TaxTMI 
TaxTMI 
2014 (6) TMI 933
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw in confirming addition of Rs. 16,78,276/- under short term capital gains as against the long term capital loss of Rs. 8,06,488/- claimed by the appellant on sale of Flat No. 702 and 703 at Kandivali (East), Mumbai. 4. The ld CIT(A) erred on facts and in law to dismiss appellant's ground against the charging of interest u/s 234A and 234B of the Act." 3. Brief facts of the case are as follows: The assessee is in the business of trading of hardware and steel goods. A search and seizure operation u/s 132 of the Income Tax Act, 1961 (herein after „the Act‟) was conducted at the assessee‟s business premises on 26.03.2010. For the instant year assessee filed return on 29.09.2010 declaring an income of Rs. 21,77,677/-. Subsequent to return a notice u/s 143(2) was issued on 26.09.2011 for the aforesaid assessment year. A notice u/s 142(1) along with questionnaire was also issued by the Assessing Officer. 4. The assessee had declared long term capital loss of Rs. 8,06,488/- in the return of income. The assessment was completed u/s 143(3) vide order dated 30.12.2011 by the Assessing Officer at an income of Rs. 31,56,530/- making the following additions:-  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which according to Gautam Jain was not correct as per the well-settled law on the issue. According to him the date of purchase of flat was 15.04.2006 (i.e. date of allotment/ booking and 1st payment). Thus, according to ld AR, the assessee held the flats for more than 36 months before its sale on 16.07.2009. Therefore the ld AR, Shri Gautam Jain contended that the assessee had correctly shown the long term capital loss of Rs. 8,06,488/- as under:- Sale proceed Rs. 1,30,90,601/- Less cost of acquisition Rs. 1,38,97,089/- Purchase value as on 15.04.2006 (Rs. 11412325X632/519) Long term capital loss (-) Rs. 8,06,488/- 11. The ld AR, Shri Gautam Jain further submitted that the ld CIT(A) has not disputed the fact that the flats were allotted to the appellant on 15.04.2006; and even the first installment was paid on 15.04.2006. Therefore the period of holding is to be computed from the date of allotment and not from the date of agreement with the builder. In other words, according to the ld AR, once it is undisputed that appellant had acquired a right to receive the flat or right to obtain conveyance of the flat on 15.04.2006....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5. Furthermore, even clause (1) to the agreement provides as under:- "1. The transferors hereby agree to sell and the transferees agree to purchase all the right, title and interest of the transferors in the "said premises" viz. Flat No. d-703, Building No. 9, "Whispering Palms XXclusive, situated at: Lokhandwala Township, Akurli Road, Kandivli (East), Mumbai-400101, for the total consideration of Rs. 1,11,58,750/- (Rs. One Crore Eleven Lacs Fifty Eight Thousand Seven Hundred and Fifty Only) payable by the transferees in the manner hereinafter specified." 12. Therefore the ld AR contended that It is evident that assessee had transferred the right in the flats on 16.07.2009 which was acquired on 15.04.2006 and, payment were also duly made to the builder to acquire the valuable right; therefore, the said asset sold was a long term capital asset and, not short term capital asset as wrongly held by the AO & ld CIT(A). 13. The ld AR in support of the above contention before us seeks to rely upon the following judgments: i) 245 ITR 227 (Del) CIT Vs. R.L. Sood (pages 180-181 of JPB-II) ii) 11 SOT 594 (Del) Jitendra Mohan Vs. ITO (pages 159-163of JPB-II) iii) 137 TT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sued to the issue to the assessee on 21.05.2006 i.e. on the date of first payment i.e. on 15.04.2006. According to Shri Gautam Jain that is precisely the reason why the builder has informed the assessee the progress of construction of the said flat and gave a report that the builder has completed the „PLINTH‟ of flat NO. 702 and was also requesting the assessee to pay the installments as agreed between the parties so that the builder can go ahead and complete the flats on time. In the said circumstances, the ld AR, prays that the order of the lower authorities being erroneous should be set aside and the claim of the assessee be upheld. 16. On the other hand the ld DR relied on the order of the Assessing Officer and the ld CIT(A) and does not want us to interfere in the order of the ld CIT(A). 17. We have heard both the parties and have perused the records and have carefully gone through the case law cited by both the sides. We find that Assessing Officer has made an addition of Rs. 16,78,276/- holding that the has obtained short-term capital gains as against long- term capital loss of Rs. 8,06,488/- claimed by the assessee/ appellant on the sale of Flat No. 702 an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring to the definition' capital asset" submitted that the term "property" would include right to obtain conveyance as it is of wide connotation. The learned counsel's submission is that since there is extinguishment of right to obtain conveyance on the date of transfer of the flat to M/s. Living Media India Ltd. which was obtained by the assessees on 8-2-1988 or, latest by 10-7-1990 on the date of death of Shri Gullu Thadani, therefore, the asset transferred was a long-term capital asset. Thus, the assessees' contention was that the date of possession was the date on which the assessees had acquired right of obtaining conveyance in the flat. If this contention of assessees is accepted then whether the physical possession was given to assessees on 03.03.1992 or 06.12.1994 will not be of much significance. In order to appreciate the argument of the learned counsel, we would first refer to various case laws relied on by him. The first case law relied on by him was the Hon'ble Supreme Court decision in the case of Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471. In this case the Hon'ble Supreme Court examined the issue of the right of the sons of the Wakf to receive a share o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were that the assessee had acquired shares in Co-operative Housing Society and allotted flat in 1979. Possession of flat was obtained in October 1981 and sold in December 1982. It was held that shares in Co-operative Society were held : more than 36 months and, therefore, gains on sale of flat are long-term capital gains. The Hon'ble Gujarat High Court examined the Contention of Revenue regarding exemption under section 5(1 )(.nviiz) of the Wealth-tax Act and observed that in respect of shares in a Co-operative Housing Society, the Legislature intended to grant exemption in favour of all the rights flowing from shares in a Co-operative Housing Society except the interest, which the Legislature itself brought in within the tax net by making an express provision in sub-section (7) of section 4 of the Act. 9. From the above-noted case laws, it is clear that the term "property" has to be given the widest possible meaning and is itself a bundle of rights and all the comprehensive valuable rights do come within the purview of the term "property". It cannot be denied that Shri Gullu Thadani had obtained a valuable right on 08-02-1988 itself and Ms. Mrinalini Thadani had also obtain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. CIT 344 ITR 501, (Punjab &Haryana) High Court held that:- "Once that is so, adverting to the facts of the present case, the assessee was allotted flat on 27.02.1982 on payment of installments by issuance of an allotment letter and he had been making payment in terms thereof but the specific number of the flat was allocated to the assessee and possession delivered on 15.05.1986. the right of the assessee prior to 15.05.1986 was a right in the property. In such a situation, it cannot be held that prior to the said date, the assessee was not holding the flat." 19. We have heard both the parties and have perused the case laws cited by both the sides. The AO has held that the gain of the assessee from the sale of the said flat to be short-term capital-gain on the reason that the sale of Flat on 16.07.2009 was only after the assessee had obtained the possession of these flats on or after 27.06.2008. The said basis adopted by the AO cannot be countenanced because of the law laid down by various judicial precedents on the subject in hand and also it is factually incorrect to state that the flats were taken on possession by the assessee on or after 27.06.2008, for the simple reason....