ACIT 21(2), MUMBAI V. MICHELLE N. SANGHVI, MUMBAI

ITA 3973/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0450 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 10-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGESHEN
• Assessee Lawyers: P P SAGAR
• Keywords: Capital asset; Cost of acquisition; Benefit of exemption
• Section: 143(3); 54F; 2(14); 133(6); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3973/MUM/2016 (ASSESSMENT YEAR: 2012-13) ACIT, CIRCLE - 21(2) ROOM NO. 115, 1ST FLOOR PIRAMAL CHAMBERS PAREL, MUMBAI 400012 VS. SHRI MICHELLE N. SANGHVI 402, KEWAL INDL. ESTATE SENAPATI BAPAT MARG LOWER PAREL MUMBAI 400013 PAN ARSPS1466M APPELLANT RESPONDENT APPELLANT BY: SHRI M.C. OMI NINGESHEN RESPONDENT BY: SHRI P.P. SAGAR DATE OF HEARING: 03.01.2018 DATE OF PRONOUNCEMENT: 13.02.2018 O R D E R PER RAJESH KUMAR, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-33, MUMBAI DATED 17.03.2016 FOR A.Y. 2012-13 . 2. THE VARIOUS GROUNDS RAISED BY THE REVENUE ARE AS UN DER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE ACTION OF THE A.O. IN MAKING AN ADDITION OF RS. 2,,88,65,116/- TREATING T HE CAPITAL GAIN ARISING AS A RESULT OF SALE OF FLAT NO. 1807, ASHOK TOWERS, MUMBAI, AS SHORT TERM CAPITAL GAIN. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE ACTION OF THE A.O. WHERE IT IS HELD BY THE A.O. THAT SHORT TERM CAPITAL GAIN IS ARISING AS A RESULT OF THE SALE OF FLAT SINCE THE ASSESSEE HAS R ECEIVED PHYSICAL POSSESSION OF THE PROPERTY IS NOT HELD FOR MORE THA N 36 MONTHS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE ACTION OF THE A.O. WHERE IT IS HELD BY THE A.O. THAT THE ASSESSEE IS NOT ELI GIBLE TO GET BENEFIT OF EXEMPTION U/S. 54 OF THE INCOME-TAX ACT, 1961. ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 2 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE ACTION OF THE A.O. WHERE IT IS HELD BY THE A.O. THAT THE ASSESSEE IS NOT ELI GIBLE TO GET BENEFIT OF EXEMPTION U/S. 54 OF THE INCOME-TAX ACT, 1961. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) HAS ERRED PLACING RELIANCE ON THE CBDT CIRCU LARS NO. 471, DID. 15.10.1986 & NO. 672, DTD. 16.12.1993 WHICH IS MISPLACED AS THE TWO CIRCULARS OF CBDT ARE IN RESPECT OF CONS TRUCTION FOR THE PURPOSE OF CAPITAL GAIN AND DEDUCTION U/S. 54 & 54F OF INCOME- TAX ACT, 1961. 6. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED.' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 28.07.2012 DECLARING TOTAL INCOME OF ` 24,20,660/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T (HEREINAFTER THE ACT). THEREAFTER THE CASE OF THE ASSESSEE WAS SELE CTED FOR SCRUTINY UNDER CASS AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 08.08.2013. DURING THE YEAR THE ASSESSEE EARNED INCOME BY WAY OF SALAR Y, LONG TERM CAPITAL GAIN AND OTHER SOURCES. THE ASSESSEE HAS SOLD ONE R ESIDENTIAL PROPERTY ON 11.05.2011 FOR A CONSIDERATION OF ` 3,63,75,000/- AND DID NOT OFFER ANY CAPITAL GAIN ON THE SAID SALE. THE AO NOTICED THE S AME AND ACCORDINGLY A QUERY WAS RAISED UPON THE ASSESSEE WHICH WAS DULY R EPLIED. THEREAFTER THE AO OBSERVED FROM THE SUBMISSIONS MADE BY THE ASSESS EE THAT THE ASSESSEE PURCHASED THE PROPERTY FROM M/S. PENINSULA LAND LTD . HE ISSUED NOTICE UNDER SECTION 133(6) TO M/S. PENINSULA LAND LTD. FO R FURNISHING COPIES OF THE DEED OF TRANSFER, POSSESSION LETTER, CONFIRMATI ON OF PAYMENT CLAIMED BY THE ASSESSEE AS SALES EXPENSES. AFTER GOING THROUGH THE REPLY RECEIVED IN RESPONSE TO NOTICE UNDER SECTION 133(6) OF THE ACT, THE AO NOTICED THAT POSSESSION OF THE PROPERTY, I.E. 1807 IN TOWER D OF ASHOK TOWERS WAS GIVEN TO THE ASSESSEE ON 19.01,2011 AND THUS THE AO CONCL UDED THAT THE ASSESSEE HAS RECEIVED PHYSICAL POSSESSION OF THE PR OPERTY ON 19.01.2011 AND SOLD THE SAME ON 11.05.2011. ACCORDING TO THE A O THE PROPERTY WAS HELD ONLY FOR A PERIOD OF FOUR MONTHS BY THE ASSESS EE AND THEREFORE HE CAME TO THE CONCLUSION THAT THE GAIN ON THE SAID SA LE OF ASSET IS SHORT TERM ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 3 CAPITAL GAIN. THE AO, IGNORED THE EVIDENCES SUCH AS AGREEMENT OF PURCHASE DATED 18.12.2006 AND THE CONTENTION OF THE ASSESSEE THAT THE PROPERTY WAS HELD FOR MORE THAN 36 MONTHS AS IT WAS PURCHASED VI DE AGREEMENT OF PURCHASE DATED 18.12.2006 AND IT WAS SOLD ON 11.05. 2011. ULTIMATELY THE AO ADDED A SUM OF ` 2,88,65,116/- AS SHORT TERM CAPITAL GAIN ON THE SAL E OF SAID PROPERTY BY FRAMING THE ASSESSMENT UNDER SECTI ON 143(3) OF THE ACT VIDE ORDER DATED 09.02.2015. 4. AGGRIEVED BY THE ORDER OF THE AO ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESS EE BY HOLDING AS UNDER: - 11. I HAVE CAREFULLY CONSIDERED THE IMPUGNED ASSES SMENT ORDER, SUBMISSIONS OF THE APPELLANT, PAPER BOOK AND MATERI AL AVAILABLE ON RECORD. MY OBSERVATIONS ARE AS UNDER:- 12. THE MAIN QUESTION TO BE DECIDED IS WHETHER THE PROPERTY BEING RESIDENTIAL FLAT NO. 1807. ASHOK TOWERS, MUMBAI SOL D BY THE ASSESSEE ON 11.05.2011 WAS ACQUIRED BY THE APPELLAN T, FOR THE PURPOSE OF TRANSFER OF CAPITAL ASSETS UNDER THE INC OME TAX ACT, ON TAKING PHYSICAL POSSESSION OF THE FLAT ON 19.01.201 1, AS ADOPTED BY THE AO OR AS A RESULT OF BOOKING OF THE FLAT VIDE A GREEMENT DATED 18.12.2006 AS CONTENDED BY THE APPELLANT. IN CASE T HE ARGUMENT OF THE AO IS ACCEPTED, IT WILL BE SHORT TERM CAPITAL G AIN (STCG), ALTERNATIVELY IT WILL BE LONG TERM CAPITAL GAIN (LT CG). 13. IN THIS REGARD, I FIND THAT WHILE COMING TO THE CONCLUSION THAT THE SAID TRANSFER IS STCG, THE AO HAS NOTED THAT THE PH YSICAL POSSESSION OF THE FLAT WAS RECEIVED ON 19.01.2011 AND THE PERI OD OF THREE YEARS FOR THE PURPOSE OF CAPITAL GAIN STARTS FROM THE DAT E OF TAKING POSSESSION OF THE FLAT. ACCORDING TO THE AO, VIDE A GREEMENT TO PURCHASE DATED 18.12.2006, THE ASSESSEE HAS JUST AC QUIRED 'RIGHT TO ACQUIRE FLAT' WHICH CANNOT BE EQUATED WITH 'OWNERSH IP OF FLAT'. THE AO HAS ALSO OBSERVED THAT IN THE DEFINITION OF THE TERM SHORT TERM CAPITAL GAIN THE WORD 'HELD' DENOTES COMPLETE OWNER SHIP WHICH ONLY COMES WITH POSSESSION OF THE CAPITAL ASSET. IN SUPP ORT OF THIS, THE AO RELIED UPON THE RATIO OF THE JUDGMENT IN THE CASE O F ACIT VS JAIMAL K. SHAH (2012) 24 TAXMANN.COM (MUM). WITH THIS THE AO CAME TO THE CONCLUSION THAT THE AGREEMENT TO PURCHASE DOES NOT ENTITLE THE ASSESSEE TO MAKE ANY LEGAL CLAIM OVER THE CAPITAL A SSET TO BE OWNED AND LATER ON TO BE TRANSFERRED. IT IS THE PHYSICAL POSSESSION OF THE FLAT BY WHICH RIGHT OVER THE CAPITAL ASSET IS ACQUIRED A ND HENCE THE HOLDING PERIOD IS LESS THAN 36 MONTHS I.E., SHORT T ERM CAPITAL GAIN. ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 4 14. HOWEVER, I DO NOT AGREE WITH THE AO AND HIS APP ROACH TO THE ISSUE UNDER CONSIDERATION. WHEN A LETTER OF ALLOTME NT IS ISSUED BY A BUILDER TO THE ALLOTTEE OR AGREEMENT TO PURCHASE IS EXECUTED BETWEEN THE ALLOTTEE AND THE BUILDER, THE ALLOTTEE GETS VAL UABLE RIGHTS IN THE UNITS TO BE CONSTRUCTED AND THESE NIGHTS ARE IRREVO CABLE AND WILL CONTINUE TILL THE ALLOTTEE COMPLIES WITH THE CONDIT IONS MENTIONED IN ALLOTMENT LETTER INCLUDING PAYMENT OF INSTALLMENTS BY THE SPECIFIED DATE. THE ALLOTMENT LETTER/AGREEMENT TO PURCHASE PR EVENTS BUILDER/TRANSFEROR TO SELL THE SAME UNIT TO ANOTHER INTENDED BUYER. HENCE, PERIOD OF HOLDING COMMENCES FROM THE DATE OF ISSUE OF ALLOTMENT LETTER/ AGREEMENT TO PURCHASE AS THE ALLO TTEE GETS CLEAR RIGHTS IN THE PROPERTY. IN THE INSTANT CASE, AS ON THE DATE OF SIGNING OF AGREEMENT TO PURCHASE, THE APPELLANT HAS ALREADY PA ID RS.14,63,318/- FOR THE FLAT. SINCE, THE AGREEMENT T O PURCHASE ARE DULY SIGNED BY BOTH THE PARTIES AND REGISTERED, THESE AR E LEGALLY ENFORCEABLE AND REPRESENT CONTRACT CREATING RIGHTS IN FAVOUR OF BOTH PARTIES IN TERMS OF SEC. 2(47) OF THE IT. ACT RWS 5 3A OF THE TRANSFER OF PROPERTY ACT, 1882. THIS, AGREEMENT TO PURCHASE WAS DULY CONFIRMED BY THE APPELLANT BY MAKING VARIOUS PAYMENTS SUBSEQU ENTLY. 15. AS PER THE PROVISIONS OF SECTION 2(47)(II). 'TR ANSFER' IN RELATION TO CAPITAL ASSETS INCLUDES THE EXTINGUISHMENT OF ANY R IGHT THEREIN. THE AGREEMENT TO PURCHASE EXTINGUISHES THE RIGHTS OF TH E BUILDER IN THE SAID UNITS IN FAVOUR OF THE APPELLANT AND BY SIGNIN G THIS AGREEMENT TO PURCHASE, THE APPELLANT AGREED TO BY THE SAME AND F OR WHICH PAYMENTS ARE REGULARLY MADE. THE ENFORCEABILITY OF LETTER OF ALLOTMENT HAS BEEN CLARIFIED BY THE CBDT VIDE CIRCULARS NO. 4 71 DT. 15.10.1986 AND NO. 672 DT. 16.10.1993. IT IS HELD THAT: 'THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE ISS UE OF THE ALLOTMENT LETTER AND THE PAYMENT OF INSTALLMENT IS ONLY A FOLLOW UP ACTION AND TAKING THE DELIVERY OF POSSESSION IS ONLY A FORMALITY.'' THE BOARD VIDE CIRCULAR NO. 672 AFTER REFERRING TO CIRCULAR NO. 471 EXTENDED THE FACILITY OF EXEMPTION U/S 54 & 54F IN RESPECT OF ALLOTMENT OF FLAT/HOUSE. ON CAREFUL READING OF THE CIRCULARS, IT IS CLEAR THAT AN ALLOTTEE OF THE FLAT GETS A TITLE TO THE PR OPERTY ON ISSUANCE OF THE ALLOTMENT LETTER AND THE CONSTRUCTION BY THE DEVELO PER OF PREMISES THEREAFTER SHALL BE SAID TO HAVE BEEN CARRIED OUT A T THE INSTANCE OF AND ON BEHALF OF THE ALLOTTEE. THE PAYMENT OF INSTA LLMENTS AND RECEIPT OF POSSESSION OF THE PREMISES AS A CONSEQUENCE CAN BE SAID TO BE THE RESULT OF THE FOLLOW-UP ARISING OUT OF THE LETTER O F ALLOTMENT AND ARE THEREFORE THE FORMALITIES ENSUING FROM THE SAID LET TER OF ALLOTMENT. THE BOARD IN THEIR ABOVE REFERRED CIRCULARS CONFIRMED T HAT PAYMENT UNDER LETTER OF ALLOTMENT ISSUED WILL BE IN DUE COMPLIANC E TO THE PROVISIONS OF S. 54 OF THE ACT. ALL THE RIGHTS, TITLE AND INTERES T DERIVED UNDER THE LETTER OF ALLOTMENT OR THE AGREEMENT FOR ALLOTMENT INVARIABLY GETS ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 5 TRANSFERRED TO THE PURCHASER UNDER THE SALE DEED EX ECUTED FOR TRANSFER OF THE PREMISES. 16. IN COMING TO THE ABOVE CONCLUSION, I RELY UPON THE FOLLOWING JUDGMENTS, WHICH ARE ON THE ISSUE UNDER CONSIDERATI ON. 1. ITO VS. SMT. KASHMIRABEN M. PARIKH, 44 TTJ 68(A HD.) THE HON'BLE TRIBUNAL HELD THAT SINCE THE RIGHT IN T HE FLAT WAS ACQUIRED AT THE TIME OF BOOKING THE RIGHT IN THE PROPERTY WA S HELD FOR MORE THAN THREE YEARS BEFORE ITS TRANSFER AND, THEREFORE, CAP ITAL GAINS WAS IN THE NATURE OF LONG TERM CAPITAL GAINS. 2. ACIT VS. SANJAY KAMATH (ITA NO 448/IND/2013)(LN D.) THE HON'BLE TRIBUNAL HAS HELD THAT 'AS PER THE PROV ISIONS OF SECTION 2(47)(II) 'TRANSFER' IN RELATION TO CAPITAL ASSETS INCLUDE THE EXTINGUISHMENT OF ANY RIGHT THEREIN. THE LETTER OF ALLOTMENT EXTINGUISHES THE RIGHTS OF A BUILDER IN THE SAID FL AT IN FAVOUR OF THE ASSESSEE IN RESPECT OF THIS FLAT AND BY SIGNING THE LETTER OF ALLOTMENT, THE ASSESSEE AGREED TO BUY THE SAME AND FOR WHICH P AYMENT WAS ALSO MADE ACCORDING TO THE LATTER OF ALLOTMENT. .. THIS ALLOTMENT LETTER WAS DULY CONFIRMED BY THE ASS ESSEE BY MAKING VARIOUS PAYMENT AS NARRATED ABOVE. OUT OF TOTAL PAY MENT OF RS. 33.15 LAKHS, THE ASSESSEE MADE PAYMENT OF RS. 6.23 LAKHS IN THE MONTH OF ALLOTMENT ITSELF I.E. JANUARY, 2005. SUBSEQUENT PA YMENTS WERE ALSO MADE AS PER THE TERMS AGREED WITH THE BUILDER. ONLY AFTER RECEIPT OF ENTIRE AMOUNT, THE BUILDER HAS EXECUTED AGREEMENT W ITH THE ASSESSEE ON 27.2.2009. THE ASSESSEE HAS SOLD THE SAID FLAT O N 05.03.2009. SINCE THE ASSESSEE HAS ACQUIRED ALL THE RIGHTS IN T HE FLAT ON 22.01.2005, THE PERIOD OF HOLDING IS TO BE COMPUTED WITH RESPECT TO THE DATE OF ALLOTMENT I.E. 22.01.2005. TAKING THE D ATE OF SALE AS 05.03.2009, THE HOLDING PERIOD OF FLAT WITH THE ASS ESSEE WAS MORE THAN 36 MONTHS, THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING ASSESSEE'S CLAIM FOR EXEMPTION U/S 54/ 54F BY TREATING THE CAPITAL ASSETS SO SOLD AS LONG TERM CAPITAL ASS ETS. IN SHORT, THE SIGNING THE LETTER OF ALLOTMENT AND P AYING THE BOOKING THE AMOUNT THE ASSESSEE ACQUIRED THE RIGHTS IN THE FLAT . ALL THE RIGHTS IN THE FLATS ARE DULY ACQUIRED WHEN THE ASSESSEE IS GI VEN THE LETTER OF ALLOTMENT, WHICH CLEARLY DESCRIBED THE PRESCRIBED N UMBER OF THE FLAT SO ALLOTTED. THE HOLDING PERIOD IS THEREFORE TO BE COMPUTED FROM DATE OF ALLOTMENT EVEN IF AGREEMENT WAS REGISTERED AT A LATER DATE. 3. ADDL. DIRECTOR OF INCOME TAX V. ANINDYA DUTTA ( ITA NO 613/KOL/2012) ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 6 THE HON'BLE TRIBUNAL, IN THIS CASE HELD THAT THE AS SESSEE ACQUIRES RIGHTS OVER THE PROPERTY BEARING NO.1103 & 1104 IN ASHOKA TOWER, PAREL, MUMBAI ON 12.05.2004 ON ISSUE OF LETTER OF A LLOTMENT AND SUCH RIGHT WAS HELD BY THE ASSESSEE FOR A PERIOD OF MORE THAN THIRTY-SIX MONTHS BEFORE IT WAS TRANSFERRED. IT CONCURRED WITH THE DECISION OF THE CIT(A) WHO HELD THE GAINS TO BE LTCG. THE TRIBUNAL ALSO ALLOWED EXEMPTION U/S 54. 4. CIT V K. RAMAKRISHNAN, 48 TAXMANN.COM 55 (DEL.) THE HON'BLE HIGH COURT HAS HELD THAT IT WAS DATE OF ALLOTMENT WHICH WAS RELEVANT FOR PURPOSE OF COMPUTING HOLDING PERIO D AND NOT THE DATE OF CONVEYANCE DEED. 5. VINOD KUMAR JAIN V. CIT 344 ITR 501 (P & H) THE HON'BLE PUNJAB & HARYANA HIGH COURT ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE ACQUIRED RIGH TS UNDER THE LETTER OF ALLOTMENT WHICH WERE TO BE TREATED AS CAPITAL AS SET U/S. 2(14) OF THE ACT BY RELYING ON THE CIRCULAR NO. 471 DT. 15.1 0.1996 ISSUED BY THE CBDT. THE COURT HELD THAT THE RIGHT OF THE ASSESSEE PRIOR TO 15.05.1986 UNDER THE LETTER OF ALLOTMENT WERE RIGHT S IN THE PROPERTY THAT WERE TRANSFERRED. THE COURT ALSO RELIED ON THE DECISION IN THE CASE OF CIT V. VED PRAKASH & SONS. (HUF) 207 ITR 14 8 (P & H) AND CIT V. SMT. BEENA K. JAIN 217 ITR 363 (BOM.). THE C OURT UPHELD THE CONTENTION OF THE ASSESSEE THAT FOR THE PURPOSE OF S. 2(14) AND S. 2(42A) WHAT WAS RELEVANT WAS THE HOLDING OF THE PRO PERTY AS SIGNIFIED BY THE TERM 'HELD' USED IN BOTH THE PROVISIONS AND NOT THE OWNERSHIP OF THE PROPERTY WHICH WAS DISTINCT AND DIFFERENT. F OR THE PURPOSE OF AN ASSET TO BE TREATED AS A LONG TERM CAPITAL ASSET U/S. 2(29A), IT WAS SUFFICIENT THAT THE ASSET WAS HELD FOR THE PRESCRIB ED PERIOD. THE COURT HELD THAT ON ISSUE LETTER OF ALLOTMENT, A PROPERTY WAS HELD BY THE ASSESSEE AND THEREFORE THE PERIOD OF HOLDING COMMEN CED WITH THE DATE OF ISSUE OF SUCH LETTER OF ALLOTMENT. IMPORTAN TLY, THE COURT HELD IN PARA 13 THAT AN ALLOTTEE ACQUIRED ON ALLOTMENT A TI TLE TO THE PROPERTY ON ISSUE OF AN ALLOTMENT LETTER AND THE PAYMENT OF INSTALLMENT WAS ONLY A CONSEQUENTIAL ACTION UPON WHICH THE DELIVERY OF POSSESSION FOLLOWED. THE COURT ALSO APPROVED THE DICTIONARY ME ANING OF THE TERM 'HOLDS' TO MEAN THE ONE WHO HAD A RIGHT TO CLAIM TH E TITLE TO A THING. IN PARA 16, THE COURT HAS HELD AS UNDER: 'IT IS CONCLUDED THAT THE PROVISIONS OF SECTIONS 2( 14), 2(29A) AND 2(42A) ENCOMPASSES WITHIN ITS AMBIT THOSE CASES OF CAPITAL ASSET WHICH ARE HELD BY AN ASSESSEE. ONCE THAT IS SO, ADV ERTING TO THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ALLOTTE D FLAT ON 27-2- 1982 ON PAYMENT OF INSTALLMENTS BY ISSUANCE OF AN A LLOTMENT LETTER AND HE HAD BEEN MAKING PAYMENT IN TERMS THER EOF BUT THE SPECIFIC NUMBER OF THE FLAT WAS ALLOCATED TO THE AS SESSEE AND POSSESSION DELIVERED ON 15-5-1986. THE RIGHT OF THE ASSESSEE PRIOR TO 15-5-1986 WAS A RIGHT IN THE PROPERTY. IN SUCH A ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 7 SITUATION, IT CANNOT BE HELD THAT PRIOR TO THE SAID DATE, THE ASSESSEE WAS NOT HOLDING THE FLAT.' 17. APART FROM THAT I FIND THE RELIANCE OF THE AO I N THE CASE OF ACIT 19(2), MUMBAI VS. JAIMAL K SHAH 24 TAXMANN.COM 91 ( MUM.) IS MISPLACED, AS FACTS ARE DISTINGUISHABLE. IN THAT CA SE THE OWNER OF THE LAND HAD ENTERED INTO AN AGREEMENT ON 4-10-2001 WIT H THE BUILDER FOR DEVELOPMENT-CUM-SALE AGREEMENT FOR THE PURPOSE OF D EVELOPMENT OF HIS PROPERTY. THE BUILDER HAD TO CONSTRUCT FLATS ON THE LAND AND IN CONSIDERATION OF TRANSFER OF 45% OF LAND RIGHTS HAD TO GIVE 55% SHARE OF THE BUILT-UP AREA APART FROM RS. 61 LAKH. THE LA ND OWNER HAD CONSIDERED THE TRANSFER OF THE LAND RIGHTS TO THE E XTENT OF 45% IN A.Y. 2002-03 AND HAD ACCORDINGLY, GIVEN CAPITAL GAIN WIT H REFERENCE THERETO. THE BUILDER HAD CONSTRUCTED THE PREMISES F ROM 2002 TO 2005 AND HAD GIVEN POSSESSION OF FLATS TO THE LAND OWNER ON 24-2-2005. THE LAND OWNER THEREAFTER SOLD THE FLATS IN APRIL / MAY, 2006. IN THESE CIRCUMSTANCES THE ISSUE AROSE WHETHER THE PERIOD OF HOLDING OF FLAT BY THE LAND OWNER WAS LONG-TERM AND SHORT-TERM. THE ASSESSEE IN THAT CASE CLAIMED THAT CAPITAL GAIN WAS IN THE NATURE OF LONG TERM CAPITAL GAIN. THE TRIBUNAL, HOWEVER, H ELD THAT CAPITAL GAIN WAS SHORT TERM CAPITAL GAI AND PERIOD OF HOLDI NG OF THE FLATS COULD BE COUNTED ONLY FROM THE DATE ON WHICH THE POSSESSI ON OF THE FLATS HAD BEEN GIVEN BY DEVELOPER TO THE LAND OWNER. WITH REGARD TO THE ABOVE DECISION OF THE TRIBUNAL, IN THE FACTS OF THE CASE THE ISSUE WAS NOT FOR PURCHASE OF A FLAT FROM A BUILDER WITH THE INTENTION TO ACQUIRE THE SAME. MOREOVER, THAT DECISION WAS IN RESPECT OF DEVELOPMENT CUM SALE AGREEMENT WHICH CANNOT BE APPLIED IN THE INSTA NT CASE OF PURCHASE OF A FLAT FROM A BUILDER WITH THE INTENTIO N TO ACQUIRE THE SAME. HENCE, IT IS CONCLUDED THAT THE SAID DECISION RELIE D BY THE AO DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE AND HENCE DI STINGUISHABLE. 18. IN THE LIGHT OF THE DISCUSSION MADE IN THE PRE CEDING PARAGRAPHS, IT IS CONCLUDED THAT FOR THE PURPOSE OF TRANSFER OF THE RESIDENTIAL FLAT NO. 1807, ASHOK TOWERS, MUMBAI AGREEMENT TO PURCHAS E DATED 18.12.2006 WILL BE THE DATE OF ACQUISITION OF THE P ROPERTY LEADING TO LTCG AND NOT THE DATE OF POSSESSION I.E., 19.01.201 1 WHICH HAS LED TO COMPUTATION OF SHORT TERM CAPITAL GAIN. HENCE, T HE AO IS DIRECTED TO TREAT THE ASSET AS LONG TERM CAPITAL ASSET AND THE GAIN ON THE SALE OF THE FLAT AS LONG TERM CAPITAL GAIN. 19. IN THIS CONNECTION, IT IS FURTHER OBSERVED THA T IN ORDER TO CONSTITUTE RIGHTS IN THE CAPITAL ASSET, THE ASSESSEE MAY NOT N ECESSARY PHYSICALLY POSSESS THAT ASSET FOR THE PURPOSE OF COMPUTING CAP ITAL GAIN. IN THE INSTANT CASE, THE APPELLANT HAD ACQUIRED THE RIGHT OF OWNERSHIP OVER THE FLAT IN ASHOK TOWER AS A RESULT OF MAKING PAYME NT AND BY EXECUTING AGREEMENT TO PURCHASE DATED 18.12.2006 AN D THAT RIGHT OF THE APPELLANT IS ITSELF A CAPITAL ASSET. THE WORD ' HELD' USED IN SEC. ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 8 2(14) AS WELL AS EXPLANATION TO SEC. 48 CLEARLY DEP ICT THAT THE APPELLANT HAS GOT CLEAR RIGHT IN THE SAID CAPITAL A SSET AND THEREFORE, THE BENEFIT OF INDEXATION HAS TO BE GRANTED TO THE APPELLANT ON THE BASIS OF PAYMENTS MADE BY HIM FOR ACQUIRING THE SAI D ASSET. THUS, THE APPELLANT HAS RIGHTLY CLAIMED THE INDEXATION BE NEFIT FROM 18.12.2006, ONCE PAYMENT WAS STARTED FOR THE FLAT A T ASHOK TOWER IN CONSEQUENCE TO THE AGREEMENT TO PURCHASE EXECUTED B ETWEEN THE APPELLANT AND THE BUILDER. 20. IN ARRIVING AT THE ABOVE CONCLUSION, I RELY ON THE FOLLOWING DECISIONS: (I) PRAVEEN GUPTA VS ACIT(137TTJ 307) (DEL.) (II) NITA A. PATEL VS ITO (132TTJ 468) (2009) (MUM .) (III) LATAG. ROHRA VS DCIT (2008) (21 SOT 541) (MU M.) ; (IV) ACIT VS CREDIT RATING INFORMATION SERVICES OF INDIA LTD. (ITA NO. 9396/MUM/2004 (V) PRAVEEN GUPTA VS ACIT 2011 -(052)- DTR-0334-TD EL 21. IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO RE- COMPUTE THE LONG TERM CAPITAL GAIN TAKING THE INDEXATION FOR COST OF ACQUISITION AS ON 18.12.2006 . HENCE, GROUNDS OF APPEAL NO. 2(A)-(J) AND 4 ARE ALLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE PUR CHASED FLAT NO. 1807, ASHOK TOWERS FROM M/S. PENINSULA LAND LTD. VIDE AGR EEMENT OF PURCHASE DATED 18.12.2006 AND SOLD THE SAME ON 11.05.2011. T HE ASSESSEE WAS GIVEN POSSESSION OF THE FLAT ON 19.01.11. NOW THE Q UESTION IS WHETHER THE ASSET WAS HELD FOR A PERIOD OF 36 MONTHS OR LESS. I N OUR CONSIDERED VIEW THE INTEREST IN THE PROPERTY IS CREATED THE MOVEMEN T THE AGREEMENT TO PURCHASE IS ENTERED INTO IN FAVOUR OF THE ASSESSEE ACCOMPANYING WITH PART PAYMENT. THE DATE OF POSSESSION IS NOT MATERIAL FOR DECIDING THE PERIOD OF HOLDING BY THE ASSESSEE FOR THE PURPOSE WHETHER THE GAIN IS LONG TERM OR SHORT TERM. THE LEARNED CIT(A) HAS PASSED A REASONE D AND ELABORATE ORDER FOR COMING TO THE CONCLUSION THAT THE ASSETS HELD B Y THE ASSESSEE WAS LONG TERM ASSET AND DIRECTED THE AO TO RECOMPUTE THE LON G TERM CAPITAL GAIN BY ALLOWING INDEXATION ON THE COST OF ACQUISITION TAKI NG THE DATE OF PURCHASE AS 18.12.2006. THE CASE OF THE ASSESSEE IS ALSO CO VERED BY A PLETHORA OF DECISIONS OF VARIOUS HIGH COURTS AND DECISIONS OF C OORDINATE BENCHES WHICH HAS BEEN REFERRED TO BY THE FIRST APPELLATE A UTHORITY. WE THEREFORE, ITA NO. 3973/MUM/2016 SHRI MICHELLE N. SANGHVI 9 RESPECTFULLY FOLLOWING THE SAME DISMISS THE APPEAL OF THE REVENUE BY UPHOLDING THE ORDER OF LEARNED CIT(A). ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2018. SD/ - SD/ - (D.T. GARASIA) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13 TH FEBRUARY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -33, MUMBAI 4. THE PR. CIT - 21, MUMBAI 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.