENT OF COST OF CONSTRUCTION IN INS TALLMENTS SUBJECT TO THE CONDITION THAT THE ALLOTTEE HAS TO BEAR THE INCREAS E, 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 INSTALLMENTS DOES NOT AFF ECT THE LEGAL POSITION. THEREFORE, IN CONSTRUING SUCH TAXATION PROVISIONS, WHAT SHOULD BE THE APPROACH OF THE COURTS AND THE INTERPRETATION TO BE PLACED IS CLEARLY SET OUT BY THE APEX COURT IN THE CASE OF SMT. SAROJ AGG ARWAL V. CIT 156 ITR 497 WHEREIN IT IS HELD AS UNDER-- 'FACTS SHOULD BE VIEWED IN NATURAL PERSPECTIVE, HAV ING REGARD TO THE COMPULSION OF THE CIRCUMSTANCES OF A CASE. WHERE IT IS POSSIBLE TO DRAW TWO INFERENCES FROM THE FACTS AND WHERE THERE IS NO EVIDENCE OF ANY DISHONEST OR IMPROPER MOTIVE ON THE PART OF THE ASS ESSEE, IT WOULD BE JUST AND EQUITABLE TO DRAW SUCH INFERENCE IN SUCH A MANN ER THAT WOULD LEAD TO EQUITY AND JUSTICE. TOO HYPER-TECHNICAL OR LEGAL ISTIC APPROACH SHOULD BE AVOIDED IN LOOKING AT A PROVISION WHICH MUST BE EQUITABLY INTERPRETED AND JUSTLY ADMINISTERED COURTS SHOULD, WHENEVER POS SIBLE UNLESS PREVENTED BY THE EXPRESS LANGUAGE BY ANY SECTION OR COMPELLING CIRCUMSTANCES OF ANY PARTICULAR CASE, MAKE A BENEVO LENT AND JUSTICE ORIENTED INFERENCE. FACTS MUST BE VIEWED IN THE SOC IAL MILIEU OF A COUNTRY.' THEREFORE, KEEPING THE AFORESAID PRINCIPLES IN MIND , WHEN WE LOOK AT SECTION 48, THE LANGUAGE EMPLOYED IS UNAMBIGUOUS. T HE INTENTION IS VERY CLEAR. WHEN A CAPITAL ASSET IS TRANSFERRED, IN ORDER TO DETERMINE THE CAPITAL GAIN FROM SUCH TRANSFER, WHAT IS TO BE SEEN IS, OUT OF FULL VALUE OF THE ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 12 OF 20 CONSIDERATION RECEIVED OR ACCRUING, THE COST OF ACQ UISITION OF THE ASSET, THE COST OF IMPROVEMENT AND ANY EXPENDITURE WHOLLY OR E XCLUSIVELY INCURRED IN CONNECTION WITH SUCH TRANSFER IS TO BE DEDUCTED. WHAT REMAINS THEREAFTER IS THE CAPITAL GAIN. IT IS NOT NECESSARY THAT AFTER PAYMENT OF COST OF ACQUISITION, A TITLE DEED IS TO BE EXECUTED IN FAVO UR OF THE ASSESSEE. EVEN IN THE ABSENCE OF A TITLE DEED, THE ASSESSEE HOLDS THA T PROPERTY AND THEREFORE, IT IS THE POINT OF TIME AT WHICH HE HOLDS THE PROPE RTY, WHICH IS TO BE TAKEN INTO CONSIDERATION IN DETERMINING THE PERIOD BETWEE N THE DATE OF ACQUISITION AND DATE OF TRANSFER OF SUCH CAPITAL GA IN IN ORDER TO DECIDE WHETHER IT IS A SHORT-TERM CAPITAL GAIN OR A LONG T ERM CAPITAL GAIN.' 10.1 FURTHER, IN THE CASE OF RICHA BAGRODIA V. DY. CIT [2019] 103 TAXMANN.COM 73/175 1TD 552 (MUM.), THE TRIBUNAL CONSIDERED SIM ILAR ISSUE AND OBSERVED AS UNDER: '4. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AUTHORITIES AS WELL AS THE JUDGMENTS OF THE HON'BLE HIGH COURT AND THE DECISIONS OF THE TRIBUNAL CITED BY LEARNED REPRESEN TATIVES OF BOTH THE PARTIES. THE ONLY ISSUE THAT IS TO BE DECIDED IS WHETHER THE DAT E OF ALLOTMENT OF THE FLAT OR THE DATE OF POSSESSION OF THE FLAT BY THE ASSESSEE SHOULD BE CONSIDERED AS THE DATE FOR COMPU TING THE HOLDING PERIOD OF 36 MONTHS. ON PERUSAL OF THE CITED ORDERS OF THE TRIBUNAL (SUPRA), WE FIND THAT AN IDENTICAL ISSUE CAME UP FO R ADJUDICATION BEFORE THE TRIBUNAL IN THE CASE OF MEENA A HEMNANI (SUPRA), ORDER DATED 17TH JANUARY, 2014 WHEREIN ONE OF US (AM) IS A PARTY AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY RELY ING ON VARIOUS DECISIONS OF THE TRIBUNAL AS WELL AS THE JUDGMENT O F THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF C'IT V. ANILABEN UPENDRA SHAH [2003] 262 ITR 6571[2004] 134 TAXMAN 522 (GUJ.). RE LEVANT DISCUSSION IS GIVEN IN PARAS 3 & 4 OF THE SAID ORDE R OF THE TRIBUNAL WHICH READ AS UNDER: '3. THERE ARE COUPLE OF ISSUES RAISED IN THIS APPEA L. REST OF THE GROUNDS RAISED IN THE APPEAL ARE EITHER CONSEQUENTIAL OR GE NERAL IN NATURE. ACCORDINGLY, THEY ARE DISMISSED AS GENERAL OR CONSE QUENTIAL. THE ISSUES, WHICH NEED TO BE ADJUDICATED IN THIS APPEAL ARE (0 IF THE CAPITAL GAINS EARNED BY THE ASSESSEE ARE IN THE NATURE OF THE SHO RT TERM AS HELD BY THE AO OR LONG TERM CAPITAL GAINS AS OFFERED BY THE ASS ESSEE IN THE RETURN. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED T HAT THE ASSESSEE PURCHASED A FLAT VIDE THE ALLOTMENT LETTER DATED 9- 9-2003 FROM THE BUILDER NAMELY PRESTIGE ESTATES PROJECTS PVT. LTD. THERE WA S A CONSTRUCTION AGREEMENT BETWEEN THE PARTIES DATED 1-12-2003 AND T HE REGISTERED DEED OF THE SAME WAS DATED ON 22-9-2006. THE SAID FLAT W AS SOLD BY THE ASSESSEE TO BENNET COLEMAN & COMPANY ON 10-11-2006. THE ASSESSEE EARNED CAPITAL GAINS ON THIS TRANSACTION AND OFFERE D THE SAME AS LONG TERM CAPITAL GAINS RECKONING THE DATE OF ALLOTMENT I.E.. 9-9-2003 FOR THE PURPOSE OF DETERMINING THE HOLDING PERIOD OF THREE YEARS RELEVANT FOR THE LONG TERM CAPITAL GAINS. HOWEVER, IN THE ASSESSMENT PROCEEDINGS, AO ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 13 OF 20 CONSIDERED THE DATE OF REGISTRATION I.E., 22-9-2006 THE DATE OF REGISTRATION AND DETERMINED THE SHORT TERM CAPITAL GAINS. THEREF ORE, NOW THE ISSUE TO BE DECIDED BY THE TRIBUNAL RELATES TO IF THE DATE O F ALLOTMENT SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE SAID LO NG TERM CAPITAL GAINS. IN THIS REGARD, LD COUNSEL FILED VARIOUS DECISIONS TO SUGGEST THAT THE DATE OF ALLOTMENT MUST BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAINS INSTEAD OF DATE OF REGISTRATION. LD COUNSEL FILED THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT V. SMT VA NDANA RANA ROY VIDE [ITA NO. 6173/M/2011 (A Y 2007-2008) DATED 7-11-201 2], WHEREIN ONE OF US (AM) IS A PARTY, AND STATED THAT THE 'DATE OF ALLOTMENT' SHOULD BE RECKONED AS RELEVANT DATE FOR COMPUTING THE HOLDING PERIOD FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. IN THIS REG ARD, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 7 AND 8 OF THE SAID O RDER OF THE TRIBUNAL TO SUPPORT HIS CASE. THE SAID JUDGMENT WAS DECIDED CON SIDERING THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF C IT V. ANILABEN UPENDRA SHAH [2003] 262 ITR 657 (GUJ.) APART FROM O THER DECISIONS OF THE TRIBUNAL IN THE CASE OF JITENDRA MOHAN V. ITO [ 2007] 11 SOT 594 (DELHI) AND ALSO ANOTHER DECISION OF THE ITA T IN T HE CASE OF PRAVIN GUPTA V. ACIT AND THE RELEVANT PROPOSITIONS ARE EXT RACTED IN PARA 7 OF THE TRIBUNAL'S ORDER DATED 7-11-2012. THE SAID PARA S 7 AND 8 FROM THE ORDER OF THE TRIBUNAL IN THE CASE OF SMT VANDANA RA NA ROY READ AS UNDER: '7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE CIT ED DECISIONS AND WE FIND THAT THERE IS NO DISPUTE ON THE FACTS THE ONLY ISSUE THAT IS TO BE DECIDED IS WHETHER DATE OF ALLOTMENT OF THE FLAT OR THE DATE OF POSSESSION OF THE FIAT BY THE ASSESSEE SHOULD BE CONSIDERED AS DATE OF HOLDING FOR COMPUTING THE HOLDING PERIOD OF 36 MOTHS. IN ALTERN ATIVE, THE 'DATE OF REGISTRATION' SHOULD BE THE RELEVANT DATE. ON PERUS AL OF THE SAID DECISIONS RELIED UPON BY THE LD COUNSEL, WE FIND TH AT THE DECISIONS ARE RELEVANT AND APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CONCLUSION OF THE HON'BLE GUJARAT HIGH COURT JUDGEMENT IN THE CASE OF CIT V. JINDAS PANCHAND GANDHI READS AS UNDER: 'ASSESSEE HAVING SOLD THE FIAT ALLOTTED TO HIM BY A CO-OPERATIVE HOUSING SOCIETY AFTER A PERIOD OF 36 MONTHS FROM THE DATE O F ALLOTMENT, CAPITAL GAINS ARISING TO HIM WERE LONG-TERM CAPITAL GAINS D ESPITE THE FACT THAT THE PHYSICAL POSSESSION OF THE FLAT WAS GIVEN TO THE AS SESSEE MUCH LATER AND, THEREFORE HE WAS ENTITLED TO DEDUCTION FROM SUCH GA INS AS PER LAW' 7.1 THE CONCLUSION OF THE HON'BLE GUJARAT HIGH COUR T JUDGMENT IN THE CASE OF CIT V. ANILABEN UPENDRA SHAH READS AS UNDER : 'ASSESSEE HAVING HELD THE SHARES AND ALLOTMENT OF A FLAT IN A CO-OPERATIVE HOUSING SOCIETY FOR A PERIOD OF MORE THAN 36 MOTHS THE CAPITAL GAIN ARISING FROM SALE OF SAID FLAT WAS LONGTERM CAPITAL GAIN AND ASSESSEE WAS ENTITLED TO BENEFIT OF SECTION 80T IRRESPECTIVE OF THE FACT THAT THE ASSESSEE ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 14 OF 20 DID NOT GET POSSESSION OF THE FIAT IN QUESTION AT T HE TIME OF ALLOTMENT AND IT WAS CONSTRUCTED LATER ON.' 7.2 THE CONCLUSION OF HON'BLE ITA T, DELHI BENCH IN THE CASE OF JITENDRA MOHAN V. ITO READS AS UNDER: 'ON THE FACTS OF THE CASE, ASSESSEE HELD THE CAPITA L ASSET (SHED) ALLOTTED TO IT ON INSTALLMENT BASIS FROM 2E DECEMBER, 1994, THE DATE OF PAYMENT OF SECOND INSTALLMENT AND SALE THEREOF ON 1.57 DEC EMBER, 2000, GAVE RISE TO LONG TERM CAPITAL LOSS EVEN THOUGH POSSESSI ON OF SHED WAS HANDED OVER BY DS1DC TO ASSESSEE ON 28M MAY, 1998.' 7.3 THE CONCLUSION OF HON'BLE ITA T, DELHI BENCH IN THE CASE OF PRAVEEN GUPTA V. ACIT READS AS UNDER '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 FIAT HAS T O BE GRANTED TO THE ASSESSEE FROM THE DATE (1995) WHEN HE STARTED MAKIN G PAYMENT TO THE BUILDER AND NOT FROM THE DATE OF EXECUTION OF CONVE YANCE DEED IN 2001.' 8. ALL THE ABOVE DECISIONS ARE UNIFORM IN CONCLUDIN G THAT THE 'DATE OF ALLOTMENT' IS RECKONED AS THE DATE FOR COMPUTING TH E HOLDING PERIOD FOR THE PURPOSE OF CAPITAL GAINS. THE DATE OF ALLOTMENT IN THIS CASE BEING 19- 112001 AND THE DATE OF SALE IS 23-8-2006, THEREFORE , THE HOLDING PERIOD IS MUCH MORE THAN 36 MONTHS. IN THIS CASE, THE GAINS E ARNED BY THE ASSESSEE ON THE SALE OF FLAT HAVE TO BE COMPUTED AS CAPITAL GAINS. WITHOUT PREJUDICE, EVEN IF THE DATE OF POSSESSION, BEING 14 -8-2003, IS CONSIDERED; THE ASSESSEE IS STILL ENTITLED TO THE BENEFITS OF T HE LONG TERM CAPITAL GAINS. THEREFORE, IN OUR OPINION, ORDER OF THE CIT (A) DOE S NOT CALL FOR ANY INTERFERE. ACCORDINGLY, THE GROUNDS RAISED BY THE R EVENUE ARE DISMISSED.' 4. CONSIDERING THE ABOVE SETTLED NATURE OF THIS ISS UE, WE ARE OF THE OPINION THAT THE ASSESSEE MUST SUCCEED ON THIS ISSUE. ACCOR DINGLY, THE RELEVANT GROUNDS OF APPEAL ARE ALLOWED.' 7. FROM THE ABOVE SETTLED POSITION OF THE ISSUE, IT CAN BE SAFELY CONCLUDED THAT THE 'DATE OF ALLOTMENT' SHOULD BE RECKONED AS THE DATE FOR COMPUTING THE HOLDING PERIOD FOR THE PURPOSE OF CAPITAL GAINS . IN THE INSTANT CASE, THE DATE OF ALLOTMENT IS 11-4-2003 (FY 2003-2004) AND T HE DATE OF SALE OF THE PROPERTY IS 14-10-2007, THEREFORE THE HOLDING PERIO D IS MORE THAN 36 MONTHS. THEREFORE, THE CAPITAL GAINS EARNED BY THE ASSESSEE ON THE SALE OF THE FLAT HAVE TO BE TREATED AS 'LONG TERM CAPITAL G AINS'. THE ASSESSEE PAID THE FIRST INSTALLMENT ON 11-4-2003, THEREBY CONFERR ING A RIGHT TO HOLD A FLAT, WHICH WAS LATER IDENTIFIED AND POSSESSION DELIVERED ON LATER DATE. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MRS. MADHU KAUL V. CIT VIDE INCOME-TAX [APPEAL NO. 89 OF 1999, DATE D 17TH JANUARY, 2014] HELD THAT THE MERE FACT THAT POSSESSION WAS DELIVER ED LATER, DOES NOT DETRAT FROM THE FACT THAT THE ALLOTTEE WAS CONFERRED A RIG HT TO HOLD PROPERTY ON ISSUANCE OF AN ALLOTMENT LETTER. THUS, THE ID DR'S ARGUMENTS ON NON- ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 15 OF 20 EXISTENCE OF THE FLAT AT THE TIME OF ISSUING OF ALL OTMENT LETTER STANDS ANSWERED BY THE SAID JUDGMENT OF THE HON'BLE HIGH C OURT OF PUNJAB & HARYANA (SUPRA). THE SAME VIEW WAS SUPPORTED BY VAR IOUS DECISIONS OF THE TRIBUNAL AS WELL AS THE JUDGMENTS OF THE HON'BL E GUJARAT HIGH COURT AND THE RELEVANT CONCLUSIONS WERE ALREADY EXTRACTED IN THE ABOVE PARAGRAPHS OF THIS ORDER. REGARDING THE JUDGMENTS O F THE HON'BLE JURISDICTIONAL HIGH COURT RELIED ON BY THE LD DR AR E DISTINGUISHABLE ON FACTS. THEREFORE, CONSIDERING THE ABOVE SETTLED NAT URE OF THE ISSUE AS WELL AS THE FOLLOWING THE PRINCIPLE OF CONSISTENCY, WE A RE OF THE CONSIDERED OPINION THAT THE GROUND NO. I RAISED BY THE ASSESSEE SHOULD BE ALLOWED. ACCORDINGLY, GROUND NO. 1 IS ALLOWED. 11. SAME VIEW WAS TAKEN BY COORDINATE BENCH IN THE CASE OF BHATKAL RAMARAO PRAKASH V. ITO [2019] 102 TAXMANN.COM 145/175 1TD 144 (BANG, - TRIB.). BEING SO IN OUR OPINION, IN THIS CASE FOR COMPUTING THE INFLATION COST OF THE ASSET, THE DATE TO BE RECKONED FROM THE DATE OF ALL OTMENT OF THE PROPERTY TO THE ASSESSEE AND NOT THE DATE ON WHICH POSSESSION CERTI FICATE ISSUED TO THE ASSESSEE. FURTHER, A JUDGEMENT RELIED BY CPT IN THE CASE OF BALBIR SINGH MAINI (SC) (SUPRA) HAVE NO APPLICATION AND IT WAS DELIVERED ON DIFFERENT CONTEXT WITH REFERENCE TO SECTION 2(47)(V) OF THE ACT AND THE JU DGEMENT OF HON'BLE HIGH COURT RELIED BY THE ASSESSEE'S COUNSEL IN THE CASE OF A. SURESH RAO CITED (SUPRA) IS A DIRECT JUDGEMENT APPLICABLE TO THE FACTS OF TH E CASE. BEING SO, WE HAVE NO HESITATION IN REVERSING THE FINDING OF THE LD. CIT( A) ON THIS ISSUE AND DIRECT THE A.O. TO CONSIDER THE DATE OF ALLOTMENT OF PROPERTY I.E. 20-5-1986 FOR THE PURPOSE OF DETERMINING THE COST OF INFLATION OF THE ASSETS, WHILE COMPUTING THE COST OF ACQUISITION OF PROPERTY IN TERMS OF SECTION 49 OF T HE ACT. THIS GROUND OF THE ASSESSEE IS ALLOWED. 6. FURTHER, IN THE CASE OF SRI BHATKAL RAMA RAO PRA KASH IN ITA NO.2692/BANG/2018, THE TRIBUNAL VIDE ORDER DATED 04 .01.2019 HELD AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE DISPU TE BETWEEN THE ASSESSEE AND THE REVENUE IS AS TO WHETHER THE GAIN ON SALE OF THE RR PROPERTY WHICH WAS OBTAINED ORIGINALLY ON 22.03.2001 ON LEAS E FROM THE SOCIETY WHICH WAS SUBSEQUENTLY CONVEYED ABSOLUTELY BY THE SOCIETY TO THE ASSESSEE BY A REGISTERED SALE DEED DATED 31.08.2014 CAN BE SAID T O BE A LTCG. 9. SEC.2(29B) OF THE ACT DEFINES LONG TERM CAPITAL GAIN AS FOLLOWS:- 'LONG-TERM CAPITAL GAIN' MEANS CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET; SEC.2(29A) OF THE ACT DEFINES LONG TERM CAPITAL AS SET AS FOLLOWS:- ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 16 OF 20 'LONG-TERM CAPITAL ASSET' MEANS A CAPITAL ASSET WHI CH IS NOT A SHORT-TERM CAPITAL ASSET ; SEC.2(42A) OF THE ACT DEFINES SHORT TERM CAPITAL AS SET AS FOLLOWS:- (42A) 'SHORT-TERM CAPITAL ASSET' MEANS A CAPITAL A SSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY-SIX MONTHS IMMEDIATELY PRE CEDING THE DATE OF ITS TRANSFER : .. SEC.2(42B) OF THE ACT DEFINES SHORT TERM CAPITAL GA IN AS FOLLOWS:- (42B) 'SHORT-TERM CAPITAL GAIN' MEANS CAPITAL GAIN ARISING FROM THE TRANSFER OF A SHORT-TERM CAPITAL ASSET; 10. WE HAVE TO LOOK AT THE DEFINITION OF THE TERM SHORT TERM CAPITAL GAIN BECAUSE WHAT IS NOT SHORT TERM CAPITAL GAIN IS LONG TERM CAPITAL GAIN AND THAT IS THE WAY LONG TERM CAPITAL GAIN HAS BEEN DEFINED IN THE ACT. SHORT TERM CAPITAL GAIN MEANS CAPITAL GAIN ARISING FROM THE TR ANSFER OF A SHORT TERM CAPITAL ASSET. SHORT TERM CAPITAL ASSET HAS BEEN QU ITE EXHAUSTIVELY DEFINED, COVERING SEVERAL SITUATIONS. FOR THE PRESENT APPEAL THE PORTION OF THE DEFINITION WHICH SAYS SHORT TERM CAPITAL ASSET MEAN S A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY-SIX MONTHS IMM EDIATELY PRECEDING THE DATE OF ITS TRANSFER ALONE IS RELEVANT. 11. IT IS NOT IN DISPUTE THAT THE ASSESSEE PAID COS T OF THE SITE AS EARLY AS 22.3.2001 AND WAS IN POSSESSION OF THE PROPERTY AS LESSEE CUM AGREEMENT HOLDER WITH RIGHT TO OBTAIN CONVEYANCE OF ABSOLUTE INTEREST OVER THE LAND THAT WAS LEASED. THE EXPRESSION HELD BY THE ASSESSEE I N THE CONTEXT OF SEC.2(42A) OF THE ACT, IS RATHER AMBIGUOUS, IN THE SENSE THAT IT DOES NOT SPEAK OF THE DATE OF VESTING OF LEGAL TITLE TO THE PROPER TY. EVEN THE PROVISIONS OF SEC.2(47)(V) & (VI) OF THE ACT WHICH DEFINES WHAT I S TRANSFER FOR THE PURPOSE OF THE ACT, CONSIDERS POSSESSORY RIGHTS AS AKIN TO LEGAL TITLE. IT IS THEREFORE NECESSARY TO LOOK INTO THE POLICY AND OBJECT OF THE PROVISIONS GIVING EXEMPTION FROM LEVY OF TAX ON CAPITAL GAIN. IN THE PRESENT CA SE, AS WE HAVE ALREADY SEEN, THE ASSESSEE HAD PAID THE ENTIRE CONSIDERATION FOR THE SITE ORIGINALLY ALLOTTED AS EARLY AS IN THE YEAR 2001. THE ASSESSEE HAD PERF ORMED ITS PART OF THE CONTRACT WITH THE SOCIETY. THEREFORE THE CLAIM OF T HE ASSESSEE THAT IT HELD THE PROPERTY FROM 22.3.2001 HAS TO BE ACCEPTED, ITA NO. 2692/BANG/2018 PAGE 5 OF 17 KEEPING IN MIND THE POLICY AND OBJECT OF TH E PROVISIONS GIVING EXEMPTION FROM LEVY OF TAX ON CAPITAL GAIN. 12. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. DR.SHAKUNTALA ITA NO.117 OF 2006 JUDGMENT DATED 19.9.2007 HAD TO DEAL WITH A CASE WHERE THE ASSESSEE GOT A SITE ALLOTTED IN HER FAVOUR BY T HE BANGALORE DEVELOPMENT AUTHORITY (BDA) UNDER A LEASE-CUM-SALE AGREEMENT DA TED 28.2.1981 AND WAS PUT IN POSSESSION OF THE SITE ALLOTTED. SHE GOT ABS OLUTE SALE DEED FROM BDA ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 17 OF 20 ONLY ON 19.9.1996. SHE SOLD THE PROPERTY ON 25.3.19 97. THE QUESTION BEFORE THE HONBLE KARNATAKA HIGH COURT WAS AS TO WHETHER THE CAPITAL GAIN CAN BE REGARDED AS LTCG OR STCG. THE CASE OF THE REVENUE W AS THAT THE PERIOD OF HOLDING HAD TO BE RECKONED FROM 19.9.1996 AND THE C APITAL GAIN HAD TO BE REGARDED AS STCG. THE PLEA OF THE ASSESSEE WAS THAT THE HOLDING PERIOD HAD TO BE RECKONED FROM 18.2.1981 THE DATE ON WHICH THE ASSESSEE GOT POSSESSION OF THE PROPERTY UNDER LEASE-CUM-SALE AGREEMENT WAS ACCEPTED BY THE HONBLE KARNATAKA HIGH COURT. SIMILAR DECISIONS WERE RENDER ED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SMT.RAMA RANI K ALIA 358 ITR 499 (ALL) & AMAR NATH AGARWAL 371 ITR 183 (ALL). 12. WE ALSO FIND SUPPORT FOR THE AFORESAID CONCLUSIONS FROM ANOTHER DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS A SURESH RAO 223 TAXMANN 228 (KAR) WHEREIN SIMILAR IS SUE WAS CONSIDERED AND WHEREIN THE SIGNIFICANCE OF THE EXPRESSION HEL D USED BY THE LEGISLATURE HAS BEEN ANALYSED AND EXPLAINED AT LENG TH. HONBLE HIGH COURT ANALYSED VARIOUS PROVISIONS OF THE ACT PERTAI NING TO COMPUTATION OF CAPITAL GAIN UNDER VARIOUS SITUATIONS AND ALSO CIRC ULARS ISSUED BY THE CBDT ON THIS ISSUE. RELEVANT PORTION OF THE OBSERVA TION WHEREIN THE ISSUE BEFORE US HAS BEEN PROPERLY ANALYSED IS REPRODUCED HEREUNDER:- THE DEFINITION AS CONTAINED IN SECTION 2 (42A) OF THE ACT, THOUGH USES THE WORDS, A CAPITAL ASSET HELD AN ASSESSEE FOR NOT MO RE THAN THIRTY-SIX MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSF ER, FOR THE PURPOSE OF HOLDING AN ASSET, IT IS NOT NECESSARY THAT, HE SHOU LD BE THE OWNER OF THE ASSET, WITH A REGISTERED DEED OF CONVEYANCE CONFERR ING TITLE ON HIM. IN THE LIGHT OF THE EXPANDED DEFINITION AS CONTAINED IN SE CTION 2(47), EVEN WHEN A SALE, EXCHANGE, OR RELINQUISHMENT OR EXTINGUISHME NT 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 CO- OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MA NNER WHATSOEVER, WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING T HE ENJOYMENT OF ANY IMMOVABLE PROPERTY, ALSO CONSTITUTES TRANSFER AND T HE ASSESSEE IS SAID TO HOLD THE SAID PROPERTY FOR THE PURPOSE OF THE DEFIN ITION OF SHORT-TERM CAPITAL GAIN. IN FACT, THE CIRCULAR NO.495 MAKES I T CLEAR THAT TRANSACTIONS OF THE NATURE REFERRED TO ABOVE ARE NOT REQUIRED TO BE REGISTERED UNDER THE REGISTRATION ACT, 1908. SUCH ARRANGEMENTS CONFER TH E PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE IN THE BUILDING AND ARE COMMON MODE OF ACQUIRING FLATS PARTICULARLY IN MULTISTORIED CON STRUCTIONS IN BIG CITIES. THE AFORESAID NEW SUB-CLAUSES (V) AND (VI) HAVE BEE N INSERTED IN SECTION 2(47) TO PREVENT AVOIDANCE OF CAPITAL GAINS LIABILI TY 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 ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 18 OF 20 MAKING CONSTRUCTION THOUGH THE LEGAL OWNERSHIP IN S UCH CASES CONTINUES TO BE WITH THE TRANSFEROR. THE INTENTION OF LEGISLA TURE IS TO TREAT EVEN SUCH TRANSACTIONS AS TRANSFERS AND THE CAPITAL GAIN ARIS ING OUT OF SUCH TRANSACTIONS ARE BROUGHT TO TAX. FURTHER, THE CIRCU LAR NO.4 71 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 ALLOTM ENT LETTER AND THE PAYMENT OF INSTALLMENTS IS ONLY A FOLLOW UP ACTION AND TAKI NG THE DELIVERY OF POSSESSION IS ONLY A FORMALITY. IN CASE OF CONSTRUC TION AGREEMENTS, THE TENTATIVE COST OF CONSTRUCTION IS ALREADY DETERMINE D AND THE AGREEMENT PROVIDES FOR PAYMENT OF COST OF CONSTRUCTION IN INS TALLMENTS SUBJECT TO THE ITA NO. 2692/BANG/2018 PAGE 7 OF 17 CONDITION THAT THE ALLOTTEE HAS TO BEAR THE INCREASE, IF ANY, IN THE COST OF CONSTRUCT ION. THEREFORE, FOR THE PURPOSE OF CAPITAL GAINS TAX THE COST OF THE NEW AS SET IS THE TENTATIVE COST OF CONSTRUCTION AND THE FACT THAT THE AMOUNT WAS AL LOWED TO BE PAID IN INSTALLMENTS DOES NOT AFFECT THE LEGAL POSITION. TH EREFORE, IN CONSTRUING SUCH TAXATION PROVISIONS, WHAT SHOULD BE THE APPROA CH OF THE COURTS AND THE INTERPRETATION TO BE PLACED IS CLEARLY SET OUT BY THE APEX COURT IN THE CASE OF SMT. SAROJ AGGARWAL VS CIT 156 ITR 497 WHER EIN IT IS HELD AS UNDER:- FACTS SHOULD BE VIEWED IN NATURAL PERSPECTIVE, HAV ING REGARD TO THE COMPULSION OF THE CIRCUMSTANCES OF A CASE. WHER E IT IS POSSIBLE TO DRAW TWO INFERENCES FROM THE FACTS AND WHERE THE RE IS NO EVIDENCE OF ANY DISHONEST OR IMPROPER MOTIVE ON THE PART OF THE ASSESSEE, IT WOULD BE JUST AND EQUITABLE TO DRAW SU CH INFERENCE IN SUCH A MANNER THAT WOULD LEAD TO EQUITY AND JUSTICE . TOO HYPERTECHNICAL OR LEGALISTIC APPROACH SHOULD BE AVO IDED IN LOOKING AT A PROVISION WHICH MUST BE EQUITABLY INTERPRETED AND JUSTLY ADMINISTERED COURTS SHOULD, WHENEVER POSSIBLE UNLES S PREVENTED BY THE EXPRESS LANGUAGE BY ANY SECTION OR COMPELLIN G CIRCUMSTANCES OF ANY PARTICULAR CASE, MAKE A BENEVO LENT AND JUSTICE ORIENTED INFERENCE. FACTS MUST BE VIEWED IN THE SOCIAL MILIEU OF A COUNTRY. THEREFORE, KEEPING THE AFORESAID PRINCIPLES IN MIND , WHEN WE LOOK AT SECTION 48, THE LANGUAGE EMPLOYED IS UNAMBIGUOUS. T HE INTENTION IS VERY CLEAR. WHEN A CAPITAL ASSET IS TRANSFERRED, IN ORDE R TO DETERMINE THE CAPITAL GAIN FROM SUCH TRANSFER, WHAT IS TO BE SEEN IS, OUT OF FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING, THE COST OF ACQUISITION OF THE ASSET, THE COST OF IMPROVEMENT AND ANY EXPENDITURE WHOLLY OR EXCLUSIVELY INCURRED IN CONNECTION WITH SUCH TRANSFER IS TO BE DEDUCTED. WHAT REMAINS THEREAFTER IS THE CAPITAL GAIN. IT IS NOT NECESSARY THAT AFTER PAYMENT OF COST OF ACQUISITION, A TITLE DEED IS TO BE EXECUTED IN F AVOUR OF THE ASSESSEE. EVEN IN THE ABSENCE OF A TITLE DEED, THE ASSESSEE HOLDS THAT PROPERTY AND THEREFORE, IT IS THE POINT OF TIME AT WHICH HE HOLD S THE PROPERTY, WHICH IS TO BE TAKEN INTO CONSIDERATION IN DETERMINING THE P ERIOD BETWEEN THE DATE ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 19 OF 20 OF ACQUISITION AND DATE OF TRANSFER OF SUCH CAPITAL GAIN IN ORDER TO DECIDE WHETHER IT IS A SHORT-TERM CAPITAL GAIN OR A LONG-T ERM CAPITAL GAIN. IN THE LIGHT OF THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT THE CAPITAL GAIN IN QUESTION IN THE PRESENT CASE HAS TO BE TREA TED AS LTCG AS CLAIMED BY THE ASSESSEE. GROUND NOS.3 TO 5 ARE ACCORDINGLY ALLOWED. 7. IN THE PRESENT CASE, TOTAL CONSIDERATION WAS RS. 22,53,255/- OUT OF THIS, THE ASSESSEE PAID THIS AMOUNT AS FOLLO WS: YEAR_ AMOUNT PAID INDEXED COST INDEXED AMOUNT 50% SHARE 1995 - 96 16,75,900/- 281 32,86,195/- 2006 - 07 3,64,106/- 519 3,86,556/- 2007 - 08 2,13,249/- 551 2,13,249/- TOTAL COST OF ACQUISITION 22,53,255/- 38,86,000/- 19,43,000/- CONSIDERATION RECEIVED FROM SALE OF PROPERTY 32,00,000/- 32,00,000/- 6,00,000/- NET GAIN / LOSS 9,46,745/ - (6,86,000) (3,43,000) 8. BEING SO, ASSESSEE PAID A SUBSTANTIAL AMOUNT OF RS.16,75,900/- BEFORE THE YEAR 1996 AND AS SUCH, TH E YEAR OF ACQUISITION TO BE 1996. ACCORDINGLY, I DIRECT THE A.O. TO CONSIDER THE YEAR OF ACQUISITION OF FLAT AS 1996 AND THEREAFTER COMPUTE THE COST OF ACQUISITION FROM THIS YEAR 1996 AS LONG TERM CAPITA L GAIN ONLY. THIS GROUND OF APPEAL IS ALLOWED. 9. WITH REGARD TO PAYMENT OF COMMISSION, IN MY OPIN ION, 2% COMMISSION ON SALE CONSIDERATION OF RS.16 LAKHS WORKED OUT TO RS.32,000/- IS VERY HIGH. I AM INCLINED TO GRAN T PAYMENT OF ITA NO.1686/BANG/2019 SMT. MALALI VENUGOPALA UMADEVI, BENGALURU PAGE 20 OF 20 COMMISSION OF 1% ON RS.16 LAKHS WHICH WORKED OUT AT RS.16,000/- AND THE SAME TO BE DEDUCTED FROM THE SA LE CONSIDERATION. THE ASSESSEE WOULD GET A BENEFIT OF RS.16,000/- OUT OF RS.4,95,755/- CLAIMED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH APR, 2021 SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER BANGALORE, DATED 8 TH APR, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE