Capital gains holding period starts from allotment letter when enforceable rights in the property are created.

For capital gains purposes, the holding period of an office unit is to be computed from the date of allotment letter, not from the later date of registration of the sale agreement or conveyance. The Tribunal treated section 2(42A) as referring to the period the assessee "held" the asset in a practical and enforceable sense, and noted that the allotment letter identified the unit and created enforceable rights on payment toward consideration. On that basis, the office unit qualified as a long-term capital asset and the resulting gain was taxable as long-term capital gain.

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Issues: Whether the period of holding of the office unit sold by the assessee was to be computed from the date of allotment letter or from the date of registration of the sale agreement for the purpose of section 2(42A) of the Income-tax Act, 1961, and whether the gain on sale was long-term capital gain or short-term capital gain.

Analysis: Section 2(42A) uses the expression "held" and not "owned", showing that the relevant inquiry is the period for which the assessee held the asset in a practical sense and not the date on which absolute title was completed by registration. The allotment letter identified the specific unit and recorded payment towards the consideration, thereby conferring enforceable rights in the property. The Tribunal followed the view taken in several High Court decisions that, for capital gains purposes, holding begins from the date of allotment and not from the later date of registration of conveyance or agreement. The reliance placed on the rule governing completion of transfer for immovable property was distinguished because the present question concerned holding period under the income-tax law, not the date of perfection of legal ownership.

Conclusion: The period of holding was to be reckoned from the date of allotment letter. The office unit was a long-term capital asset and the gain was taxable as long-term capital gain, in favour of the assessee.

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