Occupancy rights acquired on 03.12.1999 deemed Long Term Capital Gain. Appeals dismissed. Order on 18.10.2019.

The Tribunal upheld the CIT(A)'s decision that the date of acquisition of occupancy rights in the property was 03.12.1999. Consequently, the capital gains were classified as Long Term Capital Gain (LTCG). Both the assessee and revenue appeals were dismissed. The order was pronounced on 18.10.2019.

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Issues Involved:

1. Determination of the date of acquisition of occupancy rights in the property for capital gains tax purposes.
2. Classification of the capital gains as Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG).

Detailed Analysis:

Issue 1: Determination of the Date of Acquisition of Occupancy Rights in the Property

The primary issue revolves around determining the correct date of acquisition of the occupancy rights in the property at Bharat Diamond Bourse. The assessee claimed the acquisition date should be 1991, the year they applied for the allotment and made an initial payment. The Assessing Officer (A.O) argued that the acquisition date should be 02.08.2010, when a registered document was executed. The CIT(A) concluded that the acquisition date should be 03.12.1999, the date of the final and binding allotment.

The Tribunal examined the facts and found that the assessee’s claim of acquisition in 1991 was untenable as no specific premises were identified or allotted at that time. The Tribunal also rejected the A.O’s view, stating that the valid title conferred by the registered document in 2010 was not conclusive for determining the holding period. Instead, the Tribunal upheld the CIT(A)’s decision that the acquisition date should be 03.12.1999, when the final and binding allotment of the specific office premises was made.

Issue 2: Classification of the Capital Gains

The second issue was whether the capital gains should be classified as Long Term Capital Gain (LTCG) or Short Term Capital Gain (STCG). The A.O classified the gains as STCG, arguing that the occupancy rights were acquired only in 2010. The CIT(A) and subsequently the Tribunal disagreed, concluding that the rights were acquired in 1999, thus qualifying the gains as LTCG.

The Tribunal referred to the CBDT Circular No. 471, dated 15.10.1996, and Circular No. 672, dated 16.12.1993, which clarified that the date of allotment should be considered the date of acquisition for capital gains purposes. This view was supported by the Bombay High Court’s decision in PCIT-3, Mumbai Vs. Vembo Vaidyanathan (2019) 261 taxman 376 (Bom), which upheld that the date of allotment is relevant for determining the holding period for capital gains tax.

Conclusion:

The Tribunal upheld the CIT(A)’s decision that the date of acquisition of the occupancy rights in the property should be 03.12.1999. Consequently, the capital gains were correctly classified as Long Term Capital Gain (LTCG). The appeals of both the assessee and the revenue were dismissed.

Order Pronounced:

The order was pronounced in the open court on 18.10.2019.

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