Booking rights holding period depends on the first enforceable agreement, while business maintenance expenses remain deductible without receipts.

For computing the holding period of booking rights in immovable property, the relevant date is when a valid and enforceable agreement conferring those rights comes into existence; a preliminary offer letter without complete terms and before the seller acquired title does not create such rights. On that basis, the surplus on surrender of the booking rights was treated as short-term capital gain. Expenditure incurred to maintain business infrastructure was held allowable even though no business receipts were shown during the year, as absence of receipts does not by itself mean business had ceased. The interest set-off claim was remitted for fresh verification of the factual nexus between borrowings and advances.

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Issues: (i) Whether the surplus arising from surrender of booking rights in the proposed property was assessable as long-term capital gain or short-term capital gain; (ii) whether the administrative and other expenditure claimed by the assessee was allowable despite no business receipts during the year; (iii) whether the claim for set-off of interest received from loans and advances against interest paid on borrowings required fresh verification.

Issue (i): Whether the surplus arising from surrender of booking rights in the proposed property was assessable as long-term capital gain or short-term capital gain.

Analysis: The right in an immovable property was held to accrue only when there was a valid agreement embodying consensus ad idem and conferring enforceable rights. A mere offer letter on plain paper, without complete terms and conditions and at a time when the seller itself had not yet acquired title, was held insufficient to create such rights. The later memorandum of understanding contained the operative terms and was treated as the document creating enforceable rights in the booking. The period of holding was therefore computed from the date of that memorandum, not from the earlier letter.

Conclusion: The surplus was held to be taxable as short-term capital gain, in favour of Revenue.

Issue (ii): Whether the administrative and other expenditure claimed by the assessee was allowable despite no business receipts during the year.

Analysis: The absence of receipts by itself was held not to establish that business operations had ceased. The assessee remained engaged in its business, and only minimum establishment and maintenance expenses had been incurred to preserve the business infrastructure. In such circumstances, expenditure incurred to keep the business alive and functional was held allowable.

Conclusion: The expenditure was held allowable, in favour of the assessee.

Issue (iii): Whether the claim for set-off of interest received from loans and advances against interest paid on borrowings required fresh verification.

Analysis: The claim was based on a factual nexus between borrowings and interest-bearing advances, but that nexus had not been examined by the lower authorities. The matter was therefore sent back for verification of the factual claim before any relief could be granted.

Conclusion: The issue was remitted for fresh examination and no final relief was granted at this stage.

Final Conclusion: The principal capital gains dispute was decided against the assessee, while the allowance of business-related expenses was sustained and the interest set-off claim was left for verification, resulting in a mixed outcome with the appeal being only partly successful for both sides.

Ratio Decidendi: For computing the holding period of booking rights in immovable property, the relevant date is the date on which a valid and enforceable agreement conferring those rights comes into existence, not an earlier preliminary offer or confirmation that does not itself create such rights.

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