SAUMYA ABHAY AGARWAL, MUMBAI V. ADD/JT/DY/ASST COMM OF INCOME TAX OFFICER NATIONAL e-ASSESSMENT CENTRE, DELHI

ITA 288/MUM/2023

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The case involves Saumya Abhay Agrawal, who, along with her husband, purchased a property in Mumbai and later sold it. The Assessing Officer (AO) initially treated the gain from the sale as Short Term Capital Gain (STCG) due to the property being held for less than 36 months, based on the date of possession and registration. However, the Tribunal, referencing decisions from the Jurisdictional High Court, overturned this decision, stating that the relevant date for calculating the holding period for capital gains tax purposes is the date of allotment, not the date of possession or registration.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123825 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-05-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 30-01-2023
• Other Referred Cases: PCIT-3 Vs. Vembo Vaidyanathan, Ms. Madhu Kaul Vs. CIT, Chandigarh
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition
• Section: 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER ITA No. 288/Mum/2023 (A.Y. 2018-19) Saumya Abhay Agrawal 49, Agrawal Clinic, Daftary Road, Malad (East), Mumbai-400097. PAN: AAHPA2957P Appellant Versus Addl/JT/Dy/ACIT /ITO/ National E-assessment Centre, Delhi. Respondent Appellant/Assessee by : Sh. Rushabh Mehta, Ld. CA Respondent/Department by : Ms. Mini Vinod, DR Date of hearing : 31/05/2023 Date of pronouncement : 31/05/2023 ORDER N.K. CHOUDHRY, J.M: This Assessee/Appellant herein has preferred this appeal against the order dated 03.12.2022 impugned herein passed by National Faceless Appeal Centre, Delhi {in short „NFAC‟} u/s 250 of the Income Tax Act, 1961 (in short „the Act‟) for AY 2018-19. 2 ITA No. 288/Mum/2023-Saumya Abhay Agrawal 2. In the instant case, the Assessee being 12.5% sharer along with her husband, had booked an office i.e. Unit No. 1014, 10 th Floor, Building No. 1, Kanakai Graffity situated at Plot CTS No. 16 at Village-Chakla, Andheri, Mumbai-400093 on 02.07.2011 by paying booking token amount of Rs. 19,00,000/- vide Cheque No. 353475 dated 20.06.2011 drawn on Syndicate Bank. The said property was registered on 23.05.2017 and subsequently sold for a consideration of Rs. 24,00,000/- and therefore the Assessee claimed the Long Term Capital Gain (in short „LTCG‟) of Rs. 1,29,746/- by computing capital gain as under: (i) Cost of acquisition = Rs. 14,40,352/- (ii) Selling price Rs. 24,00,000/- (-) Transfer expenses Rs. 1,41,038/- Net Consideration = Rs. 22,58,962/- Cost of acquisition (12.5% share) = Rs. 14,40,352/- Index cost of acquisition (FY 2011-12) = Rs. 21,29,216/- Capital Gain = Rs. 1,29,746/- 3. The AO show-caused the Assessee to justify its claim qua capital gain. In response, the Assessee along with her reply also filed the copy of the purchase and sale-deed of the immovable property under consideration, which was jointly owned by the Assessee and her husband respectively in the ratio of 12.5% and 87.5% since the date of booking i.e. 02.07.2011, and also 3 ITA No. 288/Mum/2023-Saumya Abhay Agrawal claimed that though the property was allotted on the basis of booking on 02.07.2011 but the possession of the same was handed over to the Assessee only on 23.05.2017 as during the booking date and the handing over the possession, the same was under construction, which clearly reflects from the office copy of letter dated 02.07.2011 written by Kankia Spaces, addressed to the Assessee and Shri Abhay Agarwal (husband of the Assessee). The property under consideration was registered only on 23.05.2017 and subsequently sold to Mr. Mukesh Jain on 01.06.2017. 4. The AO by taking into consideration “documents and the fact that the possession and registration of property has taken over/done only on 23.05.2017 and thereafter sold the same on 01.06.2017”, determined that the Assessee after acquisition, held the property only for eight days, which are less than 36 month and accordingly Assessee gained Short Term Capital Gain (STCG) but not Long Term Capital Gain (LTCG) as claimed by the Assessee, which is calculated as under: Full value of consideration- 2400000/- [Cost of acquisition (12.5% of 11103000) 13,87,875/- Stamp duty value 1,08,525/- Registration cost 3750/- Brokerage 28,763/- Total 15,28,913/- Short term capital gain 8,71,087/- 4 ITA No. 288/Mum/2023-Saumya Abhay Agrawal 5. The AO ultimately, computed the STCG to the tune of Rs. 8,71,087/- instead LTCG of Rs. 1,29,746/- as claimed by the Assessee. 6. The Assessee being aggrieved, challenged addition of Rs. 8,71,087/- on account of STCG, while computing the total income of the Assessee and determining/calculating the holding period of the property to be less than 36 months. 7. The Ld. Commissioner affirmed the action of AO in treating the capital gain as STCG, by observing as under: That from the purchase deed dated 23.05.2017, it is seen that before the execution of the agreement, the Assessee and her husband had paid Rs. 52,71,290/- as part consideration. Similarly sale-deed dated 01.06.2017 with Mr. Kukesh Jain in para-6 of the agreement clearly mentioned that the said building is almost ready for possession and new units had not been handed over. Thus, the right in the property was purchased and sold by the Assessee and her husband without physical hand over of the property. It is clear that in July 2011 only Rs. 19,00,000/- had been paid and even upto date of the acquisition of the agreement dated 23.05.2017, only Rs. 52.71 Lakhs had been paid, which is less than 50% of the cost. In these circumstances, it cannot be said that the property had been held by the Assessee for more than 36 months to claim it as LTCG. The action of the AO in treating at as STCG is found to be correct. 8. The Assessee being aggrieved is in appeal before Tribunal. 5 ITA No. 288/Mum/2023-Saumya Abhay Agrawal 9. Having heard the parties and by perusing the record, I observe that in the instant case, the property under consideration was booked on 02.07.2011 and the possession of the same was delivered on 23.05.2017 and consequently registration was also done on the same date. Subsequently the property was sold on 01.06.2017 and therefore, LTCG was claimed. 9.1 The question involved in this case therefore relates to the determination, as to whether the Assessee has earned LTCG or STCG. It is not res-integra after the judgment of Jurisdictional High Court in the case of PCIT-3 Vs. Vembo Vaidyanathan (2019) 261 taxman 376 (Bom.) wherein the Hon‟ble Court dealt with the identical issue “ whether the date of acquisition of the property is required to be considered for determination of LTCG or the date of physical possession”. For ready reference, completeness and brevity, the concluding part of the said judgment is reproduced here-in-below: “Issue raised by the revenue in its appeal before the Hon'ble High Court was, as to whether the Tribunal was justified in reckoning the acquisition of the property from the date of letter of allotment which though did not lead to creation of any proper and effective right over the capital asset, and not from the date on which the agreement" which spelled out the exact terms and conditions for acquisition was executed. It was observed by the Hon'ble High Court, that 6 ITA No. 288/Mum/2023-Saumya Abhay Agrawal the CBDT vide its Circular No. 471, dated 15.10.1996 had clarified that when an Assessee purchases a flat to be constructed by Delhi Development Authority (D.D.A) for which allotment letter is issued, date of such allotment would be the relevant date for the purpose of capital gain tax as the date of acquisition. Further, referring to the clarification issued by the CBDT, vide its Circular No. 672, dated 16.12.1993, it was observed by the Hon'ble High Court, that the Board had clarified that if the terms of the schemes of allotment and construction of flats/houses by the co-operative societies or other institutions were similar to the terms of allotment and construction by D.D.A, then on the same basis the acquisition of the property was to be related to the date on which the allotment letter was issued. On the basis of its aforesaid observations, the Hon'ble High Court had dismissed the appeal of the revenue. In the backdrop of our aforesaid deliberations, we are of the considered view that as no infirmity emerges from the order of the CIT(A), who we find had rightly concluded that the date of acquisition of the property under consideration was to be reckoned from the date of the allotment letter i.e. 03.12.1999, therefore, we uphold his order.” 9.2 The Hon‟ble Jurisdictional High Court in the aforesaid case, also taken into consideration the judgment passed by the Hon‟ble Punjab & Haryana High Court, Chandigarh in the case of Ms. Madhu Kaul Vs. CIT, Chandigarh (ITA No. 89/1999 decided on 17.01.2014) wherein the Hon‟ble 7 ITA No. 288/Mum/2023-Saumya Abhay Agrawal High Court while considering the question of Long Term Capital gain & Short Term Capital Gain, held as under: “13. On careful reading of the Circular issued by the Board, para 2 thereof describes the nature of right that an allottee acquires on allotment of flat under Self-Financing Scheme. According to it, the allottee gets title to the property on the issuance of an allotment letter and the payment of instalments is only a consequential action case. Admittedly, the flat was allotted to the appellant on 07.06.1986, vide letter conveyed to the Assessee on 30.06.1986. The Assessee paid the first installment on 04.07.1986, thereby conferring a right upon the appellant to hold a flat, which was later identified and possession delivered on a later date. The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter. In view of what has been recorded hereinabove, we have no hesitation in holding that the Income Tax Appellate Tribunal has erred in holding that the transaction does not envisage a long term capital gain. Consequently, we allow the appeal, set aside order dated 15.02.1999 and answer the substantial questions of law in favour of the Assessee.” 8 ITA No. 288/Mum/2023-Saumya Abhay Agrawal 9.3 The Hon‟ble Punjab & Haryana High Court has clearly held that the payment of balance instalments, identification of property, flat and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter. 9.4 On the aforesaid analyazation and the dictum laid down by the Hon‟ble High Courts, I do not have any hesitation to hold that for consideration of the holding period of the property or for determination of LTCG, the date of the allotment of property is paramount but not the payment of instalments/consideration, delivery of possession or date of the registration, which are infact consequential act in pursuance to allotment letter and/or originates from the date of allotment. Hence, the determination of the Ld. Commissioner in this case to the effect “that upto July 2011 and 23.05.2017, the Assessee had paid only Rs. 19,00,000/- and 52.71 lakhs only, which is less than 50% of the cost and in the sale-deed dated 01.06.2017, it is mentioned that the said building is almost ready for possession and individual units had not been handed over, therefore, the said property was purchased and sold without physical hand over of the property and therefore cannot be said that the property had been held for more than 36 months for claiming it as LTCG”, has no essence and therefore is un-sustainable . 9 ITA No. 288/Mum/2023-Saumya Abhay Agrawal 9.5 Admittedly in the instant case, the Assessee had initially purchased the property on 02.07.2011 and sold the same on 01.06.2017, which clearly goes to show that the Assessee earned the LTCG and therefore would be entitled to LTCG but not the STCG as determined by the authorities below. Resultantly, the AO is directed to compute the capital gain of the Assessee, as LTCG. 10. In the result, the Assessee‟s appeal is allowed. Order pronounced in the open court on 31-05 -2023. Sd/- (N K CHOUDHRY) JUDICIAL MEMBER SK, Sr.PS Copy of the Order forwarded to: 1. The Appellant , 2. The Respondent. 3. The CIT(A)- 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Dy. /Asstt.Registrar) ITAT, Mumbai