Capital gains on plot sale treated as short-term where full title arose only on execution of the conveyance deed.

Profit from sale of an allotted plot was treated as short-term capital gain because complete title arose only on execution of the conveyance deed, not on initial allotment or delivery of possession. The allottee had only possessory rights after part-payment under the allotment terms and the Punjab Urban Estates (Sale of Sites) Rules, 1965, while the asset with full legal title came into existence later on conveyance. Since that legally distinct asset was acquired only on execution of the sale deed and was sold within about nine months, it qualified as a short-term capital asset under section 2(14) of the Income-tax Act, 1961.

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Issues: Whether the profit arising from sale of the plot was assessable as long-term capital gain or as short-term capital gain.

Analysis: Under the allotment terms and the Punjab Urban Estates (Sale of Sites) Rules, 1965, the allottee obtained possession and certain valuable possessory rights after payment of part of the price, but complete title passed only on execution of the deed of conveyance. The asset held from the date of allotment and delivery of possession was therefore distinct in character from the asset that came into existence when conveyance was executed. Since the latter asset was acquired only on execution of the sale deed and was sold within about nine months, it was held for a short period and answered the description of a short-term capital asset under section 2(14) of the Income-tax Act, 1961.

Conclusion: The profit was correctly assessed as short-term capital gain and not as long-term capital gain.

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