Holding period for co-operative housing flat counts from share allotment, supporting long-term capital gains treatment.

For capital gains purposes, the holding period of a flat allotted by a co-operative housing society is counted from the date the assessee acquires the society shares and allotment rights, not from the date of physical possession. The member's ownership is derived from allotment under the society's housing scheme, and actual possession is not the decisive basis of ownership. The later insertion of clause (iiia) in section 27 is consistent with this approach and does not require possession to be treated as the starting point for ownership before 1 April 1988. Accordingly, the gain on transfer qualifies as long-term capital gain, with the related section 80T benefit available.

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Issues: Whether, for the purpose of section 80T, the relevant date for computing the period of holding of a flat allotted by a co-operative housing society is the date of possession of the flat or the date on which the assessee acquired the shares and allotment in the society.

Analysis: For the relevant assessment year, clause (iii) of section 27 treated a member of a co-operative society allotted a building or part thereof under a house-building scheme as the deemed owner of that building. The absence of actual possession at the time of allotment did not negate ownership, because possession was not the sine qua non of ownership. The later insertion of clause (iiia) with effect from 1 April 1988 also showed that prior to that date possession in part performance of a contract was not, by itself, the statutory basis of ownership. In a co-operative housing society, the member's substantive right is derived from the shares, and the right to enjoy the flat flows incidentally from such membership. Therefore, for capital gains purposes, the relevant holding period is counted from acquisition of the shares and allotment rights, not from the date on which physical possession of the flat is handed over.

Conclusion: The assessee was entitled to treat the gain as long-term capital gain and to the benefit of section 80T.

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