2014 (4) TMI 1153 - AT - Income Tax

Capital gains treated as long-term based on allotment date. AO to consider car parking cost. Exemption for new house investment.

The Tribunal allowed the appeal partly, ruling that capital gains should be treated as long term based on the date of allotment. The AO was directed to ... Nature of Capital gains - LTCG v/s STCG - treatment given by the AO to the capital gains as short term instead of long term as claimed by the assessee - whether the date of allotment of the flat or the date of possession of the flat by the assessee should be considered as the date for computing the holding period of 36 months? - Held that:- The “date of allotment” should. be reckoned as the date for computing the holding period for the purpose of capital gains [See: Meena A Hemnani Versus ITO- (IT) -3 (1) , Mumbai - 2014 (1) TMI 1770 - ITAT MUMBAI ]. In the instant case, the date of allotment is 11.04.2003 (FY 2003-2004) and the date of sale of the property is 14.10.2007, therefore the holding period is more than 36 months. Therefore, the capital gains earned by the assessee on the sale of the flat have to be treated as 'long term capital gains‟. The assessee paid the first installment on 11.4.2003, thereby conferring a right to hold a flat, which was later identified and possession delivered on later date. The Hon’ble Punjab & Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT [2014 (2) TMI 1117 - PUNJAB & HARYANA HIGH COURT ] held that the mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold. property on issuance of an allotment letter. Thus, the ld. DR's arguments on non-existence of the flat at the time of issuing of allotment letter stands answered in favour of assessee Exemption for investment in new residential house u/s 54 / 54F against long term capital gains on sale of the property allowed in favour of assessee Issues:1. Determination of capital gains as short term or long term.2. Reckoning the date of allotment for computing the holding period.Issue 1: Determination of Capital GainsThe appeal was filed against the CIT (A)'s order for the assessment year 2008-2009. The AO did not allow the claimed long term capital gains on the sale of property by the assessee, treating them as short term gains due to holding period less than 36 months. The CIT (A) upheld this decision, leading to the appeal before the Tribunal. The assessee argued that the date of allotment should be considered for computing the holding period. The Tribunal referred to past decisions favoring this argument, emphasizing the relevance of the date of allotment over possession or registration dates. The Tribunal relied on various judgments and concluded that the capital gains should be treated as long term gains based on the date of allotment, allowing the appeal.Issue 2: Reckoning Date of AllotmentThe primary issue revolved around whether the date of allotment or possession should be considered for computing the holding period of 36 months. The Tribunal analyzed past decisions and highlighted the importance of the date of allotment in determining capital gains. The Tribunal cited specific cases where the date of allotment was upheld as the relevant date for computing the holding period. It was emphasized that the date of allotment confers the right to hold the property, even if possession is granted later. The Tribunal referred to a judgment by the Punjab & Haryana High Court supporting this view. The Tribunal concluded that the date of allotment should be reckoned for computing the holding period, leading to the allowance of ground no.1 in favor of the assessee.In conclusion, the Tribunal allowed the appeal partly, determining that the capital gains should be treated as long term gains based on the date of allotment. Additionally, the Tribunal directed the AO to examine and allow the cost of acquiring car parking if included in the consideration. The issue regarding the exemption for investment in a new residential house against long term capital gains was also allowed in favor of the assessee.