Holding period for capital gains begins on acquisition of enforceable property rights under a binding allotment agreement, not later possession.

For capital gains purposes, the holding period of a flat starts when the buyer acquires enforceable rights under a binding registered allotment or purchase agreement, not when final payment is made or physical possession is later obtained. Where the assessee had already obtained rights, title and interest under the registered agreement dated 03.10.2016, that date governed computation of the period of holding even though possession and final payment followed in 2019. On that basis, the transfer was treated as giving rise to long-term capital gain, and recharacterisation of the gain as short-term capital gain was not sustainable.

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Issues: Whether the period of holding of the flat was to be reckoned from the date of the registered allotment agreement dated 03.10.2016 or from the date of final payment and possession on 21.08.2019 for determining whether the gain on transfer was long-term capital gain or short-term capital gain.

Analysis: The assessee had acquired rights, title and interest in the flat under a registered agreement dated 03.10.2016, and the sale agreement itself referred to purchase of the property under that agreement. The holding period for capital gains purposes is governed by the date from which the assessee can be said to have acquired the capital asset in law, and not merely by the date of final payment or physical possession. The surrounding facts showed that the assessee had already entered into a binding contractual arrangement creating enforceable rights in the property, and the later payment did not alter the original date of acquisition for computing the period of holding. The authorities and precedents relied upon supported the view that allotment or analogous acquisition of enforceable rights marks the commencement of holding for capital gains purposes.

Conclusion: The period of holding was required to be computed from 03.10.2016, and the gain on transfer was rightly treated as long-term capital gain. The addition made by treating it as short-term capital gain was not sustainable.

Ratio Decidendi: For capital gains computation, the period of holding begins when the assessee acquires enforceable rights in the immovable property under a binding allotment or purchase agreement, and not from the later date of final payment or possession.

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