TaxTMI 
TaxTMI 
2016 (5) TMI 1033
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....A) erred in refusing the claim for deduction u/s 54 EC of the Income Tax Act. 6. The appellant denies the liability for interest u/ s. 234D of the Act. No opportunity was provided before levying interest u/ s 234D of the I T Act. 7. Without prejudice to the appellant's right of seeking waiver before appropriate authority the appellant begs for consequential relief in the levy of interest u/ s 234D of the Act. 8. For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 2. Ground Nos.1 to 5 relate to nature of capital gain accrued to the assessee on sale of flat acquired from a Co-operative Group Housing Society. According to assessee, the flat was booked in a society and he got one share allotted on 5.8.1993. Thereafter, various demands were raised by the society and he accordingly made the payments. Finally, possession of the flat was given to the assessee on 22.2.2003. Later on, the assessee sold the flat on 19.1.2006 and the assessee offered long term capital gain on income earned on this sale transaction. The Assessing Officer....
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....e ld. DR, besides placing reliance upon the order of CIT(Appeals), has invited our attention to the judgment of Hon'ble High Court of Karnataka in the case of CIT V. Dr. V.V. Modi, 218 ITR 1, in which it has been held that the assessee having acquired a site under lease-cum-sale agreement and sold it a few months after becoming absolute owner thereof, the capital gains arising therefrom were short-term capital gains, though assessee held the property for 10 years before conveyance was secured by him upon payment of entire sale consideration in respect of lease-cum-sale agreement. 7. Having carefully examined the order of lower authorities in light of the rival submissions, we find that undisputedly assessee has acquired the shares for allotment of a flat by the society on 5.8.1993. Thereafter, he made various payments to the society towards construction of Co-operative Group Housing Society building and finally the constructed flat was allotted to the assessee on 22.2.2003, which was sold on 19.1.2006. The assessee offered the capital gain accrued on its sale as long term capital gain, whereas the AO treated it to be short term capital gain. Now the issue before us is the nature o....
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....y of any kind' is of wide import. When this expression is read along with the expression defined in s. 2(47)(ii) i.e., 'extinguishment of any rights therein', the giving up of a right of specific performance by the assessee to get conveyance of immovable property in lieu of receiving consideration, results in the extinguishment of the right in property, thereby attracting the rigor of s. 2(14) r/w s. 2(47). Giving up of a right to claim specific-performance by conveyance in respect to an immovable property, amounts to relinquishment of the capital asset. Therefore, there was a transfer of capital asset within the meaning of the Act. The payment of consideration under the agreement of sale, for transfer of a capital asset, is the cost of acquisition of the capital asset. Therefore, in lieu of giving up the said right, any amount received, constitutes capital gain and it is exigible to tax. However, as is clear from s. 48, before the income chargeable under the head capital gains is computed, the deductions set out in s. 48 has to be given to the assessee. It is only the amount thus arrived at, after such deductions under s. 48, would be the income chargeable under the he....
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....y him from the date of sale in his favour and not what he held earlier to that. The Hon'ble High Court accordingly held capital gain arising from transfer could only give rise to short term capital gains. 12. But, in the instant case, the assessee acquires the right to obtain a flat in the society on the allotment of share certificate in his favour. Later on, he has also made the payments to the Co-operative Group Housing Society on their demand, meaning thereby that since the assessee has acquired some right in the capital asset on the allotment of share certificate in his favour, the flat which has been allotted to the assessee on completion of the project cannot be transferred or allotted to any other person, without the consent of the assessee. The issue with regard to nature of capital gain on such transfer of right has been adjudicated by the Lucknow Bench of the Tribunal in the case of Karunesh Agarwal v. DCIT in ITA No.182/Lkw/2015 in which the Tribunal has held that the assessee acquired the right in the property as soon as the agreement for sale is executed, though sale deed is executed after a considerable time. The relevant observation of the Tribunal is extracted as u....
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....le, it cannot be disputed that the appellants would be entitled to the benefit under the provisions of Section 54 of the Act because long term capital gain earned by the appellants had been used for purchase of a new asset/residential house on 30th April, 2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain. 20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is....
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....capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs. 15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand. 22. In addition to the fact that the term "transfer" has been defined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capita....
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....id property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated. 25. In view of the aforestated peculiar facts of the case and looking at the definition of the term 'transfer" as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house." 27. In light of the aforesaid judgment of Hon'ble Apex Court, we find force in the contention of the assessee that the residential house was acquired through a....
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.... the receipt of commission and offered it to tax which were also accepted by the Revenue, the Revenue has no right to disallow the claim of the expenditure in the hands of payer. Therefore, the claim of payment of commission to commission agents should be allowed. 32. The ld. DR simply placed reliance on the order of the ld. CIT(A). 33. Having carefully examined the order of lower authorities and the documents available on record, we find that the assessee has claimed the payment of commission on sale of flats to various commission agents and during the course of assessment proceedings the AO raised queries from the commission agents and asked them to file confirmation letters etc. In response thereto the confirmation letters alongwith bank statement and copy of return of income alongwith computation of income were filed. The said evidence is also find before us and available at page no. 199 to 440 of the compilation of the assessee. Having carefully perused, we find that in response to notices issued by the AO the commission agents have accepted the receipt on commission from the assessee. The commission agents have also paid the tax on receipt commission and the same was ac....