Leasehold allotment right held to be acquired on bid acceptance, making the transfer a long-term capital loss.

A right under an allotment letter for leasehold property is a capital asset, and its acquisition occurs when a concluded contract arises on acceptance of the bid and compliance with the initial payment condition. Later instalments made under the contract do not defer the date of acquisition, because they only perform the already vested right to obtain conveyance. On that basis, the right was acquired in 1994 rather than 2004, so the holding period exceeded the long-term threshold. The transfer was therefore treated as giving rise to a long-term capital loss.

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Issues: Whether the assessee acquired the capital asset, namely the right under the allotment letter for leasehold rights in the property, in 1994 on acceptance of its bid or only in 2004 on making the final payment, and whether the resulting loss on transfer was a long-term capital loss or short-term capital gain.

Analysis: The right obtained under the allotment letter was itself a capital asset within the meaning of the income-tax law. The acceptance of the bid by the development authority in 1994, coupled with compliance with the initial payment condition, brought into existence a concluded contract and vested in the assessee a right to obtain leasehold conveyance of the property. The later payments were only performance of the contractual terms and did not postpone the date of acquisition of the right. The transfer of that right in 2004 was therefore of a right acquired in 1994, and the period of holding exceeded the threshold for a long-term capital asset.

Conclusion: The right in the property was acquired in 1994, not in 2004, and the loss arising on transfer was correctly assessable as a long-term capital loss in favour of the assessee.

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