2016 (7) TMI 169 - AT - Income Tax

Appellate Tribunal Rules in Favor of Taxpayer in LTCG vs. STCG Property Sale Case

Utsav Jain Versus ITO, Ward-29 (4), Kolkataa

The Appellate Tribunal overturned the Commissioner's decision to treat Long Term Capital Gains (LTCG) as Short Term Capital Gains (STCG) in a property ... Capital gain computation - selection of period of holding - whether the date of allotment should be taken for the period of holding for the working of capital gain? - Held that:- From the facts of this case, we find that there is no separate agreement executed by assessee for the purchase of the flat and the letter of allotment which is in the paper book at pages 23 to 33 is the only document which gives right of ownership in the flat. Therefore, in our view with the date of allotment letter will be taken for working out the period of holding in the instant case. Thus we reverse the orders of Authorities Below and direct the Assessing Officer to take the date of letter of allotment for working out the period of holding. In the instant case letter of allotment is on 01.01.2006 and accordingly the right was acquired on that date. The assessee sold the right acquired by way of letter of allotment is to be dated on 07.03.2009. accordingly the period of holding exceeds 36 months in the present case. So the period of holding in the instant case exceeds 36 months and income arising on the sale of said property will be treated as LTCG. - Decided in favour of assessee. Issues Involved:1. Dismissal of appeal by Commissioner of Income Tax (Appeals)2. Treatment of Long Term Capital Gains as Short Term Capital Gains3. Denial of deductions for Long Term Capital Gains4. Confirmation of interest levy under Section 234B and Section 234CIssue 1: Dismissal of Appeal by Commissioner of Income Tax (Appeals):The appellant contested the dismissal of the appeal by the Commissioner of Income Tax (Appeals) on the grounds of errors in law and facts. The appellant argued that the claim for Long Term Capital Gains (LTCG) arising from the sale of a property was unjustly treated as Short Term Capital Gains (STCG). The appellant also claimed entitlement to deductions for LTCG, which were denied by the authorities. The Commissioner upheld the Assessing Officer's decision, emphasizing the short duration of property holding as the basis for treating the gains as STCG.Issue 2: Treatment of Long Term Capital Gains as Short Term Capital Gains:The Assessing Officer (AO) determined that the gains from the property sale should be classified as STCG due to the short duration of property holding. The AO disregarded the appellant's argument regarding the date of allotment, emphasizing the payment schedule and lack of a separate agreement for property purchase. The Commissioner affirmed this decision, noting the timing of payments and possession of the property. However, the appellant argued that the right of ownership was acquired through the allotment letter, which should dictate the period of holding for capital gains purposes.Issue 3: Denial of Deductions for Long Term Capital Gains:The appellant contended that deductions available for LTCG were wrongly denied, as the property holding period exceeded the threshold for LTCG treatment. The appellant relied on legal precedents and the terms of the allotment letter to support the claim that the property sale should be treated as LTCG. The Appellate Tribunal agreed with the appellant's interpretation, emphasizing the significance of the allotment letter in determining the period of holding and the nature of the gains.Issue 4: Confirmation of Interest Levy under Section 234B and Section 234C:The Commissioner's decision to confirm the levy of interest under Section 234B and Section 234C was challenged by the appellant. However, as the Tribunal allowed the appeal regarding the capital gains treatment, the issue of interest levy became premature and did not require further adjudication. The Tribunal ultimately allowed the appellant's appeal, reversing the decisions of the lower authorities and directing the Assessing Officer to consider the date of the allotment letter for determining the period of holding and the nature of the capital gains.This detailed analysis of the judgment highlights the key legal issues, arguments presented by the parties, decisions of the authorities, and the final ruling by the Appellate Tribunal in favor of the appellant.