TaxTMI 
TaxTMI 
2014 (1) TMI 1585
X X X X Extracts X X X X
X X X X Extracts X X X X
....ared in pursuance of the notice, produced the details called for. The material produced discloses that during the financial year 2009 -10, the assessee sold the property No.365-A, situated at Sector 6, Hosur - Sarjapur Road, Bangalore on 28.05.2008 for consideration of Rs. 1,13,00,000/-. The assessee worked out the income from long term capital gain as under:- Sale consideration Rs. 1,13,00,000/- (Less) Cost of property allotted on 21.09.1988 Rs.1,20,510/- Indexed cost of acquisition Rs. 1,20,510/- x 161/585 Rs. 4,37,878/- Rs. 1,08,62,122/- (Add) Registration Fee etc. paid on 27.02.2008 Rs. 11,770/- The total capital gain is Rs. 1,08,73,892/- Out of the consideration received by the assessee, he invested an amount of Rs.28,00,000/- and Rs.22,00,000/- in REC bonds and National Highway Authority Bonds respectively. He also purchased an apartment at Hebbal, Bangalore for a sum of Rs.56,03,596/- and offered the balance amount of Rs.2,70,296/- to tax under the head 'income from long term capital gain'. 4. The assessing authority was of the view that the sale deed executed in favour of the assessee was on 27.02.2008 and he sold the property on 29.05.2008 withi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rises for our consideration in this appeal is as under: Whether in the facts and circumstances of the case, the Tribunal is right in law in holding that the expression "held by the assessee" in Section 2(42-A) of the Income Tax Act implies a person in whose favour an allotment of a site made in the first instance, when the entire consideration was paid in pursuance of such allotment? 7. The learned Counsel appearing for the revenue contended that though initially the site was allotted on 21.9.1988 and an amount of Rs.1, 11,480/- was paid as consideration for the said site and sale deed also came to be executed on 6.10.2005, the same was cancelled on 18.9.2007. Subsequently, one more site was allotted in Hennur-Banaswadi Road, which allotment also came to be cancelled on 9.1.2008 and finally the site in question was allotted on 15.2.2008 followed by a registered sale deed dated 27.2.2008. Therefore, it is only on 27.2.2008 it can be said that the assessee held the capital asset. Therefore, when he sold the said capital asset on 29.5.2008 within three years from the date of purchase, the capital gains accrued thereon is a short term capital gain and therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s under: "2(42B) : "short-term capital gain" means capital gain arising from the transfer of a short-term capital asset." "Section 2(29A) of the Act defines "long-term capital asset" as under: "2(29A): "long-term capital asset" means a capital asset which is not a short-term capital asset". Section 2(29B) of the Act defines "long-term capital gain", which reads as under: "2(29B): "long-term capital gain" means capital gain arising from the transfer of a long-term capital asset." The definition of "long-term-capital gain" and "short-term capital gain" refers to "transfer". The word "transfer" is also defined under the Act at Section 2(47). This provision has undergone substantial amendment by Finance Act, 1987, which came into effect from 1.4.1988, whereunder clauses-5 and 6 were introduced. In the definition of "short-term capital asset" prior to the amendment, by Finance Act No.2 of 1977, which came into effect from 1.4.1978, the period prescribed was 60 months. By Finance Act, 1977, it was amended reducing the period to 36 months. In the memorandum explaining the provisions i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of rights in the manner referred to above. "11.2 The newly inserted sub-clause (vi) of section 2(47) has brought into the ambit of "transfer", the practice of enjoyment of property rights through what is commonly known as Power of attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is legally not permitted. A person holding the power of attorney is authorized the powers of owner, including that of making construction. The legal ownership in such cases continues to be with the transferor. 11.3 These amendments shall come into force with effect from 1-4-1988 and will accordingly apply to the assessment year 1988-89 and subsequent years." Subsequent to the amendment, the Central Board of Direct Taxes issued a Circular No.471 dated 15.10.1986 explaining how capital gains from long-term capital asset is to be calculated in cases where the allottee gets title to the property on the issuance of allotment letter and the payment of instalments though possession is not delivered and registered deed of conveyance is not disputed. It reads as under: "474. Capital gains f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sition stated above. In view of these facts, it has been decided that cases of allotment of flats under the Self-Financing Scheme of the D.D.A. shall be treated as cases of construction for the purpose of capital gains." Section 48 of the Act deals with mode of computation of capital gains, which reads as under: "48. Mode of computation. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such "transfer, (iii) the cost .of acquisition of the asset and the cost of any improvement thereto: Provided .................. Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian Company referred to in the first proviso, the provisions of clause (ii) shall have effect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....saction the assessee is put in possession of an immovable property or he retained the same in part performance of the contract under Section 53-A of the Transfer of Property Act, it amounts to transfer. No registered deed of sale is required to constitute a transfer. Similarly, any transaction whether by way of becoming a member of or acquiring shares in a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of any immovable property, also constitutes transfer and the assessee is said to hold the said property for the purpose of the definition of "short-term capital gain. In fact, the Circular No.495 makes it clear that transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are common mode of acquiring flats particularly in multistoried constructions in big cities. The aforesaid new sub-clauses (v) and (vi) have been inserted in Section 2(47) to prevent avoidance of capital ga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....age employed is unambiguous. The intention is very clear. When a capital asset is transferred, in order to determine the capital gain from such transfer, what is to be seen is, out of full value of the consideration received or accruing, the cost of acquisition of the asset, the cost of improvement and any expenditure wholly or exclusively incurred in connection with such transfer is to be deducted. What remains thereafter is the capital gain. It is not necessary that after payment of cost of acquisition, a title deed is to be executed in favour of the assessee. Even in the absence of a title deed, the assessee holds that property and therefore, it is the point of time at which he holds the property, which is to be taken into consideration in determining the period between the date of acquisition and date of transfer of such capital gain in order to decide whether it is a short-term capital gain or a long-term capital gain. 13. Revenue relies on the case of Commissioner of Income Tax v. Smt. R.R. Sood [1986] 161 ITR 92 (Bom), where the Court was dealing with an agreement to purchase a plot dated 25th May 1963 and the amount paid under the said agreement. In that context, it was he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he same analogy, the assessee, who is liable to pay the capital gains, is also entitled to the exemption granted under the very Act on such capital gains. That is precisely what the Apex Court has said in Smt. Saroj Aggarwal's case (supra) that facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Too hyper technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. The Courts should place an interpretation making a benevolent and justice oriented inference and the facts must be viewed in the social milieu of a country. Now in this background, let us see the facts of this case. 16. The assessee was allotted a site on 21.9.1988 in R.M.V. Extension, Bangalore. The assessee paid a sum of Rs. 1,11,480/- on such allotment. He was also put in possession of the property and possession certificate was issued. On compliance with other legal requirement, a registered sale deed came to be executed on 6.10.2005 in his name. However, the said site was the subject matter of litigation and therefore, when the assessee was not allowed to enjoy the said property in....