regarding transfer of allotment of immovable property

[FARIDUDDIN AHMAD]

respected sir, my client got allotted flat in his name in the year 2019 by paying Rs-100 to xyz. registered sale deed was not executed in favor of client by xyz. later in the year 2023 my client sold the same flat to abc for Rs-150, without executing sale deed. the said transaction has been done with the consent of xyz,by transferring the allotment of flat to abc. my question-can this transaction be related to capital gain or income from other sourced or banami transaction.

[Padmanathan KV]

There are lot of decisions of court holding the same as capital gains. The date of allotment shall be date of acquisition. Hence it would be LTCG.

[Padmanathan KV]

One may place reliance on Circular no.471/1986 dated 15-10-1986, which states:

2. The Board had occasion to examine as to whether the acquisition of a flat by an allottee under the Self-financing Scheme of the Delhi Development Authority amounts to purchase or is construction by the D.D.A. on behalf of the allottee. Under the Self-financing Scheme of the Delhi Development Authority, the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled or the allottee withdraws from the scheme. The allotment is cancelled only under exceptional circumstances. The allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow-up action and taking the delivery of possession is only a formality. If there is a failure on the part of the D.D.A. to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession.

Also see decision of Bombay HC in PR. COMMISSIONER OF INCOME TAX-3, MUMBAI VERSUS VEMBU VAIDYANATHAN 2019 (1) TMI 1361 - BOMBAY HIGH COURT

VINOD KUMAR JAIN VERSUS COMMISSIONER OF INCOME TAX 2010 (9) TMI 850 - PUNJAB AND HARYANA HIGH COURT

Catena of Tribunal decisions as well on this issue. Fairly settled in my opinion.

AI Summary

Capital gains treatment where allotment confers title: allotment date determines acquisition and gain character. Where an allottee obtains an allotment letter under a self financing allotment scheme and the allotment is final, the allottee is treated as acquiring title on issuance of the allotment; thus the date of allotment is the date of acquisition for capital gains purposes and transfer of the allotment has been treated as taxable capital gains, including as long term capital gains if the holding period is satisfied, notwithstanding non execution of a registered sale deed.