Allotment-based ownership rights determine the holding period, allowing residential property gains to qualify as long-term capital gains.

For determining the holding period of a residential flat, the relevant date is the date when allotment and the buyer's agreement confer enforceable rights, rather than the later date of possession or registration. Where substantial consideration has been paid and the purchaser obtains rights to secure conveyance and deal with the property, those rights constitute sufficient ownership for income-tax purposes. Accordingly, the holding period begins from the allotment date, and gains on a subsequent sale may qualify as long-term capital gains.

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Issues: Whether, for determining the period of holding of the flat and the character of capital gains, the reckoning date was the date of allotment / buyer's agreement or the later date of possession.

Analysis: The dispute concerned the tax treatment of gains arising from sale of a residential flat where allotment and buyer's agreement were made in 2008, substantial consideration was paid much before possession, and possession was delivered later. The decision proceeded on the basis that allotment coupled with the buyer's agreement vested the assessee with enforceable rights in the property, including the right to obtain conveyance and to deal with the asset. Those rights constituted sufficient ownership for income-tax purposes. The legal position accepted was that where substantial rights in an immovable property accrue on allotment, the holding period commences from that date and not from the date of actual possession or registration.

Conclusion: The date of allotment, i.e. 26-06-2008, was the correct starting point for computing the holding period; consequently, the gain on sale of the flat was assessable as long-term capital gain and the issue was decided in favour of the assessee.

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