2014 (1) TMI 1770 - AT - Income Tax

Tribunal rules on capital gains classification, emphasizes date of allotment. Reevaluation of acquisition cost ordered.

Meena A Hemnani Versus ITO- (IT) -3 (1), Mumbai.

The Tribunal ruled in favor of the assessee regarding the classification of capital gains as short term or long term, emphasizing the significance of the ... Capital gain computation - STCG OR LTCG - selection of date - Held that:- The “date of allotment” is reckoned as the date for computing the holding period for the purpose of capital gains. The date of allotment in this case being 19.11.2001 and the date of sale is 23.8.2006, therefore, the holding period is much more than 36 months. In this case, the gains earned by the assessee on the sale of flat have to be computed as capital gains. Without prejudice, even if the date of possession, being 14.8.2003, is considered; the assessee is still entitled to the benefits of the Long Term Capital Gains. Therefore, in our opinion, order of the CIT (A) does not call for any interference. - Decided in favour of assessee Determining cost of acquisition of flat for the purpose of computing the capital gains - Held that:- Finding of the CIT (A) is very cryptic and has not gone into the relevant facts of the said contributions to corpus fund as well as for meeting the charges, the onetime payments in connection with the acquisition of the said flat. After hearing both the parties, we are of the opinion that the assessee has a strong case. However, the CIT (A) has not adjudicated the issue by passing a speaking order, therefore, for want of reasoned order, we set aside the issue to the files of the CIT (A) for deciding the issue afresh in a time bound manner i.e., within a couple of months from the date of receipt of this order. Assessee shall be granted a reasonable opportunity of being heard to the assessee during the set aside proceedings. Accordingly, grounds raised by the assessee are allowed for statistical purposes. Issues:1. Determination of capital gains as short term or long term.2. Allowance of expenditure for computing short term capital gain tax liability.3. Dismissal of grounds regarding interest under section 234B.Analysis:1. Capital Gains: The appeal raised the issue of determining whether the capital gains earned by the assessee should be classified as short term or long term. The assessee argued that the date of allotment, not registration, should be considered for computing long term capital gains. The Tribunal referred to various decisions supporting the assessee's position, emphasizing that the date of allotment is crucial for determining the holding period. Citing precedents, the Tribunal concluded that the gains should be computed as capital gains based on the date of allotment. Therefore, the Tribunal allowed the relevant grounds of appeal.2. Cost of Acquisition: Another issue involved the determination of the cost of acquisition for computing capital gains. The assessee claimed maintenance and assessment charges as part of the cost of acquisition. The Tribunal noted that the Revenue Authorities did not properly consider the nature of these charges, which were argued to be capital contributions or corpus funds. The Tribunal found the CIT (A)'s reasoning to be insufficient and set aside the issue for reevaluation, directing the CIT (A) to provide a reasoned order within a specified timeframe. The grounds raised by the assessee were allowed for statistical purposes.3. Interest under Section 234B: The appeal also contested the dismissal of grounds regarding interest under section 234B. The Tribunal noted specific arguments related to the calculation of interest on assessed tax reduced by self-assessment tax paid. However, the Tribunal did not provide detailed analysis on this issue in the judgment.In conclusion, the Tribunal ruled in favor of the assessee on the capital gains issue, directed a reevaluation of the cost of acquisition, and allowed the appeal for statistical purposes. The judgment highlighted the importance of considering the date of allotment for determining long term capital gains and emphasized the need for reasoned orders in tax assessments.