Shiv Kumar Jatia, New Delhi V. ITO, Ward- 10(2), New Delhi

ITA 241/DEL/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5774 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 14-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: C S AGGARWAL
• Keywords: Capital asset; Earning of tax free income; Fair market value; Capital Gains; CHAPTER IV
• Section: 2(14); 14A; 115JB; 201; 43; 13; 22; 54; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 7256/DEL/2019 : ASSTT. YEAR : 2011-12 ITA NO. 241/DEL/2019 : ASSTT. YEAR : 2013-14 SH. SHIV KUMAR JATIA, B-50, GULMOHAR PARK, NEW DELHI-110049 VS INCOME TAX OFFICER, WARD-10(2), NEW DELHI-110002 (APPELLANT) (RESPONDENT) PAN NO. AABPJ7582K ASSESSEE BY : SH. C. S. AGGARWAL, SR. ADV. REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEAR ING: 10 . 0 3 .20 2 1 DATE OF PRONOUNCEMENT: 26 .04 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF THE LD. CIT(A)-4, NEW DELHI DA TED 01.08.2019 FOR THE A.Y. 2011-12 AND THE ORDER OF TH E LD. CIT (A)-60, MUMBAI DATED 30.11.2018 FOR THE A.Y. 2013-1 4. 2. THE RELEVANT PART OF THE ASSESSMENT ORDER REQUIR ED FOR ADJUDICATION OF THE ISSUE IS AS UNDER: IT IS NOTICED THAT THE TRANSACTIONS OF SALE OF SHA RES WERE SUBJECT TO SECURITIES TRANSACTION TAX (STT). LONG-TERM CAPITAL GAIN ON TRANSACTION OF SALE OF SHARES, WHERE THE TRANSACTIONS HAVE SUFFERED STT, I S EXEMPT FROM TAX U/S 10(38) OF THE ACT. UNDER THE SCHEME OF THE INCOME TAX ACT, WHERE INCOME FROM A PARTICULAR SOURCE IS EXEMPT FROM TAX (I.E. INCOMES ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 2 EXEMPT UNDER SECTION 10), THE GAIN OR LOSS FROM TRANSACTIONS SUCH SOURCE DES NOT ENTER INTO THE COMPUTATION OF INCOME AS THE SAME GETS EXCLUDED AT THE THRESHOLD ITSELF. THEREFORE, LOSS FROM SUCH SOU RCE IS NOT AVAILABLE FOR SET OFF OR FOR CARRY FORWARD F OR SET- OFF AGAINST INCOME CHARGEABLE TO TAX. THEREFORE, WH ILE THE COMPUTATION OF LONG TERM CAPITAL GAIN/LOSS ON THE SALE OFF THE SAID SHARES IS ACCEPTED AS CORRECT , THE AFORESAID NET LONG TERM CAPITAL LOSS (RS.4,45,74,513/-) SHALL NOT BE CARRIED FORWARD FOR SET-OFF AGAINST LONG TERM CAPITAL GAIN, IF ANY, IN THE SUCCEEDING YEARS. 3. THE LD. CIT (A) SUPPORTED THE ACTION OF THE ASSE SSING OFFICER RELYING ON THE FAQ DATED 04.02.2018 ISSUED BY CBDT. THE QUESTION 23 OF THE SAID INSTRUCTIONS IS AS UNDE R: Q23. WHAT WILL BE THE TREATMENT OF LONG-TERM CAPIT AL LOSS ARISING FROM TRANSFER MADE BETWEEN 1 ST FEBRUARY, 2018 AND 31 ST MARCH, 2018? ANS.23. AS THE EXEMPTION FROM LONG-TERM CAPITAL GAI NS UNDER CLAUSE (38) OF SECTION 10 WILL BE AVAILABLE F OR TRANSFER MADE BETWEEN 1 ST FEBRUARY, 2018 AND 31 ST MARCH, 2018, THE LONG-TERM CAPITAL LOSS ARISING DUR ING THIS PERIOD WILL NOT BE ALLOWED TO BE SET-OFF OR CA RRIED FORWARD. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE US. 5. THE LD. AR MAINLY ARGUED REFERRING TO THE PROVIS IONS OF THE ACT VIZ. SECTION 10(38), SECTION 71 AND SECTION 74 . 6. THE LD. DR ARGUED ON THE ISSUE OF WHAT CONSTITUT ES INCOME AS PER SECTION 2(24), PROVISIONS OF SECTION 10(38) WHICH DEALS WITH INCOMES NOT INCLUDED IN TOTAL INCOME AND ARG UED THAT WHEN X INCOME DERIVED FROM SOURCE Y IS NOT TAXA BLE, THE LOSS INCURRED UNDER THE SIMILAR TRANSACTIONS OF Y IS NOT ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 3 ALLOWABLE. THE ARGUMENTS OF THE LD. SR. DR ARE SUM MARIZED AS UNDER: 1. THE MAIN ISSUE IN THIS APPEAL IS WHETHER LOSS F ROM SALE OF LONG TERM CAPITAL SHARE ON WHICH SECURITY TRANSACTI ON TAX HAS BEEN PAID SHOULD BE ALLOWED TO BE CARRIED FORWARD F OR SET OFF EVEN THOUGH THE INCOME FROM SUCH TRANSFER OF LONG T ERM CAPITAL ASSET IS EXEMPT U/S 10(38). IN THIS CONTEXT THE ATT ENTION OF THE HONBLE BENCH IS DRAWN TO THE SCHEME OF COMPUTATION OF INCOME AND ENVISAGED UNDER THE I.T. ACT, 1961. 2. UNDER THE SCHEME OF THE INCOME TAX ACT, 1961, AL L THE RECEIPT BY ASSESSEE ARE TO BE FIRST CONSIDERED FROM THE ANGLE OF WHETHER THEY CARRY AN OBLIGATION TO BE RETURNED TO THE PAYER OR NOT. IF THEY ENTAIL THE OBLIGATION TO BE RETURNED, GENUINE RECEIPT FROM EXPLAINED SOURCES DOES NOT PARTAKE THE NATURE OF INCOME AND IS NORMALLY NOT TAXABLE AS SUCH. IF IT HAS NO O BLIGATION TO BE RETURNED, THE RECEIPTS ARE NORMALLY TO BE CONSIDERE D AS INCOME. IN THIS BACKGROUND, KIND ATTENTION OF THE BENCH IS DRAWN TO SECTION 2(24) OF THE INCOME TAX ACT, 1961 WHICH DEF INES INCOME FOR THE PURPOSES OF THE ACT. THE WORD' INCOM E' IS OF THE WIDEST AMPLITUDE AND IT MUST BE GIVEN ITS NATURAL A ND GRAMMATICAL MEANING. IT MAY BE APPRECIATED THAT DEF INITION OF THE INCOME AS ENVISAGED IN SECTION 2(24) IS AN INCL USIVE DEFINITION. THE PURPOSE OF THE DEFINITION IS NOT TO LIMIT THE MEANING OF INCOME' BUT TO WIDEN ITS NET AND THE SEV ERAL CLAUSES THEREIN ARE NOT EXHAUSTIVE OF THE MEANING OF INCOME . HONBLE SUPREME COURT HAS LAID DOWN THE WORD INCOME IS OF WIDEST AMPLITUDE AND MUST BE GIVEN ITS NATURAL GRAMMATICAL MEANING. THUS EVEN IF A RECEIPT DOES NOT FALL WITHIN THE SP ECIFIC AMBIT OF ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 4 SECTION 2(24), IT MAY STILL BE INCOME IF IT PARTAKE S THE NATURE OF INCOME. KIND ATTENTION IS DRAWN TO CIT VS G.R. KART HIKEYAN (SC) 201 ITR 866 IN THIS REGARD, IN THE CASE OF THE ASSE SSEE THE RECEIPT FROM SALE OF LONG TERM ASSET CLEARLY IS INC OME IN THE HAND OF THE ASSESSEE IN TERM OF SECTION 2(24) READ WITH THE DEFINITION OF TRANSFER AS DEFINED U/S 2(47) OF THE I.T. ACT. 1961. 3. THE RECEIPT THEN HAS TO BE CONSIDERED FROM THE V IEW OF SPECIFIC PROVISION OF EXEMPTION UNDER CHAPTER III O F THE INCOME TAX ACT, 1961. THE PRIVY COUNCIL IN ITS LANDMARK JU DGMENT IN GOPAL SARAN NARAIN SINGH VS CIT (1935) 3 ITR 237 PC ] LAID DOWN THAT ANYTHING THAT CAN BE PROPERLY DESCRIBED AS INCOME IS TAXABLE UNDER THE ACT UNLESS EXPRESSLY EXEMPTED. C HAPTER III EXPLICITLY PROVIDES FOR THE INCOME WHICH DOES NOT F ORM PART OF TOTAL INCOME. IF THE RECEIPT IS COVERED BY THE PROV ISIONS OF CHAPTER III, PARTICULARLY SECTION 10, THEN EVEN IF THE RECEIPT IS IN NATURE OF THE INCOME IT CANNOT BE ASSESSED AS IN COME. ONLY THE RECEIPTS WHICH HAVE PASSED THE ABOVE TESTS ARE TO BE ASSESSED AS INCOME OF AN ASSESSEE AS PER THE PROVIS IONS OF CHAPTER IV FOR COMPUTING THE TOTAL INCOME OF AN ASS ESSEE. THE QUESTION OF SETTING OF LOSSES OR CARRY FORWARD OF L OSSES PROVIDED FOR UNDER CHAPTER VI OF THE I.T. ACT, 1961 WILL ARI SE ONLY WHEN THE COMPUTATION OF INCOME IS SO DONE. 4. NOW KIND ATTENTION IS DRAWN TO 10(38) OF THE I.T . ACT, 1961 FOR THE PURPOSE OF ANALYZING WHETHER THE RECEIPT WO ULD FORM THE PART OF TOTAL INCOME OF ASSESSEE OR NOT, IT IS REPR ODUCED AS UNDER: ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 5 10 (38) ANY INCOME ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY O R A UNIT OF AN EQUITY ORIENTED FUND WHERE (A) THE TRANSACTION OF SALE OF SUCH EQUITY SHARE OR UNIT IS ENTERED INTO ON OR AFTER THE DATE ON WHICH CHAPTER VII OF THE FINANCE (NO. 2) ACT, 2004 COMES INTO FORCE; AND (B) SUCH TRANSACTION IS CHARGEABLE TO SECURITIES TR ANSACTION TAX UNDER THAT CHAPTER: [PROVIDED THAT THE INCOME BY WAY OF LONG-TERM CAPIT AL GAIN OF A COMPANY SHALL BE TAKEN INTO ACCOUNT IN COMPUTING THE BOOK PROFIT AND INCOME-TAX PAYABLE UNDER SECTION 115JB.] EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'EQU ITY ORIENTED FUND' MEANS A FUND (I) WHERE THE INVESTIBLE FUNDS ARE INVESTED BY WAY OF EQUITY SHARES IN DOMESTIC COMPANIES TO THE EXTENT OF MORE THAN [SIXTY-FIVE] PER CENT OF THE TOTAL PROCEEDS OF SUCH FUND; AND (II) WHICH HAS BEEN SET UP UNDER A SCHEME OF A MUTU AL FUND SPECIFIED UNDER CLAUSE (23D): PROVIDED THAT THE PERCENTAGE OF EQUITY SHAREHOLDING OF THE FUND SHALL BE COMPUTED WITH REFERENCE TO THE ANNUAL AVERAGE OF THE MONTHLY AVERAGES OF THE OPENING AND CLOSING FIGURES. 5. THUS IT MAY BE APPRECIATED THAT WHAT IS ENVISAGE D TO BE EXEMPT U/S 10(38) IS NOT GAIN FROM SALE OF LONG TER M ASSET BUT INCOME FROM TRANSFER OF LONG TERM ASSET, THE NATU RE OF THE ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 6 ASSET BEING EQUITY SHARE IN A COMPANY OR A UNIT OF EQUITY ORIENTED FUND. IT IS IMPORTANT TO APPRECIATE THE FI NE DIFFERENCE BETWEEN INCOME AND GAIN. ANY RECEIPT IN THE NAT URE OF INCOME IS ENVISAGED AS THE INCOME UNDER THE SCHEME OF THE ACT. GAIN ESSENTIALLY MEANS THE SURPLUS OF INCOME OVER T HE DEDUCTION ALLOWABLE WHILE COMPUTING THE GAIN OR PROFIT UNDER CHAPTER IV OF THE INCOME TAX ACT, 1961. THUS IF ANY RECEIPT DOES NOT PASS OR CLEAR THE TEST OF EXEMPTION, THE ACT DOES NOT PROVI DE FOR ANY COMPUTATION OR DEDUCTION FOR COMPUTATION OF THE GAI N OR PROFIT ARISING FROM SUCH INCOME UNLESS SPECIFICALLY PROVID ED BY THE RELEVANT SECTION EXEMPTING SUCH INCOME FROM TAX. LO SS ESSENTIALLY IS TO EXCESS OF ALLOWABLE DEDUCTION OVE R THE RECEIPT IN THE NATURE OF INCOME. THUS IF THE RECEIPT ITSELF IS EXEMPT, THE QUESTION OF CONSIDERING THE EXPENSES INCURRED FOR E ARNING THAT RECEIPT/ INCOME DOES NOT ARISE UNLESS SPECIFICALLY PROVIDED FOR IN THE PROVISIONS WHICH EXEMPT OR EXCLUDE SUCH INCOME FROM PART OF TOTAL INCOME FOR THE ASSESSEE. THUS IN THE CASE OF THE ASSESSEE IF THE INCOME FROM THE TRANSFER OF LONG TE RM ASSET BEING EQUITY SHARE IS EXEMPT UNDER SECTION 10(38) T HEN THERE IS NO MANDATE TO COMPUTE TO LONG TERM CAPITAL GAIN OR LOSS FOR THE PURPOSES OF SECTION 10(38). IN CASE THE INTERPRETAT ION THAT IT IS THE CAPITAL GAIN WHICH IS EXEMPT U/S 10(38) IS TAKE N, THEN SUCH INTERPRETATION WOULD BE NOT IN HARMONY WITH SCHEME OF ACT FOR COMPUTATION OF INCOME OF ASSESSEE. NEEDLESS TO SAY SUCH AN INTERPRETATION WOULD ALSO UNSETTLED THE TRITE LEGAL POSITION WHEREBY LOSSES FROM AGRICULTURAL ACTIVITIES AND EAR NING DIVIDEND WILL ALSO BE CLAIMED FOR SETOFF. TO SUMMARIZE THE H ONBLE BENCH MAY KINDLY APPRECIATE THAT THE ALLOWABILITY OF DEDU CTION FOR INCOME EXEMPT UNDER SECTION 10(38) CANNOT BE DONE S ELECTIVELY ONLY WHEN THE EXPENSES EXCEED THE INCOME. THUS IT D OES NOT ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 7 MATTER WHETHER AN ASSESSEE HAD GAIN OR LOSS FROM TR ANSFER OF LONG TERM CAPITAL ASSET BEING EQUITY SHARE IN A COM PANY WHERE SUCH TRANSACTION IS CHARGEABLE TO STT, SINCE THE EN TIRE RECEIPT FROM SUCH TRANSFER IS EXEMPT UNDER SECTION 10(38). KIND ATTENTION IS ALSO DRAWN TO SECTION 14A OF THE ACT, WHICH PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL I NCOME UNDER CHAPTER IV, NO DEDUCTION SHALL BE ALLOWED IN RESPEC T OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FOR PART OF TOTAL INCOME UNDER THIS ACT. 6. THUS, IF THE CONTENTION OF THE ASSESSEE IS AGREE D TO, IT WILL AMOUNT TO RENDERING THE PROVISIONS OF SECTION 14A I NFRUCTUOUS, SINCE EXPENDITURE INCURRED BY ASSESSEE IN RELATION TO INCOME NOT FORMING PART OF HIS TOTAL INCOME WILL STAND TO BE A LLOWED AGAINST TAXABLE INCOME OF THE ASSESSEE. FURTHER, THE JUDICI AL PRECEDENCE SO SET, WILL ALSO PAVE WAY FOR CLAIMING THE EXPENDI TURE AGAINST OTHER EXEMPT INCOME TO BE CLAIMED AGAINST TAXABLE I NCOME AND WILL MAKE THE SECTION 14A COMPLETELY INFRUCTUOUS. S UCH INTERPRETATION IS CLEARLY NOT IN LINE WITH THE ESTA BLISHED PROCEDURE OF HARMONIOUS INTERPRETATION AS LAID DOWN BY THE HONBLE SC IN THE LANDMARK CASES OF: 1) SRI SANKARI PRASAD SINGH DEO VS UNION OF INDIA [ 1951 AIR 458, 1952 SCR 89] WHEREIN THE HONOURABLE SUPREME CO URT ENUNCIATED THE DOCTRINE OF HARMONIOUS CONSTRUCTION. 2) CIT VS HINDUSTAN BULK CARRIERS IN CASE NO. APPEA L (CIVIL) 7966-67 OF 1996 WHEREIN THE HONOURABLE SUPREME COUR T AS HELD AS FOLLOWS: ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 8 'A CONSTRUCTION WHICH REDUCES THE STATUTE TO A FUTI LITY HAS TO BE AVOIDED. A STATUTE OR ANY ENACTING PROVISION THEREI N MUST BE SO CONSTRUED AS TO MAKE IT EFFECTIVE AND OPERATIVE ON THE PRINCIPLE EXPRESSED IN MAXIM UT RES MAGIS VALEAT QUAM PER EAT I.E. A LIBERAL CONSTRUCTION SHOULD BE PUT UPON WRITTEN INS TRUMENTS, SO AS TO UPHOLD THEM, IF POSSIBLE, AND CARRY INTO EFFE CT THE INTENTION OF THE PARTIES A STATUTE IS DESIGNED TO B E WORKABLE AND THE INTERPRETATION THEREOF BY A COURT SHOULD BE TO SECURE THAT OBJECT UNLESS CRUCIAL OMISSION OR CLEAR DIRECTION M AKES THAT END UNATTAINABLE. (SEE WHITNEY V. COMMISSIONER OF INLAN D REVENUE (1926) AC 37 P.52 REFERRED TO IN COMMISSIONER OF IN COME TAX V. S. TEJA SINGH (AIR 1959 SC 352), GURSAHAI SAIGAL V. COMMISSIONER OF INCOME TAX, PUNJAB (AIR 1963 SC 106 2). THE COURTS WILL HAVE TO REJECT THAT CONSTRUCTION WH ICH WILL DEFEAT THE PLAIN INTENTION OF THE LEGISLATURE EVEN THOUGH THERE MAY BE SOME INEXACTITUDE IN THE LANGUAGE USED. IF THE CHOICE IS BETWEEN TWO INTERPRETATIONS, THE N ARROWER OF WHICH WOULD FAIL TO ACHIEVE THE MANIFEST PURPOSE OF THE LEGISLATION WE SHOULD AVOID A CONSTRUCTION WHICH WO ULD REDUCE THE LEGISLATION TO FUTILITY, AND SHOULD RATHER ACCE PT THE BOLDER CONSTRUCTION, BASED ON THE VIEW THAT PARLIAMENT WOU LD LEGISLATE ONLY FOR THE PURPOSE OF BRINGING ABOUT AN EFFECTIVE RESULT THE PRINCIPLES INDICATED IN THE SAID CASES WERE REITERA TED BY THIS COURT IN MOHAN KUMAR SINGHANIA V. UNION OF INDIA (A IR 1992 SC 1). THE STATUTE MUST BE READ AS A WHOLE AND ONE PRO VISION OF THE ACT SHOULD BE CONSTRUED WITH REFERENCE TO OTHER PROVISIONS IN THE SAME ACT SO AS TO MAKE A CONSISTENT ENACTMEN T OF THE WHOLE STATUTE. ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 9 6.6 THE COURT MUST ASCERTAIN THE INTENTION OF THE L EGISLATURE BY DIRECTING ITS ATTENTION NOT MERELY TO THE CLAUSES T O BE CONSTRUED BUT TO THE ENTIRE STATUTE; IT MUST COMPARE CLAUSE W ITH OTHER PARTS OF THE LAW AND THE SETTING IN WHICH THE CLAUS E TO BE INTERPRETED OCCURS. [SEE R.S. RAGHUNALH V. STATE OF KARNATAKA AND ANR. (AIR 1992 SC 81)]. SUCH A CONSTRUCTION HAS THE MERIT OF AVOIDING ANY INCONSISTENCY OR REPUGNANCY EITHER WNTHIN A SECTION OR BETWEEN TWO DIFFERENT SECTIONS OR PROVIS IONS OF THE SAME STATUTE. IT IS THE DUTY OF THE COURT TO AVOID A HEAD ON CLASH BETWEEN TWO SECTIONS OF THE SAME ACT. [SEE SU LTANA BEGUM V. PREM CHAND JAIN (AIR 1997 SC 1006)] WHENEV ER IT IS POSSIBLE TO DO SO, IT MUST BE DONE TO CONSTRUE THE PROVISIONS WHICH APPEAR TO CONFLICT SO THAT THEY HARMONIZE. IT SHOULD NOT BE LIGHTLY ASSUMED THAT PARLIAMENT HAD GIVEN WITH O NE HAND WHAT IT TOOK AWAY WITH THE OTHER. 6.7 THE PROVISIONS OF ONE SECTION OF THE STATUTE CA NNOT BE USED TO DEFEAT THOSE OF ANOTHER UNLESS IT IS IMPOSSIBLE TO EFFECT RECONCILIATION BETWEEN THEM. THUS CONSTRUCTION THAT REDUCES ONE OF THE PROVISIONS TO A 'USELESS LUMBER' OR 'DEAD LE TTER IS NOT A HARMONIZED CONSTRUCTION. TO HARMONIZE IS NOT TO DES TROY. 7. THE INTENTION OF THE LEGISLATURE IS THAT EVERY P ROVISION SHOULD REMAIN OPERATIVE. BUT WHERE TWO PROVISIONS ARE CONT RADICTORY, IT MAY NOT BE POSSIBLE TO EFFECTUATE BOTH OF THEM AND IN RESULT, ONE SHALL BE REDUCED TO FUTILITY AS AGAINST THE SET TLED BASIC PRINCIPLE OF UT RES MCIGIS VALEAT QAUAM PEREAT. THE REFORE, SUCH A CONSTRUCTION SHOULD BE ALLOWED TO PREVAIL BY WHIC H THE EXISTING INCONSISTENCY IS REMOVED AND BOTH THE PROV ISIONS REMAIN IN FORCE, IN HARMONY WITH EACH OTHER. ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 10 THUS IT IS PRAYED THAT THE ORDER OF THE ASSESSING O FFICER AND THE CIT(APPEALS) MAY KINDLY BE UPHELD. 7. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 8. PROVISIONS OF SECTION 2(14), SECTION 10(38), SEC TION 71 AND SECTION 74 ARE EXAMINED. SECTION 2(14) : AS PER S. 2(24) OF THE INCOME TAX ACT, 1961, UNLES S THE CONTEXT OTHERWISE REQUIRES, THE TERM INCOME INCLU DES- (I) PROFITS AND GAINS; (II) DIVIDEND; (IIA) VOLUNTARY CONTRIBUTIONS RECEIVED BY A TRUST C REATED WHOLLY OR PARTLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR B Y AN INSTITUTION ESTABLISHED WHOLLY OR PARTLY FOR SUCH PURPOSES OR B Y AN ASSOCIATION OR INSTITUTION REFERRED TO IN CLAUSE (2 1) OR CLAUSE (23), OR BY A FUND OR TRUST OR INSTITUTION REFERRED TO IN SUB- CLAUSE (IV) OR SUB-CLAUSE (V) OR BY ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE ( IIIAD) OR SUB- CLAUSE (VI) OR BY ANY HOSPITAL OR OTHER INSTITUTION REFERRED TO IN SUB-CLAUSE (IIIAE) OR SUB-CLAUSE (VIA) OF CLAUSE (2 3C) OF SECTION 10 OR BY AN ELECTORAL TRUST. EXPLANATION: FOR THE PURPOSES OF THIS SUB-CLAUSE, TRUST INCLUDES ANY OTHER LEGAL OBLIGATION. (III) THE VALUE OF ANY PERQUISITE OR PROFIT IN LIEU OF SALARY TAXABLE UNDER CLAUSES (2) AND (3) OF SECTION 17; ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 11 (IIIA) ANY SPECIAL ALLOWANCE OR BENEFIT, OTHER THAN PERQUISITE INCLUDED UNDER SUB-CLAUSE (III), SPECIFICALLY GRANT ED TO THE ASSESSEE TO MEET EXPENSES WHOLLY, NECESSARILY AND E XCLUSIVELY FOR THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR E MPLOYMENT OF PROFIT; (IIIB) ANY ALLOWANCE GRANTED TO THE ASSESSEE EITHER TO MEET HIS PERSONAL EXPENSES AT THE PLACE WHERE THE DUTIES OF HIS OFFICE OR EMPLOYMENT OF PROFIT ARE ORDINARILY PERFORMED BY HI M OR AT A PLACE WHERE HE ORDINARILY RESIDES OR TO COMPENSATE HIM FOR THE INCREASED COST OF LIVING; (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHE R CONVERTIBLE INTO MONEY OR NOT, OBTAINED FROM A COMPANY EITHER B Y A DIRECTOR OR BY A PERSON WHO HAS A SUBSTANTIAL INTER EST IN THE COMPANY, OR BY A RELATIVE OF THE DIRECTOR OR SUCH P ERSON, AND ANY SUM PAID BY ANY SUCH COMPANY IN RESPECT OF ANY OBLIGATION WHICH, BUT FOR SUCH PAYMENT, WOULD HAVE BEEN PAYABL E BY THE DIRECTOR OR OTHER PERSON AFORESAID; (IVA) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETH ER CONVERTIBLE INTO MONEY OR NOT, OBTAINED BY ANY REPRESENTATIVE A SSESSEE MENTIONED IN CLAUSE (III) OR CLAUSE (IV) OF SUB-SEC TION (1) OF SECTION 160 OR BY ANY PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT ANY INCOME IS RECEIVABLE BY THE REPRESENTAT IVE ASSESSEE (SUCH PERSON BEING HEREAFTER IN THIS SUB-CLAUSE REF ERRED TO AS THE BENEFICIARY) AND ANY SUM PAID BY THE REPRESEN TATIVE ASSESSEE IN RESPECT OF ANY OBLIGATION WHICH, BUT FO R SUCH PAYMENT, WOULD HAVE BEEN PAYABLE BY THE BENEFICIARY ; ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 12 (V) ANY SUM CHARGEABLE TO INCOME-TAX UNDER CLAUSES (II) AND (III) OF SECTION 28 OR SECTION 41 OR SECTION 59; (VA) ANY SUM CHARGEABLE TO INCOME-TAX UNDER CLAUSE (IIIA) OF SECTION 28; (VB) ANY SUM CHARGEABLE TO INCOME-TAX UNDER CLAUSE (IIIB) OF SECTION 28; (VC) ANY SUM CHARGEABLE TO INCOME-TAX UNDER CLAUSE (IIIC) OF SECTION 28; (VD) THE VALUE OF ANY BENEFIT OR PERQUISITE TAXABLE UNDER CLAUSE (IV) OF SECTION 28; (VE) ANY SUM CHARGEABLE TO INCOME-TAX UNDER CLAUSE (V) OF SECTION 28; (VI) ANY CAPITAL GAINS CHARGEABLE UNDER SECTION 45; (VII) THE PROFITS AND GAINS OF ANY BUSINESS OF INSU RANCE CARRIED ON BY A MUTUAL INSURANCE COMPANY OR BY A CO-OPERATI VE SOCIETY, COMPUTED IN ACCORDANCE WITH SECTION 44 OR ANY SURPL US TAKEN TO BE SUCH PROFITS AND GAINS BY VIRTUE OF PROVISIONS C ONTAINED IN THE FIRST SCHEDULE; (VIIA) THE PROFITS AND GAINS OF ANY BUSINESS OF BAN KING (INCLUDING PROVIDING CREDIT FACILITIES) CARRIED ON BY A CO- OPERATIVE SOCIETY WITH ITS MEMBERS; (VIII) OMITTED ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 13 (IX) ANY WINNINGS FROM LOTTERIES, CROSSWORD PUZZLES , RACES INCLUDING HORSE RACES, CARD GAMES AND OTHER GAMES O F ANY SORT OR FROM GAMBLING OR BETTING OF ANY FORM OR NATURE W HATSOEVER. EXPLANATION: FOR THE PURPOSES OF THIS SUB-CLAUSE,- (I) LOTTERY INCLUDES WINNINGS FROM PRIZES AWARDE D TO ANY PERSON BY DRAW OF LOTS OR BY CHANCE OR IN ANY OTHER MANNER WHATSOEVER, UNDER ANY SCHEME OR ARRANGEMENT BY WHAT EVER NAME CALLED; (II) CARD GAME AND OTHER GAME OF ANY SORT INCLUDE S ANY GAME SHOW, AN ENTERTAINMENT PROGRAMME ON TELEVISION OR E LECTRONIC MODE, IN WHICH PEOPLE COMPETE TO WIN PRIZES OR ANY OTHER SIMILAR GAME; (X) ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLO YEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNUATI ON FUND OR ANY FUND SET UP UNDER THE PROVISIONS OF THE EMPLOYE ES STATE INSURANCE ACT, 1948 (34 OF 1948), OR ANY OTHER FUND FOR THE WELFARE OF SUCH EMPLOYEES; (XI) ANY SUM RECEIVED UNDER A KEYMAN INSURANCE POLI CY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY. EXPLANATION: FOR THE PURPOSES OF THIS CLAUSE, THE E XPRESSION KEYMAN INSURANCE POLICY SHALL HAVE THE MEANING AS SIGNED TO IT IN THE EXPLANATION TO CLAUSE (10D) OF SECTION 10; (XII) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28; (XIIA) THE FAIR MARKET VALUE OF INVENTORY REFERRED TO IN CLAUSE (VIA) OF SECTION 28; ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 14 (XIII) ANY SUM REFERRED TO IN CLAUSE (V) OF SUB-SEC TION (2) OF SECTION 56; (XIV) ANY SUM REFERRED TO IN CLAUSE (VI) OF SUB-SEC TION (2) OF SECTION 56; (XV) ANY SUM OF MONEY OR VALUE OF PROPERTY REFERRED TO IN CLAUSE (VII) OR CLAUSE (VIIA) OF SUB-SECTION (2) OF SECTION 56; (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAUSE (VIIB) OF SUB-SECTION (2) OF SECTION 56; (XVII) ANY SUM OF MONEY REFERRED TO IN CLAUSE (IX) OF SUB-SECTION (2) OF SECTION 56; (XVIIA) ANY SUM OF MONEY OR VALUE OF PROPERTY REFER RED TO IN CLAUSE (X) OF SUB-SECTION (2) OF SECTION 56; (XVIIB) ANY COMPENSATION OR OTHER PAYMENT REFERRED TO IN CLAUSE (XI) OF SUB-SECTION (2) OF SECTION 56; (XVIII) ASSISTANCE IN THE FORM OF A SUBSIDY OR GRAN T OR CASH INCENTIVE OR DUTY DRAWBACK OR WAIVER OR CONCESSION OR REIMBURSEMENT (BY WHATEVER NAME CALLED) BY THE CENT RAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY O R BODY OR AGENCY IN CASH OR KIND TO THE ASSESSEE OTHER THAN,- (A) THE SUBSIDY OR GRANT OR REIMBURSEMENT WHICH IS TAKEN INTO ACCOUNT FOR DETERMINATION OF THE ACTUAL COST OF THE ASSET IN ACCORDANCE WITH THE PROVISIONS OF EXPLANATION 10 TO CLAUSE (1) OF SECTION 43; OR (B) THE SUBSIDY OR GRANT BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF THE CORPUS OF A TRUST OR INSTITUTION EST ABLISHED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT, AS THE CA SE MAY BE; ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 15 INCOME TAX IS A CHARGE ON INCOME, SO ITS IMPORTAN T TO UNDERSTAND THE MEANING OF THE TERM INCOME UNDER S . 2(24) OF THE INCOME TAX ACT. THERE ARE VARIOUS IMPORTANT CAS E-LAWS ON INTERPRETATION OF THE TERM INCOME, WHICH ALSO NEE DS TO BE REVIEWED. SECTION 10(38): 10(38) ANY INCOME ARISING FROM THE TRANSFER OF A L ONG-TERM CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY O R A UNIT OF AN EQUITY ORIENTED FUND OR A UNIT OF A BUSINESS TRU ST WHERE (A) THE TRANSACTION OF SALE OF SUCH EQUITY SHARE OR UNIT IS ENTERED INTO ON OR AFTER THE DATE ON WHICH CHAPTER VII OF THE FINANCE (NO. 2) ACT, 2004 COMES INTO FORCE; AND (B) SUCH TRANSACTION IS CHARGEABLE TO SECURITIES TR ANSACTION TAX UNDER THAT CHAPTER : PROVIDED THAT THE INCOME BY WAY OF LONG-TERM CAPITA L GAIN OF A COMPANY SHALL BE TAKEN INTO ACCOUNT IN COMPUTING TH E BOOK PROFIT AND INCOME-TAX PAYABLE UNDER SECTION 115JB : PROVIDED ALSO THAT NOTHING CONTAINED IN SUB-CLAUSE (B) SHALL APPLY TO A TRANSACTION UNDERTAKEN ON A RECOGNISED S TOCK EXCHANGE LOCATED IN ANY INTERNATIONAL FINANCIAL SER VICES CENTRE AND WHERE THE CONSIDERATION FOR SUCH TRANSACTION IS PAID OR PAYABLE IN FOREIGN CURRENCY: PROVIDED ALSO THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY TO ANY INCOME ARISING FROM THE TRANSFER OF A LONG-T ERM CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY, IF THE T RANSACTION OF ACQUISITION, OTHER THAN THE ACQUISITION NOTIFIED BY THE CENTRAL ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 16 GOVERNMENT IN THIS BEHALF, OF SUCH EQUITY SHARE IS ENTERED INTO ON OR AFTER THE 1ST DAY OF OCTOBER, 2004 AND SUCH T RANSACTION IS NOT CHARGEABLE TO SECURITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE (NO. 2) ACT, 2004 (23 OF 2004): [PROVIDED ALSO THAT NOTHING CONTAINED IN THIS CLAUS E SHALL APPLY TO ANY INCOME ARISING FROM THE TRANSFER OF LONG-TER M CAPITAL ASSET, BEING AN EQUITY SHARE IN A COMPANY OR A UNIT OF AN EQUITY ORIENTED FUND OR A UNIT OF A BUSINESS TRUST, MADE O N OR AFTER THE 1ST DAY OF APRIL, 2018.] EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (A) EQUITY ORIENTED FUND MEANS A FUND (I) WHERE THE INVESTIBLE FUNDS ARE INVESTED BY WAY OF EQUITY SHARES IN DOMESTIC COMPANIES TO THE EXTENT OF MORE THAN SIXTY- FIVE PER CENT OF THE TOTAL PROCEEDS OF SUCH FUND; A ND (II) WHICH HAS BEEN SET UP UNDER A SCHEME OF A MUTU AL FUND SPECIFIED UNDER CLAUSE (23D): PROVIDED THAT THE PERCENTAGE OF EQUITY SHARE HOLDIN G OF THE FUND SHALL BE COMPUTED WITH REFERENCE TO THE ANNUAL AVER AGE OF THE MONTHLY AVERAGES OF THE OPENING AND CLOSING FIGURES ; (B) INTERNATIONAL FINANCIAL SERVICES CENTRE SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE (Q) OF SEC TION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 (28 OF 2005); (C) RECOGNISED STOCK EXCHANGE SHALL HAVE THE MEAN ING ASSIGNED TO IT IN CLAUSE (II) OF THE EXPLANATION 1 TO SUB-SECTION (5) OF SECTION 43 ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 17 SECTION 71: [ SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER. 71. (1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'CAPITAL GAINS', IS A LOSS AND THE ASSESSEE HAS NO INCOME UNDER THE HEAD 'CAPITAL GAINS', HE SHALL, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUC H LOSS SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASS ESSMENT YEAR UNDER ANY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THA N 'CAPITAL GAINS', IS A LOSS AND THE ASSESSEE HAS INCOME ASSES SABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD 'CAPITAL GAINS' (WHETH ER RELATING TO SHORT-TERM CAPITAL ASSETS OR ANY OTHER CAPITAL A SSETS). [(2A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SEC TION (1) OR SUB-SECTION (2), WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'PROFI TS AND GAINS OF BUSINESS OR PROFESSION' IS A LOSS AND THE ASSESS EE HAS INCOME ASSESSABLE UNDER THE HEAD 'SALARIES', TH E ASSESSEE SHALL NOT BE ENTITLED TO HAVE SUCH LOSS SET OFF AGA INST SUCH INCOME.] ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 18 (3) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER THE HEAD 'CAPITAL GAINS' IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER ANY OTHER HEAD OF INCOME, THE ASSESSEE SHALL NOT BE ENTITLED TO HA VE SUCH LOSS SET OFF AGAINST INCOME UNDER THE OTHER HEAD.] [(3A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SEC TION (1) OR SUB-SECTION (2), WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY' IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER ANY OTHER HEAD OF INCOM E, THE ASSESSEE SHALL NOT BE ENTITLED TO SET OFF SUCH LOSS , TO THE EXTENT THE AMOUNT OF THE LOSS EXCEEDS TWO LAKH RUPEES, AGAINST INCOME UNDER THE OTHER HEAD.] [(4) WHERE THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' IS A LOSS, IN RESPECT OF THE ASSESSMENT YEARS COMMENCING ON THE 1ST DAY OF APRIL , 1995 AND THE 1ST DAY OF APRIL, 1996, SUCH LOSS SHALL BE FIRS T SET OFF UNDER SUB-SECTIONS (1) AND (2) AND THEREAFTER THE LOSS RE FERRED TO IN SECTION 71A SHALL BE SET OFF IN THE RELEVANT ASSESSMENT YEAR IN ACCORDANCE WITH THE PROVISIONS OF THAT SECTION.] SECTION 74: [ LOSSES UNDER THE HEAD 'CAPITAL GAINS'. 74. [(1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE N ET RESULT OF THE COMPUTATION UNDER THE HEAD 'CAPITAL G AINS' IS A LOSS TO THE ASSESSEE, THE WHOLE LOSS SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS CHAPTER, BE CARRIED FORWARD TO T HE FOLLOWING ASSESSMENT YEAR, AND ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 19 (A) IN SO FAR AS SUCH LOSS RELATES TO A SHORT- TERM CAPITAL ASSET, IT SHALL BE SET OFF AGAINST INCOME, IF ANY, UNDER THE HEAD 'CAPITAL GAINS' ASSESSABLE FOR THAT ASSESSMENT YEAR IN RESPECT OF ANY OTHER CAPITAL ASSET; (B) IN SO FAR AS SUCH LOSS RELATES TO A LONG- TERM CAPITAL ASSET, IT SHALL BE SET OFF AGAINST INCOME, IF ANY, UNDER THE HEAD 'CAPITAL GAINS' ASSESSABLE FOR THAT ASSESSMENT YEAR IN RESPECT OF ANY OTHER CAPITAL ASSET NOT BEING A SHOR T- TERM CAPITAL ASSET; (C) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLL OWING ASSESSMENT YEAR AND SO ON.] (2) NO LOSS SHALL BE CARRIED FORWARD UNDER THIS SEC TION FOR MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUT ED. (3) [OMITTED BY THE FINANCE ACT, 2002, W.E.F. 1-4-2 003.] 9. ON CONCURRENT READING OF THE PROVISIONS OF THE S ECTIONS QUOTED ABOVE, WE FIND THAT THE SECTION 74 HAS NOT B EEN MADE AND CANNOT BE MADE OTIOSE. THE PROVISIONS OF SECTION 10(38) AND SECTION 74 HAVE TO BE READ HARMONIOUSLY BUT NOT ANTAGONISTICALLY. WE HOLD THAT THE DECISION OF THE LD. CIT (A) IS ON INCORRECT INTERPRETATION OF THE PROVISIONS OF TH E ACT AND HENCE CANNOT BE SUSTAINED. ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 20 ITA NO. 241/DEL/2019 A.Y. 2013-14 10. THE RELEVANT FACTS ARE AS UNDER: DATE OF AGREEMENT WITH THE BUILDER 01.09.2004 DATE OF SALE 01.05.2012 THE LAST INSTALLMENT PAID BY THE ASSESSEE 18.05 .2009 11. THE ASSESSING OFFICER HELD THAT SINCE THE ASSES SEE HAS PAID LAST INSTALLMENT ON 18.05.2009, HE ACQUIRED THE RIG HT ON THE PROPERTY ONLY ON 18.05.2009 AND SINCE THE PROPERTY WAS SOLD ON 01.05.2012, THE GAINS ARE TREATED AS SHORT TERM CAP ITAL GAIN AND TAXED ACCORDINGLY. 12. THE LD. CIT (A) HELD THAT THE ASSESSEE HAS NOT CREATED ANY RIGHT IN THE PROPERTY BY MAKING PERIODIC PAYMENTS F ROM 2004 TO 2009 TO THE DEVELOPER. THE RIGHT OF THE ASSESSEE WO ULD BE CREATED IN THE ANY PROPERTY ONLY AFTER SIGNING OF T HE CONVEYANCE DEED. TO BE A LONG TERM CAPITAL ASSET, THE ASSET HA S TO BE HELD BY THE ASSESSEE FOR MORE THAN 36 MONTHS IMME DIATELY PRECEDING THE DATE OF TRANSFER. IT WAS ALSO HELD TH E AGREEMENT BETWEEN THE ASSESSEE AND THE BUILDER 13. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 14. WE FIND THAT AS PER THE DEFINITION OF CAPITAL A SSET UNDER SECTION 2(14), ANY KIND OF PROPERTY HELD BY AN ASSE SSEE WOULD COME WITHIN THE DEFINITION OF 'CAPITAL ASSET. ANY RIGHT WHICH COULD BE CALLED PROPERTY WOULD BE INCLUDED IN THE D EFINITION OF 'CAPITAL ASSET. IT DOES NOT DEFINE THE WORDS ANY KIND BUT PROVIDES FOR THE TYPES OF PROPERTIES WHICH ARE TO B E EXCLUDED ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 21 FROM THE DEFINITION OF CAPITAL ASSET, INCIDENTALLY, INTEREST IN AN UNDER CONSTRUCTION FLAT IS NOT ONE OF THE EXCLUSION S. PROPERTY IS A BUNDLE OF RIGHTS AND ONE OF THE RIGHTS IS THE ABI LITY TO TRANSFER SUCH PROPERTY BY THE OWNERS TO A THIRD PARTY. THUS, TO UNDERSTAND WHAT KIND OF PROPERTY CAN BE CONSIDERED A CAPITAL ASSET, IT WOULD BE APPROPRIATE TO REFER TO THE DEFI NITION OF TRANSFER IN SECTION 2(47) OF THE ACT. 15. SECTION 2(47)(V) AND (VI), AND EXPLANATION 2 MA KE IT ADEQUATELY CLEAR THAT POSSESSION, ENJOYMENT OF IMMO VABLE PROPERTY, AS WELL AS AN INTEREST IN ANY ASSET ARE A LL TRANSFERABLE 'CAPITAL ASSETS'. EXPLANATION CLARIFIES THAT THE T RANSFER INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED DISPOSI NG OF OR PARTING WITH AN ASSET OR ANY INTEREST THEREIN OR CR EATING ANY INTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER, DIR ECTLY OR INDIRECTLY, ABSOLUTELY OR CONDITIONALLY, VOLUNTARIL Y OR INVOLUNTARILY, BY WAY OF AN AGREEMENT OR OTHERWISE. THUS, RIGHTS OR INTERESTS IN A PROPERTY ARE KINDS OF PROPERTY TH AT ARE TRANSFERABLE CAPITAL ASSETS. HENCE, BOOKING RIGHTS OR RIGHTS TO PURCHASE THE APARTMENT OR RIGHTS TO OBTAIN TITLE TO THE APARTMENT ARE ALSO CAPITAL ASSETS THAT CAN BE TRANS FERABLE. 16. A CONTRACT FOR SALE OF FLAT WAS CAPABLE OF SPEC IFIC PERFORMANCE AND WAS ALSO AND THEREFORE, A RIGHT IN AN UNCOMPLETED BUILDING OR A FLAT WAS CLEARLY A PROPER TY AS CONTEMPLATED BY SECTION 2(14). P&H HIGH COURT IN CA SE OF VINOD KUMAR JAIN V. COMMISSIONER OF INCOME-TAX, [2010- 19 5 TAXMAN 174 (PUNJ. & HAR.) HAS RULED THAT THE RIGHT TO ACQU IRE PROPERTY THROUGH 'AGREEMENT FOR SALE' UNDER SECTION 54 OF TR ANSFER OF PROPERTY ACT IS AN ACTIONABLE CLAIM WHICH IS CAPABL E OF BEING ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 22 TRANSFERRED. THUS, IT IS A CAPITAL ASSET UNDER SECT ION 2(14) AS PER THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE PERIOD OF HOLDING IS TO BE RECKONED FROM THE DATE OF FIRST AG REEMENT WHILE CALCULATING CAPITAL GAIN ON SALE OF SUCH PROPERTY. 17. FROM THE FACTS OF THE CASE, THE ASSESSEE HAVING PAID RS.63,30,963/- TO THE BUILDER HAS TRANSFERRED THE B UYING RIGHT TO THE SELLER. THE SELLER HAS PAID THE REMAINING AM OUNT OF RS.2,82,326/- TO THE BUILDER SUBSEQUENTLY. THE AO H ELD THAT AS PER THE CLAUSE IN THE PURCHASE AGREEMENT WHICH STAT ES THIS AGREEMENT SHALL NOT BE ASSIGNED BY THE APARTMENT AL LOTTEE WITHOUT PRIOR PERMISSION OF THE COMPANY AND CAME TO THE CONCLUSION THAT THE ASSESSEE NEVER VESTED WITH THE RIGHT TO THE PROPERTY AND HENCE THE ASSESSEE COULD NOT HAVE SOLD THE RIGHTS. ON GOING THROUGH THE FACTS OF THE CASE, WE FIND THA T WHAT THE ASSESSEE HAS SOLD IS THE RIGHT AND THE RIGHT ARISES WHEN THE ASSESSEE ENTERS INTO AN AGREEMENT WITH THE BUILDER IN THE YEAR 2004-05. SINCE, SUCH RIGHT ACCRUED IN THE YEAR 2004 -05 AND THE SALE TOOK PLACE ON 01.05.2012, IT ATTAINS THE NATUR E OF SALE OF LONG TERM CAPITAL ASSET AND THE GAINS WILL HAVE TO BE TREATED AS LONG TERM CAPITAL GAINS. THE AO IS DIRECTED TO CO MPUTE THE LTCG AFTER TAKING INTO CONSIDERATION, THE AMOUNT RE CEIVED ON ACCOUNT OF SALE AS PER THE DOCUMENTS (TO VERIFY THE FIGURE OF RS.1,17,18,792/- OR RS.1,20,01,118/-). THE AO SHALL ALSO VERIFY AND CONSIDER THE DEDUCTION OF RS.1,80,000/- PAID TO THE BROKER. WITH REGARD TO INCOME FROM OTHER SOURCES OF RS.1,47 ,142/-, THE AO IS HEREBY DIRECTED TO VERIFY FROM THE RECORDS WH ETHER THE AMOUNT WAS OFFERED TO TAX INCOME FROM OTHER SOURCES OR NOT AND EXAMINED WHETHER THE CORRECT FIGURE IS RS.1,47, 143/- OR RS.1,37,143/- AND RECOMPUTED THE TAXABLE INCOME. ITA NOS. 7256 & 241/DEL/2019 SHIV KUMAR JATIA 23 18. AS A RESULT, THE APPEALS OF THE ASSESSEE ARE AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/04/2021. SD/- SD/- (BHAVNESH SAINI) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 26/04/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR