Allotment date determines holding period for LTCG calculation, not payment installments or sale deed execution timing

ITAT Mumbai held that for determining holding period and LTCG, the allotment date is paramount, with subsequent acts like payment installments and sale deed execution being consequential. The tribunal directed AO to consider stamp duty value as Rs. 1,88,00,000 versus sale consideration of Rs. 1,75,00,000 as on 22.12.2014. The assessee's 1/3rd share of the difference (Rs. 13,00,000) was to be added under "Income from other sources" per section 56(2)(x). Following consistency principle from daughter's case, the appeal was partly allowed with modified addition.

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Issues Involved:
1. Consideration of the allotment letter as an agreement fixing the sale price.
2. Applicability of Section 56(2)(x) of the Income Tax Act, 1961.
3. Determination of the date of acquisition for capital gain purposes.
4. Consistency in the treatment of similar cases.

Detailed Analysis:

1. Consideration of the Allotment Letter as an Agreement Fixing the Sale Price
The Assessee purchased a residential house for Rs. 1,75,00,000 during the assessment year 2020-21. The value of the property as per the Stamp Duty Authority was Rs. 2,76,29,333. The Assessee provided an allotment letter dated 29.01.2011 from M/s. Spark Builders and Infra Project Ltd., showing a total consideration of Rs. 1,75,00,000 and an advance payment of Rs. 10,00,000.

The Assessing Officer (AO) did not accept this claim and added Rs. 33,76,444 as the Assessee's share of the difference between the stamp duty value and the consideration paid. The Ld. Commissioner upheld this addition, rejecting the allotment letter as an agreement fixing the sale price, citing that the letter did not constitute a binding agreement.

However, the Tribunal found that the allotment letter dated 22.12.2014, along with the bank statement reflecting the advance payment and the sale deed dated 06.11.2019, should be considered for determining the stamp duty value. The Tribunal referenced the case of PCIT-3 Vs. Vembo Vaidyanathan (2019) 261 taxman 376 (Bom.), where the court upheld the acquisition of property from the date of the allotment letter.

2. Applicability of Section 56(2)(x) of the Income Tax Act, 1961
The Ld. Commissioner noted that the difference between the stamp duty value and the sale consideration was more than 5%, making Section 56(2)(x) applicable. The Tribunal, however, emphasized that the date of the allotment letter should be considered for stamp duty valuation under this section. The Tribunal cited various judgments, including Ms. Madhu Kaul Vs. CIT, Chandigarh, where it was held that the allotment letter conferred a right to hold the property, making subsequent actions like payment of installments and delivery of possession consequential.

3. Determination of the Date of Acquisition for Capital Gain Purposes
The Tribunal highlighted that the date of the allotment letter should be considered for determining the holding period of the property and for the valuation of stamp duty under Section 56(2)(x). This was supported by the Hon'ble Punjab & Haryana High Court in Ms. Madhu Kaul Vs. CIT, where it was determined that the allotment letter conferred a right to the property, and subsequent actions were consequential.

4. Consistency in the Treatment of Similar Cases
The Tribunal noted that a similar case involving the Assessee's daughter, Ms. Sanika Sawant, was decided by the then Ld. CIT(A), who considered the allotment letter as an agreement for fixing the amount and allowed the claim. The Tribunal emphasized the rule of consistency and directed the AO to follow the same approach.

The Tribunal directed the AO to consider the stamp duty value as on 22.12.2014 as Rs. 1,88,00,000 and the sale consideration as Rs. 1,75,00,000. The difference of Rs. 13,00,000 should be added under the head "Income from other sources," consistent with the treatment in the case of the Assessee's daughter.

Conclusion
The appeal of the Assessee was partly allowed. The AO was directed to consider the stamp duty value as on 22.12.2014 and add 1/3 of the difference between the stamp duty value and the sale consideration to the Assessee's income under "Income from other sources." The Tribunal emphasized the importance of consistency and the relevance of the allotment letter in determining the stamp duty value and the date of acquisition.

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