ADIT(IT-1(1), Kolkata, Kolkata V. Shri Anindya Dutta, Kolkata

ITA 613/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70442 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2012
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3); 54F; 2(14); 27; 54; 10

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NOS. 473/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2008-09 MR. ANINDYA DUTTA VS. DEPUTY DIRECTOR OF INCOM E-TAX (PAN: ACXPD9979J) (INTERNATIONAL TAXATION) 1(1) , KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NOS. 613/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2008-09 ADDL. DIRECTOR OF INCOME-TAX VS. MR. ANINDYA DUT TA (INTERNATIONAL TAXATION) 1(1), KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 21.11.2013 DATE OF PRONOUNCEMENT: 29.11.2013 FOR THE ASSESSEE: SHRI RAVI TULSIYAN FOR THE REVENUE: SHRI PANKAJ SINGHANIA, SR. DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM: BOTH, APPEAL OF ASSESSEE AND REVENUE ARE ARISING OU T OF ORDER OF CIT(A)-VI, KOLKATA IN APPEAL NOS. 111/CIT(A)-VI/DDIT-1(1)/10-11/2005-0 6/KOL DATED 02.01.2012. THE ASSESSMENT WAS FRAMED BY DDIT(IT)-1(1), KOLKATA U/S . 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2008-09 VIDE HIS ORDER DATED 20.12.2010. 2. THE INTER-CONNECTED ISSUE IN THESE TWO APPEALS, OF ASSESSEE AND OF REVENUE IS AS REGARDS TO WHETHER THE DATE OF ALLOTMENT OF FLATS B Y DEVELOPER BY WAY OF ALLOTMENT LETTER IS TO BE CONSIDERED AS RIGHT IN THE PROPERTY FOR THE P URPOSE OF COMPUTATION OF CAPITAL GAINS I.E., LONG TERM CAPITAL GAINS (LTCG) OR SHORT TERM CAPITA L GAINS (STCG), AS THE CASE MAY BE. FURTHER, WHETHER THE ASSESSEE IS ENTITLED TO D EDUCTION U/S 54 OR 54F OF THE ACT OR NOT? FOR THIS, ASSESSEE IN ITA NO. 473/K/2012 HAS RAISED FOLLOWING RELEVANT GROUNDS NOS. 2 AND 3: 2 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO IN DISALLOWING THE CL AIM OF DEDUCTION U/S. 54 OF THE INCOME-TAX ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) SHOULD HAVE ALTERNATIVELY HELD THAT THE APPELLANT WAS ENTITLED TO RELIEF U/S 54F OF THE ACT AND SHOULD HAVE DIRECTED THE AO ACCORDINGLY. THE REVENUE IN ITA NO. 613/K/2012 HAS RAISED FOLLOW ING FIVE GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD GOT ONLY THE RIGHT IN THE PROPERTY WHEN THE TWO FLAT WERE ALLOTTED TO HIM ON 04.02.2004 BY THE DEVELOPER S AND IT WAS NOT THE PROPERTY BUT THE RIGHT IN PROPERTY WHICH HAS GOT TRANSFERRED AND THAT THIS TRANSFER OF ASSET BEING HELD FOR A PERIOD OF MORE THAN 36 MONTHS IS IN THE NATURE OF LONG-TERM CAPITAL GAINS? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE TRANSFER OF ASSETS [ TWO FLATS ] TO BE IN THE NATURE OF LONG-TERM CAPITAL GAINS WHEN THE ASSESSEE WAS NOT THAT OWNER OF THE F LATS ON 04.02.2004 [ IE. THE ALLOTMENT DATE ] AS THE TERMS AND CONDITIONS INHERENT TO COMPLETE THE SALE AND BE THE OWNER OF THE FLATS WAS NOT COMPLETE ON THAT DAY. AL SO WHETHER THE RIGHT TO PURCHASE A FLAT [ IN THIS CASE, TWO FLATS ] CAN BE CONSIDERED AS THE OWNERSHIP OF THE FLAT(S) ] 3. WHETHER THE PERIOD OF HOLDING OF A FLAT [ IN THIS CASE, TWO FLATS ] IS TO BE COUNTED FROM THE DATE OF THE RIGHT TO ACQUIRE THE FLAT OR F ROM THE DATE OF ACQUISITION OF THE FLAT(S)? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THEE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN NOT TAKING INTO ACCOUNT THE FACT THAT THE ASSESS EE DID NOT FURNISH THE PURCHASE AGREEMENT TO THE ASSESSING OFFICER WHICH HAS ALSO B EEN DULY MENTIONED IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DT. 20 .12.2010 AND FURTHER, THAT IN ABSENCE OF THE SAME, WHETHER DETERMINATION OF THE N ATURE OF CONTRACT BETWEEN THE ASSESSEE AND THE DEVELOPERS [ SELLERS ] WOULD BE POSSIBLE? 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CITA) WAS JUSTIFIED IN HOLDING THE TRANSFER OF ASSETS [ TWO FLATS ] TO BE IN THE NATURE OF LONG-TERM CAPITAL GAINS WHEN IN THE INDENTURE FOR SALE AND CONVEYANCE DT. 12.09.2007 ENTERED INTO BY THE ASSESSEE WHEN SELLING THE FLATS TO A THIRD PART Y, SPECIFICALLY MENTIONS THAT THE ASSESSEE AND THE DEVELOPERS HAD ENTERED INTO AN AGR EEMENT FOR SALE ON 20.11.2-006, AND THE ASSESSEE HAD BECOME THE OWNER OF THE PROPER TY WITHIN THE MEANING OF MAHARASHTRA OWNERSHIP FLATS AC. IF THAT IS SO, WHET HER THE GAIN ARISING OUT OF TRANSFER OF ASSET WOULD BE IN THE NATURE OF SHORT-T ERM CAPITAL GAINS AS THE SALE WAS MADE ON 12.09.2007? 3. BRIEFLY STATED FACTS LEADING TO, ABOVE ISSUE AND GROUNDS OF APPEAL BOTH BY ASSESSEE AND REVENUE ARE, THAT THE ASSESSEE AND HIS WIFE JOI NTLY BOOKED TWO FLATS I.E. APARTMENT NO. 1103 & 1104 ON 11 TH FLOOR, TOWER-A OF ASHOKA TOWER, PAREL, MUMBAI FROM ONE DEVELOPER NAMELY, PENINSULA LAND LTD. ALSO KNOWN AS MORAJEE G OCULDAS SPINNING & WEAVING COMPANY LIMITED AND PAID AN AMOUNT OF RS.4,64,705/- AS INITIAL BOOKING PAYMENT ON 04.02.2004. THE TOTAL CONSIDERATION FOR THE ABOVE- STATED FLATS WAS RS.1,12,11,892/- TO BE 3 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 PAID INDIVIDUALLY BY THE ASSESSEE. THE BOOKING OF T HESE FLATS WAS DONE ON 04.02.2004 BY MAKING A PAYMENT OF RS.4,64,705/- I.E. INITIAL BOOK ING AMOUNT. THE DEVELOPER VIZ., PENINSULA LAND LTD. ACKNOWLEDGED THE BOOKING AND SU BSEQUENTLY, ALLOTTED FLAT BY ISSUING ALLOTMENT LETTER DATED 12.05.2004. THE FLATS ALLOT TED WERE APARTMENT NOS. 1103 & 1104 ON 11 TH FLOOR, TOWER-A OF ASHOKA TOWER, PAREL, MUMBAI. AC CORDING TO ASSESSEE, THE ALLOTMENT LETTER ISSUED BY THE DEVELOPER I.E. PENINSULA LAND LTD. IN EXCHANGE OF INITIAL PAYMENT WITH PERIODIC PAYMENTS BETWEEN THE PERIOD 29.05.2004 TO 07.09.2007, THEREBY GIVING EFFECT TO THE AGREED BALANCE PAYMENT, THE ASSESSEE HAD BEEN V ESTED WITH LEGAL RIGHT OF OWNERSHIP OVER THE IDENTIFIED PROPERTIES I.E. TWO FLATS. NO DOUBT THE ASSESSEE PAID INITIAL BOOKING AMOUNT ON 04.02.2004 AND THE DEVELOPER ISSUED ALLOT MENT LETTER ON 12.05.2004 STARTING WITH THE INITIAL BOOKING PAYMENT AND THEREAFTER FOL LOWED UP BY PERIODIC PAYMENTS BETWEEN 29.05.2004 TO 07.09.2007. THE CONTRACT FOR TRANSFE R OF THE IMMOVABLE PROPERTY BEING FLAT NOS. 1103 AND 1104, ON 11 TH FLOOR, TOWER-A OF ASHOKA TOWER, PAREL, MUMBAI ENTE RED BETWEEN THE ASSESSEE AND THE DEVELOPER FOR A CONSID ERATION OF RS.1,12,11,892/- FOR BOTH FLATS PAID INDIVIDUALLY BY ASSESSEE. THE ASSESSEE CONTENDED THAT WITH THE DATE OF ALLOTMENT OF FLATS VIDE LETTER DATED 12.05.2004 I.E. ALLOTMEN T LETTER THE ASSESSEE BECAME LEGAL OWNER AND HAS VESTED RIGHT IN THE PROPERTY IDENTIFIED WIT H AN AGREEMENT FOR BALANCE PAYMENTS. THE ASSESSEE SOLD THESE PROPERTIES NAMELY, APARTMEN T NO. 1103 & 1104 ON 12.09.2007, HELD BY HIM SINCE 12.05.2004 I.E. THE DATE OF ALLOT MENT, TO ONE SHRI ASHIM AHUJA VIDE REGISTERED SALE AGREEMENT FOR A CONSIDERATION OF RS .2,96,50,000/-. ACCORDING TO ASSESSEE, HE REALISED LTCG OF RS.1,84,38,18/-. IT WAS ALSO CLAIMED BY THE ASSESSEE THAT THE SALE PROCEEDS RECEIVED OUT OF SALE OF APARTMENT NO. 1103 & 1104 ON 11 TH FLOOR, TOWER-A OF ASHOKA TOWER, PAREL, MUMBAI WAS THEREAFTER INVESTED IN PURCHASING A NEW FLAT FOR A TOTAL CONSIDERATION OF RS.2,78,56,224/- FOR WHICH THE ASS ESSEE CLAIMED BENEFIT U/S. 54 OF THE ACT. BUT ON THESE FACTS, THE AO REJECTED BOTH THE CLAIMS OF THE ASSESSEE QUA LTCG AS WELL AS REJECTING THE DEDUCTION U/S. 54 OF THE ACT. FOR RE JECTING THE CLAIM OF LTCG, THE AO OBSERVED AT PAGE 6 OF HIS ORDER AS UNDER: THE CONTENTION OF ASSESSEE IS NOT ACCEPTED. MERE A LLOTMENT OF A FLAT DOES NOT ENTITLE ONE TO BECOME THE OWNER OF THE FIAT. THE OW NERSHIP WOULD MEAN THE RIGHT TO ENJOY THE PROPERTY, POSSESSION WHICH INCLU DES THE RIGHT TO EXCLUDE THE OTHERS. WHERE THE POSSESSION OF A PROPERTY IS ACQUI RED, WITH A RIGHT TO EXERCISE SUCH NECESSARY CONTROL OVER THE PROPERTY ACQUIRED W HICH IT IS CAPABLE OF, IT IS THE INTENTION TO EXCLUDE OTHERS WHICH EVINCES AN EL EMENT OF OWNERSHIP. THE ASSESSEE HAS NOT PAID THE ENTIRE CONSIDERATION AND WAS NOT IN ACTUAL PHYSICAL POSSESSION OF THE ENTIRE PROPERTIES CONTRACTED TO B E SOLD. THE TERMS AND CONDITIONS WERE NOT CLEARLY MENTIONED IN WRITING. T HUS ASSESSEE COULD NOT BE CONSIDERED AS OWNER OF THE PROPERTY BEFORE 12.9.200 4. FURTHER, THE ASSESSEE HAD NOT TAKEN THE FLAT UNDER SCHEME OF DDA. NEITHER IS THE ALLOTMENT OF FLAT 4 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 DONE BY ANY CO OPERATIVE SOCIETY. THE ALLOTMENT OF FLAT BY PENINSULA LAND LTD. IS SIMILAR TO ANY COMMERCIAL BOOKING OF FLAT AND IS NOT EQUIVALENT TO SCHEME OF DDA FLAT AS IN PARA 2 OF CIRCULAR 471 DATED L 5.10. 86. IN THE CASE OF ASSESSEE THE TRANSACTION IS NOT THAT THE PENINSULA LAND LTD. IS UNDERTAKING CONSTRUCTION ON BEHALF OF ASSESSEE. THE TRANSACTION IS PURELY A SALE. THE ASSESSEE NEED NOT COMPENSATE THE COMPANY PENINSULA LAND LTD. FOR INCR EASE IN COST, IF ANY. THE ASSESSEE CANNOT CLAIM THE PURCHASE OF FLAT FROM A C OMMERCIAL DEVELOPER AS SIMILAR TO A CONSTRUCTION ACTIVITY. HENCE THE ABOVE CIRCULAR ARE NOT APPLICABLE IN CASE OF THE ASSESSEE. THE FACT THAT THE ASSESSEE CAN HAVE RECOURSE TO FILLING OF SUIT IN CASE OF NON DELIVERY OF FLAT WAS STATED BY ASSESSEE. HOWEVER, NO DOCUMENTARY EVIDENCE HAS BEEN FILED IN SUPPORT OF S UCH CLAIM. THE INFERENCE BY ASSESSEES A/R IN LETTER DATED 09.12.10 IS NOT FROM ANY DOCUMENTS, AGREEMENTS PLACED ON RECORD. IT APPEARS THAT THE POINTS IN CIRCULAR NO.471 HAS BEEN STATED BY THE ASSESSEE TO HIGHLIGHT AS IF THE CIRCULAR IS APPLICABLE TO IT. 4. AND FOR REJECTING THE CLAIM OF DEDUCTION U/S. 54 OF THE ACT THE AO OBSERVED AT PAGES 2 & 3 AS UNDER: SECTION 54 OF THE ACT STATES THAT THE ASSET SHALL BE BUILDINGS OR LANDS APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE. THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. INCOME FROM HOUSE PROPERTY IS DEFINED IN SECTION 22 OF THE ACT. INCOME FROM HOUSE PROPERTY. THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUIL DINGS OR LANDS APPURTENANT THERETO OF WHICH ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY B USINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEAB LE TO INCOME-TAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FRO M HOUSE PROPERTY. IT MEANS THAT THE ASSESSEE SHOULD BE OWNER OF THE PROP ERTY FOR THE SAID ASSET TO QUALIFY FOR BENEFIT UNDER SECTION 54 OF THE ACT. THE QUESTION THEN IS WHETHER THE ASSESSEE WAS OWNER OF THE PROPERTY BEFORE 12.9.2004. OWNER OF THE PROPERTY IS DEFINED IN SECT ION 27 OF THE ACT OWNER OF HOUSE PROPERTY , ANNUAL CHARGE ETC., DEFINED. FOR THE PURPOSES OF SECTIONS 22 TO 26 (IIIA) A PERSON WHO IS ALLOWED TO TAKE TO RET AIN POSSESSION OF ANY BUILDING OR PART THEREOF IN PART PERFORMANCE OF A CONTRACT O F THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 ( 4 OF 1882), SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART THEREOF; (IIB) A PERSON WHO ACQUIRES ANY RIGHTS ( EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING O NE YEAR ) IN OR WITH RESPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY S UCH TRANSACTION AS IS REFERRED TO IN CLAUSE (F) OF SECTION 269UA, SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART THEREOF SECTION 269UA (F) OF THE ACT DEFINES TRANSFER AS TR ANSFER BY WAY OF SALE AND INCLUDES PART PERFORMANCE UNDER TRANSFER OF PROPERT Y ACT, 1882.IS A SETTLED POSITION THAT UNDER THE COMMON LAW, OWNER MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLYING WITH THE REQUIREMENTS OF LAW SUCH AS THE TRANSFER OF PROPERTY ACT, REGISTRATION ACT, ETC. UNDER THE TRANSFER OF PROPERTY ACT, THE TRANSFER OF OWNERSHIP CAN BE E FFECTED ONLY BY MEANS OF A REGISTERED INSTRUMENT. REFERENCE TO SECTION 54 OR, FOR THAT MATTER SECTION 55 OF THE TRANSFER OF PROPERTY ACT EMPHASIZES THE FACT TH AT THE LEGAL TITLE DOES NOT 5 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 PASS UNLESS THERE IS A DEED OF CONVEYANCE DULY REGI STERED. IN THIS CASE SINCE THE DEED WAS REGISTERED ON 12.9.2007 HENCE AS PER THIS REQUIREMENT, THE ASSET IS NOT A LONG TERM CAPITAL ASSET. 5. AGGRIEVED AGAINST THE ORDER OF AO, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF LTCG OF THE ASSESSEE VIDE PARA 7 TO 13 AS UNDER: 7.I HAVE DULY CONSIDERED THE OBSERVATIONS OF THE A SSESSING OFFICER IN THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE ASS ESSEE. THE APPELLANT HAD BOOKED TWO FLATS FOR A CONSIDERATION OF RS.1,12 ,11,892/-. HE PAID AN AMOUNT OF RS.4,64,705/- AS INITIAL BOOKING AMOUNTS ON 4.2.2004 TO M/S. PENINSULA LAND LTD. THE BUILDER ISSUED A RECEIPT AND AN ALLOTMENT LETTER DATED 12.05.2004 TO THE APPELLANT. THE ACKNOWLEDGME NT RECEIPT AND ALLOTMENT LETTER SERVED ON 12.05.2004 WERE FOR APAR TMENT NO. 1103 AND 1104 ON 11 TH FLOOR, TOWER A OF ASOKA TOWER, PAREL MUMBAI WITH THE INTENTION OF BUYING THEM. THE BUILDER IN EXCHANGE O F THE TOKEN AMOUNT RECEIVED HAD VESTED UPON THE APPELLANT LEGAL RIGHTS OVER THE FLATS TO BE CONSTRUCTED WITH THE AGREEMENT FOR BALANCE PAYMENT AND ON FULFILLING THE OTHER CONDITIONS. THE APPELLANT HAS SUBMITTED THAT FROM THE DATE OF BOOKING IE., 4.4.2004 THE PROPERTY HAS BEEN IDENTIFIED AND HELD BY THE APPELLANT FOR A PERIOD OF MORE THAN 36 MONTHS ARE RIGHT IN THE PROP ERTY HAS ARISEN TO THE ASSESSEE FROM THE DATE OF BOOKING OF THE FLAT. AS P ER THE APPELLANT, HE HAS BEEN HOLDING ITS RIGHT OVER THE SAID PROPERTY FOR A PERIOD OF MORE THAN 36 MONTHS. 8. SECTION 2(42A) DEFINES A SHORT TERM CAPITAL ASSE T AS FOLLOWS: 2(42A) SHORT-TERM CAPITAL ASSET MEANS A CAPITAL A SSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY-SIX MONTHS IMMEDIATELY PRE CEDING THE DATE OF ITS TRANSFER: PROVIDED THAT IN THE CASE OF A SHARE HELD IN A COMP ANY OR ANY OTHER SECURITY LISTED IN A RECOGNISED STOCK EXCHANGE IN INDIA OR A UNIT OF THE UNIT TRUST OF INDIA ESTABLISHED UNDER THE UNIT TRUST OF INDIA ACT , 1963 (52 OF 1963) OR A UNIT OF A MUTUAL FUND SPECIFIED UNDER CLAUSE (23D) OF SECTION 10 OR A ZERO COUPON BOND, THE PROVISIONS OF THIS CLAUSE SHALL HA VE EFFECT AS IF FOR THE WORDS THIRTY-SIX MONTHS , THE WORDS TWELVE MONTHS HAD BEEN SUBSTITUTED. 9. THE WORD CAPITAL ASSET HAS BEEN DEFINED IN SECTI ON 2(14) AS FOLLOWS:- CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE- (I) ANY STOCK-IN-TRADE, CONSUMABLE STORES OR RAW MATERI ALS HELD FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION; (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PROPERTY (INCLUDING WEARING APPAREL AND FURNITURE) HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM, BUT EXCLUDES - (A) JEWELLERY; (B) ARCHAEOLOGICAL COLLECTIONS; 6 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 (C) DRAWINGS; (D) PAINTINGS; (E) SCULPTURES; OR (F) ANY WORK OF ART. 10. IT IS AN EXCLUSIVE DEFINITION AND CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE. THE PROPERTY INCLUDES MOVABLE & IMMOVABLE AND RIGHTS IN THE SAME THE ASSESSEE HAS BEEN BESTOWED WITH AN ALLOTMENT LETTER FOR APARTMENT NO. 1103 & 1104 IN 11 TH FLOOR OF ASHOK TOWERS, MUMBAI. HOWEVER, THE PROPERTY HAS STILL TO COME IN EXISTENC E. THERE IS NO TRANSFER OF PROPERTY BY ANY DOCUMENTS REGISTERED WITH THE TEHSI LDAR. THERE IS NO PART PERFORMANCE AS PER SECTION 53A OF THE TRANSFER OF P ROPERTY ACT, 1882. IN THE CASE OF ANY DISPUTE THE ASSESSEE MAY NOT BE ABLE TO HAVE ANY SPECIFIC PERFORMANCE OF THE CONTRACT UNDER SPECIFIC PERFORMA NCE ACT OR UNDER INDIAN CONTRACT ACT, 1872. THE ASSESSEE MAY BE ELIGIBLE FO R LIQUIDATED DAMAGES BUT NOT FOR SPECIFIC PERFORMANCE, IF THE PROPERTY IS NO CONSTRUCTED BECAUSE OF ANY REASONS AT THE TIME OF DISPUTE. THE ASSESSEE HAS ON LY A RIGHT IN THE FLAT WHICH IS STILL TO COME IN EXISTENCE. THE AGREEMENT OF BOO KING OF THE FLAT WITH PENINSULA LAND LTD., HAS BEEN EVEN REGISTERED ON 08 .12.2006, WHICH ONLY GIVES RIGHTS TO THE ASSESSEE AGAINST APARTMENTS TO COME IN EXISTENCE BUT NO TITLE UNDER THE TRANSFER OF PROPERTY ACT, 1882 HAS BEEN PASSED ON TO THE APPELLANT. 11. THE RIGHT IN PROPERTY/FLAT HAS NOT BECOME FINAL SINCE THE INSTALLMENTS ARE STILL BEING PAID BY THE APPELLANT AND IN CASE OF AN Y VIOLATION OF THE PROVISIONS OF THE AGREEMENT MAY RESULT IT NON-ELIGI BILITY OF THE APPELLANT TO GET THE SAID FLATS. IT IS A CONTINGENT CONTRACT OF THE APPELLANT WITH THE BUILDER. THE RIGHT TO OWN THE FLAT WILL COME IN EXISTENCE ON LY IF THE FLAT IS READY FREE FROM LEGAL DISPUTES, THE APPELLANT PAYS ENTIRE MONE Y OF ITS TRANSFER AND REGISTERED THEREAFTER WITH THE TEHSILDAR ETC. THERE FORE, THERE IS NO RIGHT IN THE IMMOVABLE PROPERTY GIVEN TO THE ASSESSEE TILL T HE DATE OF THE SALE OF ITS RIGHT TO GET A FLAT UPON FULFILLING CERTAIN CONDITI ONS. THE PERIOD OF THREE YEARS IS TO BE COUNTED FROM THE INITIAL DATE OF PAYMENT F OR THE BOOKING OF FLAT BECAUSE THAT RIGHT CAME INTO EXISTENCE FROM THE DAT E OF ISSUANCE OF ALLOTMENT LETTER. THEREFORE, IT CAN BE SAID THAT THE ASSESSEE HAS GOT LTCG ON THE TRANSFER OF ITS RIGHTS BY REGISTRATION OF AGREEMENT BETWEEN THE APPELLANT AND THE BUYER. THE PROVISIONS OF SECTION 48 APPLY FOR I NDEXED COST OF ACQUISITION SINCE THE ASSET/FLAT HAS BEEN HELD BY THE ASSESSEE TILL ITS DISPOSAL AS RIGHT IN THE PROPERTY TO BE CONSTRUCTED ALTHOUGH THE SAID PR OPERTY WAS NO IN HIS POSSESSION. 12. AS PER THE DEFINITION OF CAPITAL ASSET A RIGHT HAS ACCRUED TO THE ASSESSEE ON THE DATE OF PAYMENT OF THE FIRST INSTALLMENT WHI CH IS A LONG TERM CAPITAL ASSET AFTER EXPIRY OF THREE YEARS FROM THE DATE OF PAYMENT. THIS RIGHT IS ACCRUING TO THE ASSESSEE CONTINUOUSLY ON PAYMENTS A ND WHATEVER PAYMENTS HAVE BEEN DONE FOR MORE THAN THREE YEARS WILL BE CO NSIDERED AS LONG TERM ASSET AS PER THE DEFINITION OF CAPITAL ASSET READ W ITH THE DEFINITION OF LONG TERM CAPITAL GAIN IN SECTION 2(29A) ALTHOUGH THE IN DEXED COST OF ACQUISITION WILL BE AS PER PAYMENT SCHEDULE U/S.48. A LONG TERM CAPITAL ASSET MEANS A CAPITAL ASSET WHICH IS NOT A SHORT-TE RM CAPITAL ASSET AND AS PER SECTION 2(42A) AS SHORT-TERM CAPITAL ASSET MEAN S A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY SIX MONTHS IMM EDIATELY PRECEDING THE 7 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 DATE OF ITS TRANSFE4R. THE RIGHT HAS ACCRUED TO THE APPELLANT FROM THE DATE OF ISSUANCE OF ALLOTMENT LETTER WHICH HAS BEEN SOLD AS A RIGHT AFTER THREE YEARS. THEREFORE, IT IS HELD TO BE A LONG TERM CAPITAL ASS ET. THE SALE OF ITS RIGHT IS THEREFORE HELD TO BE A LC LIABLE TO TAX BY THE AO. 13. HOWEVER, THE CIRCULAR NO 471 AND 672 ARE NOT AP PLICABLE IN THE CASE OF THE ASSESSEE SINCE THE FLAT/HOUSE IS NOT ALLOTTED B Y THE DELHI DEVELOPMENT AUTHORITY AND/OR ANY CO-OPERATIVE SOCIETIES AND OTH ER INSTITUTIONS, WHOSE SCHEMES OF ALLOTMENT AND CONSTRUCTION ARE SIMILAR T O THOSE OF THE DELHI DEVELOPMENT AUTHORITY. THESE CIRCULARS ARE APPLICAB LE FOR THE PURPOSE OF PURCHASE OF FLATS IN FUTURE AND NOT IN REVERSE TO T HE PROPERTY BEING CONSTRUCTED. THE ASSESSING OFFICER IS THEREFORE DIR ECTED TO CALCULATED THE LONG TERM CAPITAL GAIN AND GIVE BENEFIT OF INDEXED COST OF ACQUISITION AS PER THE PAYMENT SCHEDULED AFTER VERIFYING THE PAYME NTS FROM THE BANK ACCOUNT OF THE APPELLANT. HOWEVER, IT IS HELD THAT THESE ARE NOT LONG TERM CAPITAL GAIN ARISING FROM THE SALE OF IMMOVABLE PRO PERTY. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 6. BUT DISALLOWED THE CLAIM OF DEDUCTION U/S. 54 OF THE ACT VIDE PARA 14 TO 16 AS UNDER: 14. AFTER HOLDING THAT IT IS A LTCG, IT IS FURTHER HELD THAT THE PROVISIONS OF SECTION54 ARE NOT APPLICABLE IN THE CASE OF THE ASS ESSEE AS PER THE DETAILED REASONS GIVEN BY THE ASSESSING OFFICER IN THE ASSES SMENT ORDER. SECTION 54 IS APPLICABLE ONLY IN A CASE WHERE THE TRANSFER IS OF A LONG TERM CAPITAL ASSET BEING BUILDING OR LAND .APPURTENANT THEREOF AND/OR BELONG A RESIDENTIAL HOUSE, THE INCOME OF WHICH S CHARGEABLE UNDER THE HEAD IN COME FROM HOUSE PROPERTY. IT IS LIKE ANY OTHER RIGHT OF PURCHASE OF ANY PROPERTY INCLUDING. MOVABLE PROPERTY. IT IS DEALING IN THE RIGHT OF AN IMMOVABLE PROPERTY WITHOUT ACTUAL DELIVERY BY THE APPELLANT. 15. THE CONDITIONS OF SECTION 54 ARE NOT FULFILLED. THE APPELLANT HAS NEVER BECOME OWNER OF THE PROPERTY BY ANY EXPRESS OR DEEM ED PROVISIONS OF THE LAW INCLUDING SECTION 53A OF TRANSFER OF PROPERTY ACT. THE APPELLANT DOES NOT QUALIFY TO BE THE OWNER OF THE HOUSE PROPERTY AS PE R SECTION 27 OF THE I.T, ACT, I1 981. THE OWNER OF A HOUSE PROPERTY IS A PERSON W HO HAS GOT THE VALID LEGAL RIGHT OF THE PROPERTY REGISTERED IN HIS OWN NAME UN DER THE TRANSFER OF PROPERTY ACT, 1882 OR DEEMED OWNER AS PER PROVISION OF SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882. THE APPELLANT HAS A CQUIRED A RIGHT ON THE DATE OF BOOKING OF THE FLAT BY WAY OF AN AGREEMENT W.E.F . 4.2.2004 WHICH IS STILL TO BE CONSTRUCTED. THEREFORE, THE APPELLANT IS NOT ENT ITLED TO THE BENEFITS U/S 54 OF INCOME TAX ACT, 1961. THEREFORE, THE ORDER OF THE A SSESSING OFFICER IS UPHELD AND APPEAL OF THE ASSESSEE IS DISMISSED. 16. IN THIS CASE THERE IS NO LAND OR BUILDING ON TH E DATE OF TRANSFER AND IT IS MERELY A RIGHT TO GET A FIAT IN FUTURE WHICH (RIGHT ) IS BEING SOLD BY THE APPELLANT. THE APPELLANT HAS BOOKED TWO FLATS ALTHO UGH IN THE JOINT NAME OF HIS WIFE. AS PER THE SUBMISSIONS DURING THE APPELLATE P ROCEEDINGS THE ENTIRE AMOUNT WAS PAID BY THE ASSESSEE FROM HIS OWN AND EN TIRE GAIN HAS BEEN EARNED BY THE APPELLANT THEREFORE, THE RIGHT OF THE ASSESSEE WAS IN TWO FLATS TO BE CONSTRUCTED IN FUTURE AND NOT A SINGLE HOUSE AS IS REQUIRED IN THE PROVISIONS 8 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 OF SECTION 54. THEREFORE, THE ASSESSEE DOES NOT FU LFILL EVEN THIS CONDITION FULLY AND THE ENTIRE LTCG CANNOT BE OTHERWISE ELIGIBLE FO R DEDUCTION U/S. 54. AGGRIEVED, AGAINST THE ALLOWANCE OF CLAIM OF LTCG T HE REVENUE CAME IN APPEAL AND AGAINST THE CONFIRMATION OF DISALLOWANCE OF DEDUCTION U/S. 54 OF THE ACT ASSESSEE CAME IN APPEAL BEFORE US AND ALTERNATIVELY, ASSESSEE ALSO CLAIMED DEDUCTION U/S. 54F OF THE ACT. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ADMITTED FACTS ARE THAT THE ASSESSEE WITH JOINT NAME OF HIS WIFE BOOKED TWO FLATS I.E., APARTMENT NO.1103 AND 1104 IN ASHOKA TO WER, PAREL, MUMBAI WITH A INITIAL BOOKING AMOUNTING OF RS.4,64,705/- ON 04-02-2004 TO PENINSULA LAND LTD. SUBSEQUENTLY THE DEVELOPER PENINSULA LAND LTD. ON RECEIPT OF BOO KING AMOUNT ISSUED AN ALLOTMENT LETTER FOR THESE TWO FLATS ON 12-05-2004 WITH PERIODIC PAY MENTS CONDITIONS STARTING FROM 29-05- 2004 TILL 07-09-2007 THEREBY GIVING EFFECT TO THE A GREEMENT FOR BALANCE PAYMENT THE APARTMENTS, WHICH DURING THE ABOVE STIPULATED PERIO D WAS UNDER CONSTRUCTION. THE ASSESSEE AND THE BUILDER/DEVELOPERS ENTERED INTO CONTRACT FO R IDENTIFIED AND IMMOVABLE PROPERTY, HELD BY ASSESSEE, ON 20-11-2006 AND THE SAID PURCHASE AG REEMENT WAS REGISTERED ON 08-12-2006. THE ASSESSEE SOLD THIS IMMOVABLE PROPERTY ON 12.9.2 007 I.E. TWO APARTMENTS NO. 1103 & 1104 IN ASHOKA TOWER, PAREL, MUMBAI TO ONE SHIR ASH IM AHUJA VIDE REGISTERED SALE AGREEMENT FOR A TOTAL CONSIDERATION OF RS.2,96,50,0 00/- THEREBY REALIZING A CAPITAL GAIN OF RS.1,84,38,108/- AND THE SAME WAS DISCLOSED IN HIS RETURN OF INCOME FILED FOR THE RELEVANT AY 2008-09. THE ASSESSEE IN HIS RETURN OF INCOME CL AIMED DEDUCTION U/S. 54 OF THE ACT FOR THE REASON THAT THIS TOTAL SALE CONSIDERATION OF RS .2,78,56,224/- WAS INVESTED IN PURCHASE OF A NEW FLAT IN THE VERY AY I.E., 2008-09. THE ASSESS ING OFFICER REJECTED THE CLAIM OF THE ASSESSEE FOR LTCG FIRSTLY FOR THE REASON THAT ELEME NT OF OWNERSHIP WAS ABSENT IN THE CASE OF THE ASSESSEE ON OR BEFORE 08-12-2006, AS THE DAT E OF PURCHASE AGREEMENT WAS REGISTERED BY THE ASSESSEE ON 08-12-2006 AND NOT ON THE DATE O F BOOKING OF PROPERTY ON 04-02-2004 OR ALLOTMENT LETTER ISSUED BY THE BUILDER/DEVELOPER ON 12-05-2004. ACCORDING TO AO, THE MERE ALLOTMENT LETTER WAS NOT A LEGAL RIGHT AND AS PER S ECTION 54 & 55 OF THE TRANSFER PROPERTY ACT LEGAL TITLE OVER A PROPERTY DOES NOT PASS UNLES S THERE IS A DEED OF CONVEYANCE DULY REGISTERED. ACCORDINGLY, AO ASSESSED THE ENTIRE REC EIPT OF SALE PROCEEDS AMOUNTING TO RS.2,78,56,224/- AS STCG IN THE HANDS OF THE ASSESS EE. NOW WE HAVE TO GO THROUGH THE TERM OWNERSHIP WHICH IS NOT CONNOTATIVE OF HAVING POSSESSION OVER A PROPERTY. THE WORD OWNERSHIP IMPLIES DOMAIN AND CONTROL OVER A PROPE RTY. CAPITAL ASSET INCLUDES EVERY KIND OF PROPERTY AS GENERALLY UNDERSTOOD. THE DEFINITION OF CAPITAL ASSET UNDER THE ACT, 9 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 REFERRING TO PROPERTY OF ANY KIND CARRIES NO WOR DS OF LIMITATION. THE DEFINITION IS OF WIDE AMPLITUDE TO INCLUDE EVERY POSSIBLE INTEREST THAT A PERSON MAY HOLD AND ENJOY. THE DEFINITION OF CAPITAL ASSET REFERS TO PROPERTY OF ANY KIND HELD BY AN ASSESSEE. IN CONTRADISTINCTION TO THE WORD OWNER OR OWNED DE FINITION USES THE PHRASE HELD. THIS VIEW IS ALSO CONFIRMED BY HONBLE MADRAS HIGH COURT IN THE CASE OF MADATHIL BROTHERS V. DCIT (2008) 301 ITR 345 (MAD), WHEREIN IT IS HELD THAT, A READING OF SECTION 45 SHOWS THAT CAPITAL GAINS TAX IS CHARGEABLE ON ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF T HE CAPITAL ASSET . READ IN THE CONTEXT OF THE DEFINITIONS OF CAPITAL ASSET AND TRANSFER THE SECTION CARRIES NO WORDS OF LIMITATION TO THE EFFEC T THAT A TRANSFER EFFECTED BY A PERSON BACKED UP WITH A TITLE PASSED ON UNDER A REGISTERED DEED ALONE COULD BE CONSIDERED AS RESULTING IN A PROFIT OR GAIN ASSESSABLE UNDER SECT ION 45. ALL THAT THE SECTION LOOKS AT IS THE TRANSFER OF A CAPITAL ASSET HELD AS UNDERSTOOD UNDE R SECTION 2(14) AND UNDER SECTION 2(47). ACCORDING TO US, THE AO FAILED TO APPRECIATE THAT T HE ASSESSEE HAS ACQUIRED A LEGAL RIGHT IN THE CAPITAL ASSET IN TERMS OF SEC. 247OF THE ACT R. W.S. 53A OF THE TRANSFER OF PROPERTY ACT 1882 I.E. THE TWO APARTMENTS FROM THE BUILDER/DEVEL OPER, PAREL, LAND LTD., VIDE LETTER ISSUED ON 12-05-2004 WITH THE INITIAL BOOKING PAYMENT AND ALSO IN VIEW OF THE PERIODIC PAYMENT STARTING FROM 29-05-2004 TILL 07-09-2007, THEREBY G IVING EFFECT TO THE AGREEMENT FOR BALANCE PAYMENT, IN RESPECT OF THE IDENTIFIED PROPERTY I.E. THE TWO APARTMENTS, WHICH DURING THE ABOVE STIPULATED PERIOD WAS UNDER CONSTRUCTION. THE FACT NEEDS APPRECIATION IS THAT THE PERIODIC PAYMENTS FOR THE PERIOD I.E., IDENTIFIED A ND HELD BY THE ASSESSEE STRETCHED FOR A PERIOD OF MORE THAN 36 MONTHS I.E., FROM THE DATE O F ALLOTMENT OF FLATS VIDE ALLOTMENT LETTER DATED 12-05-2004 TILL 07-09-2007. THE SAID ALLOTMEN T ISSUED ON 12-05-2004 AND THE ACKNOWLEDGEMENT RECEIPT OF INITIAL BOOKING AMOUNT H AD VESTED UPON HIM TITLE, DOMAIN AND CONTROL OVER THE APARTMENTS IDENTIFIED BY HIM. THE ASSESSEE WAS HAVING LEGAL RIGHT OVER THE PROPERTY AND FOR THIS WE HAVE TO NOTE THE DEFINITIO N OF CAPITAL ASSET WHERE THE WORD USED IS HELD IN THE SECTION 2(14) READ WITH EXPLANATION T O SECTION 48 OF THE ACT CLEARLY DEPICTS RIGHTS OF THE ASSESSEE OVER A CAPITAL ASSET AND ALS O SPECIFIES THE BENEFIT OF INDEXATION TO BE GRANTED TO THE ASSESSEE ON THE BASIS OF PAYMENTS MA DE BY HIM FOR ACQUIRING THE SAID ASSET. THE RELEVANT DEFINITION OF CAPITAL ASSET AS PROVIDE D IN SECTION 2(14) READS AS UNDER:- DEFINITIONS. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIR ES, - (14)CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE 10 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 THE ABOVE STATED TWO APARTMENTS DO NOT FALL UNDER A NY OF THE EXCLUSION CLAUSES AS IS GIVEN IN SECTION 2(14) OF THE ACT. THE DEFINITION OF LTCG IS PROVIDED IN SECTION 2(29A) OF THE ACT AS READS AS UNDER:- (29A) LONG-TERM CAPITAL ASSET MEANS A CAPITAL A SSET WHICH IS NOT A SHORT-TERM CAPITAL ASSET ; FURTHER, THE DEFINITION OF STC ASSET AS PROVIDED IN SECTION 2(42A) OF THE ACT READS AS UNDER:- (42A) [SHORT-TERM CAPITAL ASSET MEANS A CAPITAL A SSET HELD BY AN ASSESSEE FOR NOT MORE THAN (THIRTY-SIX) MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER]; THE EXPLANATION TO SECTION 2(48) OF THE ACT READS A S UNDER:- MODE OF COMPUTATION. 48. (III) INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INFLATION I NDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION IN DEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGI NNING ON THE 1 ST DAY OF APRIL, 1981, WHICHEVER IS LATER; 8. FROM THE ABOVE PROVISIONS IT IMPLIES THAT ANY CA PITAL ASSET HELD BY THE ASSESSEE FOR MORE THAN A PERIOD OF THIRTY-SIX MONTHS IS IN THE N ATURE OF LONG TERM CAPITAL ASSET. FURTHER, THE WORD HELD USED IN SECTION 2(14) OF T HE ACT IMPLIES RIGHT OVER A CAPITAL ASSET. HERE IN THE PRESENT CASE, THE RIGHT OVER THE PROPER TY I.E. BEING APARTMENT NO.1103 & 1104 IN ASHOKA TOWER, PAREL, MUMBAI HELD BY THE ASSESSEE FO R A PERIOD OF MORE THAN THIRTY-SIX MONTHS WAS RIGHTLY HELD BY CIT(A) TO BE IN THE NATU RE OF LTCS AND SALE OF THE SAID RIGHT WAS HELD TO BE LTCG LIABLE TO TAX. IN SUCH CIRCUMST ANCES, NOW THE QUESTION ARISES AS RAISED BY REVENUE IN ITS GROUNDS OF APPEAL VIDE GROUND NO. 1-5, THE FIRST QUESTION, WHETHER THE PERIOD OF HOLDING OF A FLAT IS TO BE COUNTED FROM T HE DATE OF THE DATE OF THE RIGHT TO ACQUIRE THE FLAT OR FROM THE DATE OF ACQUISITION OF THE FLA T. THIS QUESTION HAS BEEN ANSWERED EXACTLY ON SAME FACTS BY DELHI TRIBUNAL IN THE CASE OF PRAVEEN GUPTA V. ACIT (2011) 52 DTR 334 (DEL) (TRIB), IT WAS HELD THAT THAT THE FLAT WAS AL LOTTED TO THE ASSESSEE VIDE ALLOTMENT LETTER 2 ND AUG., 1995 AND AGREEMENT WAS EXECUTED ON 27 TH SEPT., 1995. THE ASSESSEE STARTED MAKING PAYMENT FROM 22 ND AUG., 1995 AND WAS MAKING PAYMENT TILL 28 TH SEPT., 2001. THE AO WAS THEREFORE WRONG IN HOLDING THAT THE BENEFIT OF INDEXATION WILL BE AVAILABLE TO THE ASSESSEE FROM 27 TH DEC., 2011 I.E. FROM THE DATE OF EXECUTION OF THE CONVEYANCE DEED AND NOT FROM 27 TH SEPT., 1995. BY ENTERING INTO AN AGREEMENT TO ALLO T A FLAT, THE ASSESSEE HAS IDENTIFIED A PARTICULAR PROPERTY WHICH HE INTENDED TO BUY FROM THE BUILDER AND THE BUILDER IS ALSO BOUND TO PROVIDE THE APPLICANT WITH THAT PROPE RTY BY ACCEPTING CERTAIN ADVANCE AMOUNT 11 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 AND MAKING AGREEMENT FOR BALANCE PAYMENT AS SCHEDUL ED IN THE AGREEMENT. THUS, GOING INTO THE PROVISIONS, IT IS NOT NECESSARY THAT TO CONSTIT UTE A CAPITAL ASSET THE ASSESSEE MUST BE THE OWNER BY WAY OF CONVEYANCE DEED IN RESPECT OF THAT ASSET FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. THE ASSESSEE HAD ACQUIRED A RIGHT TO GET A PARTICULAR FLAT FROM THE BUILDER AN THAT RIGHT OF THE ASSESSEE ITSELF IS A CAPITAL ASSE T. THE WORD HELD USED IN S.2(14) AS WELL AS IN EXPLANATION TO S.48 CLEARLY DEPICTS THAT ASSESSE E MUST HAVE SOME RIGHT IN THE CAPITAL ASSET AND, THEREFORE, THE BENEFIT OF INDEXATION HAS TO BE GRANTED TO THE ASSESSEE ON THE BASIS OF PAYMENTS MADE BY HIM FOR ACQUIRING THE SAID ASSET A ND THE ASSESSEE HAS RIGHTLY CLAIMED THE INDEXATION BENEFIT FROM THE DATES WHEN HE HAS MADE THE PAYMENTS TO THE BUILDER. THE AO IS DIRECTED TO PROVIDE THE BENEFIT OF INDEXATION TO TH E ASSESSEE. IT WAS CONCLUDED BY SAYING THAT ASSESSEE CAN BE SAID TO HAVE HELD THE FLAT WHEN HE MADE THE PAYMENT TO THE BUILDER AND RECEIVED THE ALLOTMENT LETTER AND, THEREFORE, BENEF IT OF INDEXATION OF COST OF ACQUISITION OF THE FLAT HAS TO BE GRANTED TO THE ASSESSEE FROM THE DATE (1995) WHEN HE STARTED MAKING PAYMENTS TO THE BUILDER AND NOT FROM THE DATE OF EX ECUTION OF CONVEYANCE DEED IN 2001. 9. FURTHER, BOARDS CIRCULAR NO. 471 DATED 15-10-19 86, HAS ALSO BEEN CONSIDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. HILLA J.B. WADIA 216 ITR 376 (BOM), IT WAS HELD THAT SECTION 54 OF THE ACT HAS TO BE CONST RUED IN THE CONTEXT OF THE MANNER IN WHICH RESIDENTIAL PROPERTIES ARE NOW BEING CONSTRUC TED IN A CITY LIKE BOMBAY WHERE, LOOKING TO THE COST OF THE LAND, CO-OPERATIVE HOUSI NG SOCIETIES ARE BEING FORMED FOR CONSTRUCTING A BUILDING IN WHICH FLATS ARE ALLOTTED TO MEMBERS. THIS MUST ALSO BE VIEWED AS A METHOD OF CONSTRUCTING RESIDENTIAL TENEMENTS. WHA T WE HAVE TO SEE IS WHETHER THE ASSESSEE HAS ACQUIRED A RIGHT TO A SPECIFIC FLAT IN SUCH A BUILDER WHICH IS BEING CONSTRUCTED BY THE SOCIETY AND WHETHER HE HAS MADE A SUBSTANTIA L INVESTMENT WITHIN THE PRESCRIBED PERIOD WHICH WILL ENTITLE HIM TO OBTAIN POSSESSION OF THE FLAT SO CONSTRUCTED AND IN WHICH HE INTENDS TO RESIDE. THE MATERIAL TEST IN THIS CON NECTION IS DOMAIN OVER THE FLAT AND INVESTMENT IN IT. CENTRAL BOARD OF DIRECT TAXES CIR CULAR NO. 471, DATED OCTOBER 15, 1986, DEALS WITH INVESTMENT IN FLATS UNDER THE SELF-FINAN CING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY. THE BOARD HAS STATED IN THE CIRCULAR THA T WHEN AN ALLOTMENT LETTER IS ISSUED TO AN ALLOTTEE UNDER THIS SCHEME ON PAYMENT OF THE FIRST INSTALLMENT OF THE COST OF CONSTRUCTION, THE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED. THE ALLO TTEE, THEREUPON, GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER AND THE PAYMEN T OF INSTALLMENTS IS ONLY A FOLLOW-UP ACTION AND TAKING DELIVERY OF POSSESSION IS ONLY A FORMALITY. THE BOARD HAS DIRECTED THAT SUCH AN ALLOTMENT OF A FLAT UNDER THIS SCHEME SHOUL D BE TREATED AS A CASE OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. 12 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 10. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE IDENTIFIED FLATS NO. 1103 & 1104 WAS ALLOTTED TO THE ASSESSEE BY WAY OF ALLOTMENT ON 12-05-2004 BY PAYING A BOOKING MONEY OF RS.4,64,705/- AND FROM THAT PERIOD THE ASSESSEE WAS ENJOYING LEGAL RIGHT OVER THE SAID PROPERTY. SINCE THE PERIOD OF PAYMENT OF PURCHASE C ONSIDERATION OF RS.1,12,11,892/- WAS FOLLOWED-UP BY THE ASSESSEE TILL 10-09-2007 I.E., F OR A PERIOD OF MORE THAN THIRTY-SIX MONTHS, THE RIGHT ENJOYED BY THE ASSESSEE OVER THE PERIOD I N QUESTION WAS IN THE NATURE OF LTCS. SINCE THE PROPERTY ACQUIRED IS LTCG I.E. RIGHT OVER THE PROPERTY IN QUESTION ENJOYED BY THE ASSESSEE, THE SALE OF THE SAID PROPERTY THE CONSIDE RATION WAS NECESSARILY IN THE NATURE OF LTCG AS FOR AS THE PROVISIONS OF THE ACT ABOVEMENTI ONED. AT THE BEST, THE DATE OF ALLOTMENT LETTER DATED 12-05-2004 IS TO BE CONSIDERED AS DATE OF ACQUISITION OF RIGHT IN THE PROPERTY. HENCE, WE ALLOW THIS ISSUE IN FAVOUR OF ASSESSEE AN D AGAINST THE REVENUE. THIS ISSUE OF REVENUES APPEAL, RAISED BY WAY OF GROUND NO.1-5, I S DISMISSED. 11. NOW COMING TO THE ISSUE OF ASSESSEES APPEAL, C IT(A) AS WELL AS ASSESSING OFFICER NOTED THE FACT THAT ALTHOUGH THE ASSESSEE HAS HELD THE RIGHT OVER THE CAPITAL ASSET AND THE SAME WAS IN THE NATURE OF LTC ASSET BUT HE DENIED D EDUCTION U/S. 54 OF THE ACT BY STATING THAT THE PROPERTY IN QUESTION ALTHOUGH NOT IN EXIST ENCE AT THE TIME OF TRANSFER AND WAS NOT IN THE NATURE OF HOUSE PROPERTY. THE CIT(A) VIDE HIS O RDER HAS OPINED (WHICH IS SUMMARIZED) AS UNDER:- THAT THE CONDITIONS OF SECTION 54OF THE ACT WERE N OT FULFILLED BY THE ASSESSEE. THE ASSESSEE HAD NEVER BECOME OWNER OF THE PROPERTY BY ANY EXPRESS OR DEEMED PROVISIONS OF THE LAW INCLUDING SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THAT THE ASSESSEE DOESNT QUALIFY TO BE THE OWNER O F THE HOUSE PROPERTY AS PER SECTION 27 OF THE ACT, AS THE OWNER OF HOUSE PROPER TY IS A PERSON WHO HAS GOT THE VALID LEGAL RIGHT OF THE PROPERTY REGISTERED IN HIS OWN NAME UNDER THE TRANSFER OF PROPERTY ACT, 1882 OR DEEMED OWNER AS PER PROVISO O F SECTION 53A OF TRANSFER OF PROPERTY ACT. THAT THE ASSESSEE HAD ONLY ACQUIRED A RIGHT ON THE DATE OF BOOKING OF THE FLAT BY WAY OF AN AGREEMENT W.E.F. 4.2.2004 WHICH WAS STILL TO BE CONSTRUCTED. THAT IN THIS CONCERNED CASE THERE IS NO LAND OR BUI LDING ON THE DATE OF TRANSFER AND IT MERELY WAS A RIGHT TO GET A FLAT IN FUTURE WHICH WAS SOLD BY THE ASSESSEE. THAT THE ASSESSEE HAD BOOKED TWO FLATS ALTHOUGH IN JOINT NAME; THE ENTIRE AMOUNT WAS PAID BY HIM FROM HIS OWN ACCOUNT AND ENTIRE GAI N BELONGS TO HIM ONLY. THEREFORE, RIGHT OF THE ASSESSEE WAS IN TWO FLATS T O BE CONSTRUCTED IN FUTURE AND NOT A SINGLE HOUSE AS IS REQUIRED IN THE PROVISIONS OF SE CTION 54 OF THE ACT. 13 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 FOR THIS NOW, WE HAVE TO GO THROUGH THE PROVISIONS OF SECTION 54 OF THE ACT, WHICH READS AS UNDER:- PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 54.[(1)][SUBJECT TO THE PROVISIONS OF SUB-SECTION ( 2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET [*** ], BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FORM HOUSE PROPERTY (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF [ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHI CH THE TRANSFER TOOK PLACE PURCHASED], OR HAS WITHIN A PERIOD OF THREE YEARS A FTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE, THEN], INSTEAD OF THE CAPITAL GA IN BEING CHARGED TO INCOME TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF HIS SEC TION, THAT IS TO SAY,- .. .. FROM THE ABOVE PROVISIONS OF SEC.54, IT IS CLEAR TH AT WHEN AN ASSESSEE, INDIVIDUAL OR HINDU UNDIVIDED FAMILY, SALES A RESIDENTIAL BUILDING OR L AND APPURTENANT THERETO, AND INVESTMENT THE CAPITAL GAINS FOR THE PURCHASE OF A NEW RESIDEN TIAL HOUSE, HE OR SHE STAND ELIGIBLE TO SEEK THAT CAPITAL GAINS TAX NOT CHARGEABLE ON THE SALE C ONSIDERATION. HERE, WE HAVE TO REFERRED TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SMT. K.G. RUKUMINI AMMA (2011) 96 TAXMAN 86 (KAR), WHEREIN IT IS HELD THAT THE CONTEXT IN WHICH THE EXPRESSION A RESIDENTIAL HOUSE IS USED IN SECTION 54 MAKES IT CLEAR THAT IT WAS NOT THE INTENTION OF THE LEGISLATION TO CONVEY THE MEANING THAT IT REFERS TO A SINGLE RESIDENTIAL HOUSE. IF THAT WAS THE INTENTION, THEY WOULD HAVE USED THE WORD ONE. AS IN THE EARLIER PART, THE WORDS USED ARE BUILDINGS OR LANDS WHICH ARE PLURAL IN NUMBER AND THAT IS REFERRED TO AS A RESIDENTIAL HOUSE, THE ORIGINAL ASSET, AN ASSET NE WLY ACQUIRED AFTER THE SALE OF THE ORIGINAL ASSET ALSO CAN BE BUILDINGS OR LANDS APPURTENANT TH ERETO, WHICH ALSO SHOULD BE A RESIDENTIAL HOUSE. THEREFORE, THE LETTER A IN THE CONTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANING SINGULAR. BUT, BEING AN INDEFINITE ARTICLE, THE S AID EXPRESSION SHOULD BE READ IN CONSONANCE WITH THE OTHER WORDS BUILDINGS AND LANDS AND, T HEREFORE, THE SINGULAR A RESIDENTIAL HOUSE ALSO PERMITS USE OF PLURAL BY VIRTUE OF SECT ION 13(2) OF THE GENERAL CLAUSES ACT. IN THE PRESENT CASE BEFORE US, IT IS CLEAR THAT THE BU ILDER/DEVELOPER HAS CARRIED OUT CONSTRUCTION OF A RESIDENTIAL SCHEME AND HE CONSTRUCTED RESIDENT IAL APARTMENTS. EVEN THE PROPERTY IDENTIFIED AND HELD BY ASSESSEE WAS IN THE NATURE O F HOUSE PROPERTY AND THE SAID PROPERTY WAS FOR THE USE OF THE ASSESSEES RESIDENTIAL PURPO SE. BUT FROM THE FACTS, IT IS CLEAR THAT THERE ARE TWO FLATS I.E. NAMELY NO.1103 & 1104 IN ASHOKA TOWER, PAREL, MUMBAI AND THESE TWO FLATS WERE PURCHASED BY ASSESSEE FOR THE PURPOSE TH AT THE SAME COULD BE USED BY HIM AND HIS WIFE AS A SINGLE RESIDENTIAL PREMISES BUT THESE ARE ACTUALLY TWO RESIDENTIAL APARTMENTS BUILT 14 ITA NO. 613 & 473/K/2012 ANINDYA DUTTA ., AY:2008-09 BY BUILDER-CUM-DEVELOPER. ACCORDING TO US, THE ASSE SSEE BECAME THE OWNER OF PROPERTY U/S. 53A OF THE TRANSFER OF PROPERTY ACT IN TERMS OF CBD T CIRCULAR NO. 471 DATED 15-10-1986. HERE, WE ARE IN AGREEMENT WITH THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE THAT ASSESSEE WAS OWNING LEGAL RIGHTS OVER THE SAID APARTMENTS FO R A PERIOD OF MORE THAN THIRTY-SIX MONTHS AND THE SALE PROCEED OUT OF ITS SALE CONSIDE RATION WERE IN THE NATURE OF LTCG AND WERE INVESTED FOR PURCHASING THE NEW HOUSE PROPERTY FOR RESIDENTIAL PURPOSE WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF SALE OF PROPERTY. HENC E, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION SEC.54 OF THE ACT. BUT IN THE PRESENT CASE, WHETHER THE ASSESSEE HAS INVESTED THE LTCG ARISING OUT OF SALE OF THESE APARTMENTS IN THE NEW RESIDENTIAL HOUSE OR NOT, HAS NOT BEEN EXAMINED BY THE AO, THESE NEED EXAMINATION, FACTUAL LY. HENCE, FOR FACTUAL EXAMINATION, WE SET ASIDE THIS ISSUE TO THE FILE OF AO. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND TH AT OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH NOV. 2013 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH NOVEMBER, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT ADIT/DCIT (IT)-1(1), KOLKATA. 2 ./,- / RESPONDENT SHRI ANINDYA DUTTA, 14, HINDUSTAN ROA D, KOLKATA-700 029.. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA. <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .