ASST CIT 8(3)(2), MUMBAI V. YOGESH AGENCIES & INVESTMENT P.LTD, MUMBAI

ITA 4608/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9802 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 27-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: USHA GOPALAN
• Keywords: Capital asset; Business income; Cost of acquisition
• Section: 143(3); 54F; 54

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 4608/ MUM/2015 ( / ASSESSMENT YEAR : 2010-11) ASSTT. COMMISSIONER OF INCOME TAX 8(3)(2), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / V. M/S YOGESH AGENCIES & INVESTMENTS PVT. LTD., 420, CRERATIVE INDUSTRIAL ESTATE, 72 N.M. JOSHI MARG, LOWER PAREL, MUMBAI 400 011. ./ PAN :AAACY1568L ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI V. VIDHYADHAR ASSESSEEBY : MS. USHA GOPALAN / DATE OF HEARING : 17.08.2017 / DATE OF PRONOUNCEMENT :23.08.2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 4 608/MUM/2015, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 29.05.20 15 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 14, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2010-11, APPELLATE PR OCEEDINGS BEFORE LEARNED CIT(A) HAD ARISEN FROM THE ASSESSMENT ORDER DATED 2 8 TH DECEMBER, 2012 ITA 4608/MUM/2015 2 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CA LLED THE AO) U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE A CT) . 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN T HE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- (I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW IN DELETING THE ADDITION OF RS.33,08,740/- IN RELATION TO STCG ON SALE OF TWO RESIDENTIAL FLATS WITHOUT PROPERLY APPR ECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE AO IN THE ASSESSMENT ORDER. (II) THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 33,08,740/- IN RELATIO N TO STCG WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE ACQ UIRES COMPLETE OR SUBSTANTIAL RIGHTS IN THESE TWO FLATS ONLY WHEN AGREEMENT WAS EXECUTED AS HAS BEEN HELD IN ITAT'S DECISION IN THE CASE OF MRS. LATA VS ADDL. CIT, IN (2011) 10 TAXMANN.COM96 (MUM) IN IT APPEAL NO.2864 AND 2968 OF 2009, WHERE FACTS WERE S IMILAR. 2. THE LD. CIT(A)'S ORDER IS CONTRARY TO LAW AND ON FACTS AND DESERVES TO BE SET ASIDE AND A.O'S ORDER MAY BE RES TORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS] S 143(3) R.W.S. 143(2) OF THE 1961 ACT, THE A.O. OBSERVED THAT THE ASSESSEE HAD SOLD TWO FLATS NO. 504 AND 604 SIT UATED AT CYGNA BUILDIBNG, ZIRCON VENTURE CHS LTD, VINMAN NAGAR, PUNE FOR A CO NSIDERATION OF RS. 32,50,000/- EACH. THE ASSESSEE HAD OFFERED LONG TER M CAPITAL OF HRS. 19,29,577/- IN RESPECT OF SALE OF ABOVE SAID TWO FL ATS. THE A.O. OBSERVED THAT THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL GAINS ON SALE OF THE ABOVE TWO FLATS ON THE PREMISE THAT IT HAD PAID ADVANCE PAYME NT FOR PURCHASE OF FLAT IN THE YEAR 2005, HENCE, THE HOLDING PERIOD OF THE ABO VE TWO FLATS WERE TAKEN FROM THE YEAR 2005 AND THE PROFIT ARISING ON SALE O F ABOVE FLATS WERE TAKEN AS ITA 4608/MUM/2015 3 LONG TERM CAPITAL GAIN AS THE SAID FLATS WERE SOLD IN OCTOBER 2009. THE A.O. OBSERVED THAT THE ASSESSEE HAD MADE ONLY ADVANCE PA YMENT FOR PURCHASE OF THESE TWO FLAT IN THE YEAR 2005 AND HAD CLAIMED THE PROFIT ARISING AS LONG TERM CAPITAL GAIN ALTHOUGH THE ASSESSEE ENTERED IN TO RE GISTERED PURCHASE AGREEMENT ON 14.3.2008 WITH THE BUILDER. THUS, THE VIEW OF THE AO IS THAT THE ASSESSEE BECAME OWNER OF THE FLATS ONLY ON 14-03-20 08 WHEN THE ASSESSEE ENTERED INTO REGISTERED PURCHASE AGREEMENT WITH THE BUILDER AND SINCE THE FLATS WERE SOLD IN OCTOBER 2009, THE ASSESSEE HAD E ARNED INCOME FROM SHORT TERM CAPITAL GAIN (LOSS) ON TRANSFER OF THESE TWO F LATS WHICH WERE SHORT TERM CAPITAL ASSETS HELD BY THE ASSESSEE. WITHOUT PREJUD ICE, THE AO HELD THAT WHAT THE ASSESSEE TRANSFERRED WAS THE FLAT AND NOT THE A LLOTMENT LETTER OR RIGHT TO ACQUIRE THE PROPERTY IN THE FORM OF ALLOTMENT LETTE R. THE AO REFERS TO VARIOUS CLAUSES OF THE REGISTERED PURCHASE AGREEMENT DATED 14-03-2008 TO COME TO ABOVE CONCLUSION. IN-FACT IT IS UNDISPUTED THAT WHA T IS TRANSFERRED BY THE ASSESSEE IN OCTOBER/DECEMBER 2009 WERE THE FLATS WH ILE THE ASSESSEE WAS ALLOTTED FLATS IN 2005. THE AO OBSERVED THAT THE IM MOVABLE PROPERTY HAS BUNDLE OF RIGHTS AND WHEN ONE ACQUIRES RHE RIGHT TO BUY PROPERTY AND LATER TAKE THE POSSESSION OF PROPERTY, INFERIOR RIGHT IN THE FORM OF RIGHT TO ACQUIRE GETS MERGED WITH THE SUPERIOR RIGHT IN THE FORM OF POSSESSION OF PROPERTY. THE AO OBSERVED THAT THE ASSESSEE HAD ENTERED INTO AN R EGISTERED PURCHASE AGREEMENT ON 14-03-2008 AND SOLD THE SAME CAPITAL A SSETS IN OCTOBER 2009 , THEREFORE THE ASSET WAS HELD FOR LESS THAN THIRTY S IX MONTHS AND IT SHALL BE CONSTRUED AS SHORT TERM CAPITAL ASSET WITHIN THE ME ANING OF SECTION,2(42A) OF THE 1961 ACT. THUS, IN THIS APPEAL, THE ISSUE IS IN THE VERY NARROW COMPASS. IT WAS ALSO OBSERVED BY THE AO THAT IN THE INSTANT CAS E, EVEN THE ALLOTMENT LETTER IS NOT ISSUED BY THE BUILDER. THE AO RELIED UPON DE CISION OF MRS. LATA V. ADDL. EIT REPORTED IN (2011) 10 TAXMANN.COM 96(MUM.). THU S, THE AO OBSERVED THAT IT IS CLEAR THAT THE CHARACTER OF CAPITAL ASSETS TR ANSFERRED IS FLAT AND NOT ALLOTMENT LETTER OR RIGHT TO ACQUIRE THE PROPERTY A ND HENCE THE A.O. COMPUTED THE SHORT TERM CAPITAL GAIN AS UNDER:- ITA 4608/MUM/2015 4 FLAT NO. 504 FLAT NO. 604 TOTAL SALES CONSIDERATION 32,00,000 32,50,000 64,50,000 STAMP DUTY VALUATION (A) 39,75,451 39,04,824 78,80,275 COST OF ACQUISITION 20,58,925 20,98,750 STAMP DUTY AND REGISTRATION CHARGES 2,05,580 2,09,080 TOTAL COST OF ACQUISITION (B) 22,63,705/- 23,07,830/- 45,71,535/- SHORT TERM CAPITAL GAIN (A+B) 17,11,746/- 15,96,994 33,08,740/- THUS, THE A.O. BROUGHT TO TAX AN INCOME TO THE TUNE OF RS. 33,08,740/- TO TAX AS SHORT TERM CAPITAL GAIN(STCG), VIDE ASSESSMENT O RDER DATED 28TH DECEMBER, 2012 PASSED BY THE AO U/S 143(3) OF THE A CT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28-12-20 12 PASSED BY THE A.O., THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E ID. CIT(A) VIDE APPELLATE ORDER DATED 29-05-2015 , WHO ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- '3.2. I HAVE GONE THROUGH THE SAME. THE AO HAS OBSE RVED THAT BY OBTAINING THE ALLOTMENT LETTER IN RESPECT OF BOTH T HESE TWO FLATS, THE ASSESSEE GOT ONLY THE RIGHT TO ACQUIRE THE FLAT S AND NOT THE FLAT THEMSELVES. THUS THE RIGHT TO ACQUIRE FLAT WAS SEPA RATE AND DISTINCT FROM HOLDING RIGHT ON THE FLAT ITSELF. THE RIGHT TO OWN THE FLAT ONLY CAME INTO EXISTENCE ON THE DATE OF REGIST RATION WHICH HAPPENED ON 14/03/2008 AND THUS HOLDING OF THE ASSE T BEING ONLY FROM 14/03/2008 TO OCTOBER, 2009, PERIOD BEING LESS THAN 3 YEARS, THE FLATS REMAINED SHORT TERM ASSETS AND CON SEQUENTLY THE GAINS ON SALE OF THE SAME HAS TO BE TAXED AS SHORT TERM CAPITAL GAIN. I HAVE CONSIDERED THE SAME AND I AM PARTLY IN AGREEMENT WITH THE AO THAT BOTH THESE RIGHTS I.E. RIGHT TO PU RCHASE THE FLAT AND RIGHT IN THE FLAT ITSELF ARE DIFFERENT. SAME IS EVIDENT FROM INSTANCES WHERE ALLOTMENT LETTER THEMSELVES ARE SOL D FOR TRANSFERRING THE RIGHT TO ACQUIRE THE FLAT BY A PER SON I.E. ALLOTTEE. IN SUCH A CASE HOLDING PERIOD IS CONSIDERED FOR CAL CULATION OF CAPITAL GAINS OF HOLDING OF ALLOTMENT LETTER ITSELF . HOWEVER, COMING TO THE INSTANT CASE WHERE THE ALLOTMENT LETTER GIVE N BY THE BUILDER ITA 4608/MUM/2015 5 WAS SUBSEQUENTLY FOLLOWED BY PAYMENTS IN INSTALMENT S AS PER TERMS AND CONDITIONS IN THE SAME AND THE REGISTRATI ON WAS DONE ALSO FOR HANDING OVER THE POSSESSION FINALLY; ON TH ESE GIVEN FACTS, WHERE THUS THE ALLOTMENT CREATED RIGHT TO ACQUIRE T HE PROPERTY FINALLY CULMINATED INTO ACQUIRING OF FLAT ITSELF, T HE RIGHT TO POSSESS CAPITAL ASSET I.E. FLAT CANNOT BE SEGREGATED . NOW FOR THE REASON THAT AS PER SECTION 53A OF TRANSFER OF PROPERTY ACT ALSO, THE TRANSFER HAS TAKEN PLACE AND THE SAME IS NOT TO BE DETERMINED FROM THE DATE OF REGISTRATION ONLY AS HAS BEEN CONC LUDED BY A.O. IN THE CASE OF SHIRISH AGARWAL WHILE CONSIDERING TH IS ISSUE I.E. DATE OF TRANSFER WITH REFERENCE TO SECTION 53A OF T RANSFER OF PROPERTY ACT, THE HON'BLE ITAT, DELHI HAS DISCUSSED THIS ISSUE AS UNDER:- 'THUS FROM THE ABOVE TWO DECISIONS, IT BECOMES ABSO LUTELY CLEAR THAT FOR THE PURPOSE OF THE INCOME TAX ACT TH E GROUND REALITY HAS TO BE RECOGNIZED AND IF ALL THE INGREDI ENTS OF TRANSFER HAVE BEEN COMPLETED, THEN SUCH TRANSFER HA S TO BE RECOGNIZED. MERELY BECAUSE THE PARTICULAR INSTRUMEN T OF TRANSFER HAS NOT BEEN REGISTERED WILL NOT ALTER THE SITUATION. THIS POSITION IS FURTHER STRENGTHENED BY THE FACT T HAT LEGISLATURE ITSELF HAS INSERTED CLAUSE (V) TO SECTI ON 2(47) AND WHILE REFERRING TO THE PROVISIONS OF SECTION 53A, R EFERENCE HAS BEEN MADE BY STATING THAT CONTRACTS IN THE NATU RE OF SECTION 53A SHOULD ALSO BE COVERED BY DEFINITION OF 'TRANSFER'. THEREFORE, IN OUR HUMBLE VIEW, THE AMEN DMENT TO SEC. 53A OF THE TRANSFER OF PROPERTY ACT WHEREBY THE REQUIREMENT OF THE DOCUMENTS NOT BEING REGISTERED H AS BEEN OMITTED WILL ALTER THE SITUATION FOR HOLDING T HE TRANSACTION TO BE A TRANSFER U / S 2 (4 7)(V) IF AL L OTHER INGREDIENTS HAVE BEEN SATISFIED.' 3.3. IN A CASE LIKE THIS, WHERE THE ASSET WHICH CAM E TO POSSESSION AS PER TERMS AND CONDITIONS MENTIONED IN THE ALLOTM ENT LETTER, IT IS CLEAR THAT THE CONTRACT FOR PURCHASE OF FLAT WAS IN EXISTENCE, WHICH WAS IN WRITING AND SAME WAS FOLLOWED BY WILLI NG PARTIES OF THE CONTRACT ON THESE TWO SPECIFIED BOTH THE SIDES BY MAKING PAYMENT OF INSTALMENTS FROM TIME TO TIME BY ONE AND REGISTRATION OF THE DOCUMENTS ALONGWITH BRINGING INTO EXISTENCE OF FLATS AND HANDING OVER OF POSSESSION OF THE FLAT ITSELF. ON T HESE GIVEN FACTS I.E. HAVING DONE PART PERFORMANCE IN TERMS OF SECTI ON 53A OF TRANSFER OF PROPERTY ACT, THE CONTRACT HAVING COME INTO EXISTENCE ON THE DATE OF ALLOTMENT LETTER FOR THE SAID FLATS AND THUS PERIOD OF ITA 4608/MUM/2015 6 HOLDING IN THE CASE BEING MORE THAN 3 YEARS BEFORE SALE OF SAME IN OCTOBER, 2009, BOTH THESE FLATS HAVE TO BE TREAT ED AS LONG TERM CAPITAL ASSETS AND CONSEQUENTLY GAIN ON SALE OF THE SAME IS LONG TERM CAPITAL GAIN. IN VIEW OF THIS THE APPELLANT'S CALCULATION OF LONG TERM CAPITAL GAIN ALREADY OFFERED TO TAX HAS T O BE ACCEPTED. THE GROUND NO. 2 TAKEN BY THE APPELLANT IS ALLOWED' . 5. AGGRIEVED BY THE APPELLATE ORDER DATED 29-05-201 5 PASSED BY THE ID. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNA L. 6. THE ID. D.R. RELIED ON THE ASSESSMENT ORDER OF T HE A.O. AND THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SHRI GULSHAN MALIK V. CIT IN ITA NO.55/2014, C.M. APPL 2383/2014 & 2384/2014 ,JU DGMENT DATED 14.03.2014 AND SUBMITTED THAT THE ASSESSEE HAD ENTE RED INTO AN AGREEMENT FOR PURCHASE OF THE SAID FLAT NO. 504 AND 604 ONLY ON 14.3.2008 , WHEREBY TWO FLATS WERE PURCHASED BY THE ASSESSEE. PRIOR TO THAT THE ASSESSEE HAD MADE PAYMENT IN INSTALLMENTS FROM TIME TO TIME AND NO RI GHT OR TITLE WAS CREATED IN THE FLATS, TILL THE FLATS WERE REGISTERED IN THE NA ME OF THE ASSESSEE ON 14-03- 2008. IT WAS SUBMITTED THAT THE; SAID FLATS WERE SO LD IN OCTOBER/DECEMBER 2009 AND HENCE THE AO RIGHTLY BROUGHT TO TAX GAINS ARISING FROM SALE OF FLATS AS SHORT TERM CAPITAL GAINS. 7. THE ID. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PURCHASED TWO FLATS BEARING NO. 504 AND 604 IN PROJ ECT CYGNA BUILDING, ZIRCON VENTURE CHS LTD. IT IS SUBMITTED THAT THESE FLATS WERE ALLOTTED BY THE BUILDER IN THE YEAR 2005 AND OUR ATTENTION WAS INVI TED TO COMMUNICATION WITH THE BUILDER WHICH ARE PLACED IN THE PAPER BOOK /PAG E 22 TO 35. OUR ATTENTION WAS ALSO DRAWN TO PAGE L/PAPER BOOK WHEREIN DETAILS OF PAYMENTS MADE TO THE BUILDER IN INSTALLMENTS ARE IN PLACE. THUS, IT IS S UBMITTED THAT THE FLATS WERE BOOKED ON SEPTEMBER, 2005, WHEREIN THE ADVANCES WER E GIVEN OF RS. 1 LAC FOR EACH FLAT. IT WAS SUBMITTED THAT THEREAFTER PAYMENT S WERE MADE FROM TIME TO TIME BY INSTALLMENTS BY THE ASSESSEE TO THE BUILDE R. THUS, IT IS SUBMITTED ITA 4608/MUM/2015 7 THAT THE PERIOD OF HOLDING OF FLATS IS MORE THAN TH REE YEARS AS THE FLATS WERE SOLD IN OCTOBER/DECEMBER 2009 AND THE LONG TERM CAP ITAL GAIN WERE EARNED BY THE ASSESSEE ON SALE OF BOTH THE FLATS AND THE A SSESSEE HAS RIGHTLY DECLARED THE LONG TERM CAPITAL GAINS EARNED ON THESE TWO FLA TS AFTER CLAIMING BENEFIT OF INDEXATION. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE. THE ASSE SSEE HAD SOLD TWO FLATS BEARING NO. 504 AND 604 SITUATED AT CYGNA BUILDIBNG , ZIRCON VENTURE CHS LTD, VINMAN NAGAR, PUNE FOR A CONSIDERATION OF RS. 32,50,000/- AND RS. 32,50,000/- RESPECTIVELY, VIDE AGREEMENTS TO SALE E NTERED INTO ON 15TH OCTOBER, 2009 AND 30TH DECEMBER 2009 RESPECTIVELY W HICH IS NOT IN DISPUTE. THE DISPUTE HAS ARISEN BETWEEN THE RIVAL PARTIES MA INLY WITH RESPECT TO THE DATE OF ACQUISITION OF THESE TWO AFORESAID FLATS AN D WHETHER THE RESULTANT GAINS/LOSS ON THE SALE OF THESE TWO FLATS IS LONG T ERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. WE HAVE OBSERVED THAT THE ASSESSEE BO OKED TWO FLATS IN SEPTEMBER, 2005 WITH THE BUILDER, BOOKING DOCUMENTS W.R.T. BOTH THE FLATS ARE PLACED IN PAPER BOOK PAGE 22/29, WHEREBY ADVANC E WERE GIVEN OF RS. 1 LAC EACH BY THE ASSESSEE TO THE BUILDER VIDE CHEQUE NO. 52 AND 53 , HDFC BANK RESPECTIVELY FOR THE' AFORESAID TWO FLATS. THIS BOO KING ADVANCE WAS FOLLOWED BY ASSESSEE MAKING PAYMENTS TO THE BUILDER IN INSTALLM ENTS FROM TIME TO TIME W.R. T. THESE TWO FLATS. THE COMMUNICATIONS WITH TH E BUILDER W.R. T. BOTH THE FLATS ARE PLACED IN PAPER BOOK/PAGE 22-35, WHEREIN BUILDER IS ASKING THE ASSESSEE TO CLEAR DUES INCLUDING REGISTRATION/ STAM P DUTY CHARGES AS WELL TO GET REGISTRATION OF FLAT IN ITS NAME. THE REVENUE I S CONTENDING THAT THE DATE OF REGISTRATION OF THE AGREEMENT OF SALE W.R.T. BOTH T HE FLATS IS 14.3.2008 WHICH IS THE RELEVANT DATE FOR COMPUTING THE PERIOD OF HOLDI NG OF CAPITAL ASSET IN THE FORM OF FLATS AS THE ASSESSEE ACQUIRED TITLE, INTER EST, RIGHTS AS WELL POSSESSION M THE FLATS W.E.F. 14-03-2008 AS PRIOR TO THAT DATE IT WAS ME RIGHT IN ITA 4608/MUM/2015 8 BOOKING OF THE FLAT WHICH WAS THERE , WHICH ENTITLE D THE ASSESSEE TO SEEK REGISTRATION AND POSSESSION OF THE FLAT. AS PER REV ENUE, NO TITLE, INTEREST AND RIGHT IS CREATED IN THE FLAT IN FAVOUR OF THE ASSES SEE PRIOR TO REGISTRATION OF FLAT IN FAVOUR OF THE ASSESSEE ON 14-03-2008 AND THAT IS THE RELEVANT DATE FOR COMPUTING CAPITAL GAINS CHARGEABLE TO TAX, BY RELYI NG ON DECISION OF GULSHAN MALIKTSUPRA). IN OUR CONSIDERED VIEW, THE ASSESSEE HAD MADE BOOKING ON 10 TH SEPTEMBER, 2005 WHEREBY CHEQUE' OF RS. 1 LAC EACH W AS GIVEN W.R.T. BOOKING OF BOTH THE FLATS TO THE BUILDER AND THEREAFTER THE PAYMENTS WERE MADE FROM TIME TO TIME BY THE ASSESSEE TO THE BUILDER WHICH I S NOT IN DISPUTE BY THE REVENUE. THE ASSESSEE HAD MADE THE FOLLOWING PAYMEN TS:- SR NO. DATE OF PAYMENT FLAT NO. 504 DATE OF PAYMENT FLAT NO. 604 1 10.09.2005 1,00,000 10.09.2005 1,00,000 2 01.12.2005 6,20,345 06.12.2005 6,34,560 3 03.05.2006 6,17,440 10.05.2006 4,19,750 4 31.07.2006 2,09,880 18.07.2006 2,09,880 IN OUR CONSIDERED VIEW, IT IS CLEAR THAT THE TILE , INTEREST AND RIGHTS IN THE FLATS IS CREATED WHEREIN SPECIFIC FLAT WAS EARMARKED AND ALLOTTED BY THE BUILDER IN FAVOUR OF THE ASSESSEE IN SEPTEMBER 2005 , HENCE, T HE PERIOD OF HOLDING IN THESE CASE W.R. T. FLATS BEING HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS BEFORE THE SAME WERE SOLD BY THE ASSESSEE IN OCTOBE R/DECEMBER, 2009. HOWEVER, WE WOULD LIKE TO CLARIFY THAT FOR CLAIMING INDEXATION FOR COMPUTING LONG TERM CAPITAL GAIN, THE ACTUAL DATE OF PAYMENT OF THE INSTALLMENTS TOWARDS FLAT WILL TAKEN INTO ACCOUNT FOR COMPUTING LONG TER M CAPITAL GAIN. THE CBDT VIDE CIRCULAR NO. 471 DATED 15-10-1986 AND CIRCULAR NO 672 DATED 16-12- 1993 STIPULATES THAT IN CASE OF ALLOTMENT OF FLAT U NDER SELF FINANCING SCHEME OF DELHI DEVELOPMENT AUTHORITY (DDA) , SIMILAR SCHEME OF CO-OPERATIVE SOCIETY AND OTHER INSTITUTIONS, THE DATE OF ALLOTMENT SHALL BE THE DATE OF CONSTRUCTION FOR THE PURPOSE OF SECTION 54/ 54F OF THE ACT. THUS , WE HOLD THAT THE ASSESSEE ITA 4608/MUM/2015 9 HAS SOLD TWO FLATS WHEREIN THE P~RIOD OF HOLDING WA S MORE THAN THREE YEARS (DATE OF ALLOTMENT SEPTEMBER, 2005 AND DATE OF SALE OCTOBER/DECEMBER, 2009) AND HENCE GAINS ARISING FROM SALE OF TWO FLAT S SHALL BE BROUGHT TO TAX AS LONG TERM CAPITAL GAINS. THUS, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE ID. CIT (A) WHICH WE ARE INCLINED TO UPHOLD/ AFFIRM . HOWEVER, THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF COST INFLATION INDEX BA SED ON ACTUAL PAYMENTS MADE TO THE BUILDER VIS-A-VIS DATE OF PAYMENT FOR COMPUT ING INDEXATION OF COST OF ACQUISITION FOR COMPUTING LONG TERM CAPITAL GAINS. THE DECISION IN THE CASE OF MR GULSHAN MALIK(SUPRA) IS CLEARLY DISTINGUISHABLE AS IN THAT CASE THE BUILDER HAS SPECIFICALLY STATED THAT ALLOTMENT LETTER WILL NOT CREATE ANY TITLE, INTEREST IN THE FLAT. THE RELEVAN T PORTION OF THE DECISION IS REPRODUCED HEREUNDER: THE CONFIRMATION LETTER DATED 6.8.2004 (ANNEXURE 3 ) SPECIFICALLY STATES FIRST, THAT NO RIGHT TO PROVISIONAL! FINAL ALLOTMEN T ACCRUES UNTIL THE BUYER'S AGREEMENT IS SIGNED AND RETURNED TO THE BUILDERS AN D SECOND, THAT NO RIGHT TO CLAIM TITLE/OWNERSHIP RESULTS FROM THE CON FIRMATION LETTER ITSELF. THUS, IT IS CLEAR THAT THE BUILDERS DO NOT INTEND T O CONVEY ANY RIGHT OF PROVISIONAL! FINAL ALLOTMENT OR ANY RIGHT TO CLAIM TITLE/ OWNERSHIP UNDER THE CONFIRMATION LETTER. THERE BEING NO INTENTION T O CONVEY RIGHTS IN THIS DOCUMENT, IT WOULD BE IMPERMISSIBLE FOR THIS COURT TO FIND THAT THE RIGHT TO OBTAIN TITLE/ 'BOOKING RIGHTS' EMANATED FROM THE CO NFIRMATION LETTER. THESE RIGHTS MAY ONLY BE LOCATED IN THE BUYER'S AGREEMENT , AND THUS, THE DATE OF ACQUISITION OF THE CAPITAL ASSET MUST BE CONSIDE RED THE DATE OF SIGNING OF SAID AGREEMENT I.E. 4.11.2004. WE MAY ALSO MENTION HERE THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASHUTOSH GURUNATH HALDIPUR V. ITO IN ITA NO . 5134/MUM/2014 FOR A.Y. 2007-08 VIDE ORDERS DATED 8TH NOVEMBER, 2016 H AD DEALT WITH SIMILAR ISSUE WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. THE RELEVANT PART OF THE TRIBUNAL DECISION IF REPRODUCED BELOW:- ITA 4608/MUM/2015 10 8. WE HAVE HEARD THE LD. D.R. AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE ALONG WI TH HIS WIFE MRS. MALINI RAO HAD PURCHASED THE FIAT FOR WHICH PAYMENT S HAVE BEEN MADE BY THE ASSESSEE AND HIS WIFE. THE ASSESSEE AND HIS WIFE HAD ALSO JOINTLY RAISED BANK LOAN FOR THE ACQUISITION OF THE SAID FI AT . THE ASSESSEE IS CLAIMING THAT HE ACQUIRED THE FIAT FROM THE DATE OF LETTER OF ALLOTMENT BY THE BUILDER I.E. 27-01-2003 WHILE THE A.A. HAS CONS IDERED THE DATE OF AGREEMENT TO SELL WHICH IS 30TH DECEMBER, 2003 AS T HE DATE OF ACQUISITION OF THE FIAT. WE HAVE OBSERVED THAT THE CBDT CIRCULAR NO. 471 DATED 15TH OCTOBER, 1986 RELATING TO ALLOTMENT OF F IAT UNDER SELF FINANCING SCHEME OF DELHI DEVELOPMENT AUTHORITY SHALL BE APPL ICABLE AS WE DO NOT SEE ANY REASON WHY THE SAID CIRCULAR SHALL NOT BE A PPLICABLE TO A PRIVATE BUILDER, AND DATE OF LETTER OF ALLOTMENT I.E. 27-01 -2003 SHALL BE DEEMED TO BE DATE OF ACQUISITION OF FIAT AND HENCE SINCE THE FIAT WAS SOLD ON 24-11- 2006, THE GAINS ACCRUED TO THE ASSESSEE ARE LONG TE RM CAPITAL GAINS AS THE ASSET IS HELD FOR A PERIOD OF MORE THAN THIRTY SIX MONTHS. THE SAID CBDT CIRCULAR NO. 471 DATED 15TH OCTOBER, 1986 IS R EPRODUCED HEREUNDER: 74. CAPITAL GAINS FROM LONG-TERM CAPITAL ASSET - IN VESTMENT IN A FLAT UNDER THE SELF-FINANCING SCHEME OF THE. D ELHI DEVELOPMENT AUTHORITY - WHETHER TO BE TREATED AS CO NSTRUCTION FOR THE PURPOSES OF CAPITAL GAINS 1. SECTIONS 54 AND 54F PROVIDE THAT CAPITAL GAINS A RISING ON TRANSFER OF A LONG-TERM CAPITAL ASSET SHALL NOT BE CHARGED TO TAX TO THE EXTENT SPECIFIED THEREIN, WHERE THE AMOUNT OF CAPITAL GAIN IS INVEST ED IN A RESIDENTIAL HOUSE. IN THE CASE OF PURCHASE OF A HOUSE, THE BENE FIT IS AVAILABLE IF THE INVESTMENT IS MADE WITHIN A PERIOD OF ONE YEAR BEFO RE .OR AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE AND IN CASE OF CON STRUCTION OF A HOUSE. THE BENEFIT IS AVAILABLE IF THE INVESTMENT IS MADE WITHIN THREE YEARS FROM THE DATE OF THE TRANSFER. ITA 4608/MUM/2015 11 2. THE BOARD HAD OCCASION TO EXAMINE AS TO WHETHER THE ACQUISITION OF A FLAT BY AN ALLOTTEE UNDER THE SELF-FINANCING SCHEME (SFS) OF THE D.D.A. AMOUNTS TO PURCHASE OR IS CONSTRUCTION BY THE D.D.A . ON BEHALF OF THE ALLOTTEE. UNDER THE SFS OF THE D.D.A., THE ALLOTMEN T LETTER IS ISSUED ON PAYMENT OF THE FIRST INSTALMENT OF THE COST OF CONS TRUCTION. THE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED OR THE ALLOTTEE WIT HDRAWS FROM THE SCHEME. THE ALLOTMENT IS CANCELLED ONLY UNDER EXCEPTIONAL C IRCUMSTANCES. THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS IS ONLY A FOLLOW-UP ACTION AND TAKING THE DELIVERY OF POSSESSION IS ONLY A FORMALITY. IF THER E IS A FAILURE ON THE PART OF THE D.D.A. TO DELIVER THE POSSESSION OF THE FLAT AFTER COMPLETING THE CONSTRUCTION, THE REMEDY FOR THE ALLOTTEE IS TO FIL E A SUIT FOR RECOVERY OF POSSESSION. 3. THE BOARD HAVE BEEN ADVISED THAT UNDER THE ABOVE CIRCUMSTANCES, THE INFERENCE THAT CAN BE DRAWN IS THAT THE, D. D.A. TA KES UP THE CONSTRUCTION WORK ON BEHALF OF THE ALLOTTEE AND THAT THE TRANSAC TION INVOLVED IS NOT A SALE. UNDER THE SCHEME THE TENTATIVE, COST OF CONST RUCTION IS ALREADY DETERMINED AND THE D.D.A. FACILITATES THE PAYMENT O F THE COST OF CONSTRUCTION IN INSTALMENTS SUBJECT TO THE CONDITIO N 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 INSTALMENTS DOES NOT AFFECT THE LEGAL POSITION STAT ED ABOVE. IN VIEW OF THESE FACTS, IT HAS BEEN DECIDED THAT CASES OF ALLO TMENT OF FLATS UNDER THE SELF-FINANCING SCHEME OF THE D.D.A. SHALL BE TREATE D AS CASES OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. CIRCULAR: NO. 471 [F. NO. 207127/85-IT(A-II)], DATED 15-10-1 986. WE WOULD LIKE TO ALSO MAKE IT CLEAR THAT THE ASSESS EE WILL BE ENTITLED FOR COST INFLATION INDEX(CII) BASED ON THE ACTUAL PAYME NTS MADE AND DATE OF PAYMENT, ACCORDINGLY CII WILL BE WORKED OUT WITH RE FERENCE TO AMOUNT OF PAYMENT AND DATE OF PAYMENT, ON PROGRESSIVE PAYMENT S. THUS, KEEPING IN VIEW THE ABOVE SAID DISCUSSIONS AN D REASONING, THE CLAIM OF THE ASSESSEE IS HEREBY ALLOWED BY US BY HOLDING THA T THE ASSESSEE TRANSFERRED LONG TERM CAPITAL ASSET BEING FLATS ON OCTOBER/DECE MBER 2009 WHICH WERE ACQUIRED IN SEPTEMBER 2005 I.E. PERIOD OF HOLDING I S MORE THAN THIRTY SIX MONTHS IN THE CASE OF BOTH THE FLATS. WE WOULD L IKE TO ALSO MAKE IT CLEAR THAT ITA 4608/MUM/2015 12 THE ASSESSEE WILL BE ENTITLED FOR COST INFLATION IN DEX(CII) BASED ON THE ACTUAL PAYMENTS MADE AND DATE OF PAYMENT, ACCORDINGLY CII WILL BE WORKED OUT WITH REFERENCE TO AMOUNT OF PAYMENT AND DATE OF PAYMENT, ON PROGRESSIVE PAYMENTS. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 4608/MUM/2015 FOR A.Y. 2010-11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2017. # $% &' 23-08-2017 ( ) SD/- SD/- (JOGINDER SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 23-08-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI G BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI