2019 (1) TMI 1361 - HC - Income Tax

Capital Gain Tax Appeal Decided in Favor of Assessee: Date of Acquisition Clarified

The appeal challenged the classification of gain from the sale of a capital asset as Long Term Capital Gain, with the main issue being the significance of ... Gain arising from the sale of capital asset as Long Term Capital Gain - exemption u/s 54F entitlement - when the assessee can be stated to have acquired the capital asset? - Held that:- The date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by D.D.A.. In that view of the matter, CIT appeals of the Tribunal correctly held that the assessee had acquired the property in question on 31st December, 2004 on which the allotment letter was issued. Revenue has also argued that in any case the assessee was not entitled to exemption under Section 54F. Since the assessee had held multiple residential units which would disqualify the assessee from claiming the exemption on it as was held by the Assessing Officer. From the record we notice that before the CIT appeals the assessee had produced additional evidence to suggest that the other units previously held by the assessee were discarded earlier and that at the relevant time the assessee did not hold any other residential unit. Quite apart from it being a pure question of fact, we do not find any indication in the impugned judgment of the Tribunal though the revenue had argued such a contention in its appeal before the Tribunal. Issues:1. Determination of long term capital gain on the sale of a capital asset.2. Date of acquisition of a residential unit for capital gain tax purposes.3. Eligibility for exemption under Section 54F of the Income Tax Act.Issue 1: Determination of long term capital gain:The appeal challenges the Income Tax Appellate Tribunal's judgment regarding the treatment of gain arising from the sale of a capital asset as Long Term Capital Gain. The main contention was whether the mere letter of allotment leads to the creation of a proper right over the capital asset or if the execution of an agreement with detailed terms and conditions is necessary. The Assessing Officer initially classified the gain as short term capital gain, leading to a dispute between the assessee and the revenue. The assessee claimed that the residential unit was acquired upon the issuance of the allotment letter, while the Assessing Officer argued that the transfer would be complete only upon the execution of the agreement.Issue 2: Date of acquisition for capital gain tax purposes:The CIT appeals and the Tribunal ruled in favor of the assessee, citing various judgments and CBDT circulars. The CBDT circulars clarified that in cases of allotment of flats, the date of allotment is considered the date of acquisition for capital gain tax purposes. The circulars emphasized that the allotment letter signifies the title to the property, and subsequent actions like payment of installments and taking possession are formalities. The Tribunal correctly held that the assessee acquired the property on the date of allotment, as per the terms of the circulars.Issue 3: Eligibility for exemption under Section 54F:The revenue argued that the assessee was not entitled to exemption under Section 54F of the Income Tax Act due to holding multiple residential units. However, the assessee presented additional evidence before the CIT appeals to show that the other units were disposed of earlier, and at the relevant time, the assessee did not own any other residential unit. The Tribunal did not find any indication of this argument in the revenue's appeal. Ultimately, the Income Tax Appeal was dismissed, upholding the assessee's eligibility for exemption under Section 54F.In conclusion, the judgment clarified the date of acquisition for capital gain tax purposes in cases of allotment of residential units and affirmed the assessee's entitlement to exemption under Section 54F based on the presented evidence.