TaxTMI 
TaxTMI 
2025 (7) TMI 370
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....eceived Rs. 96,250/-; paid Rs. 3,20,500/- against credit card bills and interest received from Corporation Bank of Rs. 1,444/-. It was observed from e-filing portal of the department that the assessee had not filed return of income for the year under consideration which caused escapement of income. Since there was escapement of assessment of income to the tune of Rs. 74,18,194/- during the year under consideration, the assessment was reopened within the provision of section 147 of the Act by issuing notice u/s 148 of the Act dated 26.04.2022. In response to the notice issued u/s 148 of the Act dated 26.04.2022, the assessee filed his return of income for the A.Y. 2015-16 on 28.05.2022 declaring total income at Rs. 1,54,700/-. Further, notice u/s 142(1) of the Act dated 03.10.2022 along with questionnaire was issued and served upon the assessee and asked to file the entire details of all immovable properties, copy of agreement of purchase/sale of property, details of payments for purchase of property, details of payments received on sale of immovable property, details of payment of credit card bill, etc. Since no reply was received from the assessee within stipulated time, penalty n....
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.... option as provided in section 144C(2) of the Act. 6. The assessee filed the objections before the Ld. DRP and Ld. DRP observed that M/s Arihant Properties entered into an agreement to sale a flat on 16.11.2007 and as per the documents, possession of Flat B-707 (identified for the first time) was handed over to the assessee vide 'Possession Letter dated 16/12/2010. The appellant sold the property in question vide Sale deed dated 25/02/2015. As per the ROI filed LTCG qua property in question has been offered at Rs. 1,66,482 (Indexation at 1024/551 x Cost of Acquisition Rs. 36,77,020 = Rs. 68,33,518), which has been recalculated to Rs. 17,04,264 (Indexation at 1024/711 x Cost of Acquisition Rs. 36,77,020 = Rs. 52,95,264). It was further observed that the core of the dispute is concerning Explanation (iii) to section 48 of the Income-tax Act i.e. 'Indexed Cost of Acquisition'. Ld. DRP finally concluded that the appellant has been given ownership/possession of the flat only in year 2010 as per the possession letter submitted and as observed from para 13 of the 'Agreement to Sale'. Hence, the objection of the assessee was not considered and accordingly rejected. 7. In ....
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....s noticed that ground no. 2, 3 & 4 pertains to considering the date of acquisition for the purpose of computation of capital gain i.e. from the date of first payment in the FY 2006-07 or from the date of possession given on 16.12.2010. Accordingly, we proceed to decide the ground no. 2 to 4 jointly on merit which are the main grounds of the appeal. 9. We have heard the Ld. AR and Ld. DR and examined the record. Ld AR brought to our notice Paper book 1 filed by the assessee on 03.04.2025 containing 140 pages, Paper Book 2 filed by the assessee on 16.06.2025 and written submissions are filed by the assessee on 11.06.2025. Firstly, the Ld. AR argued that the directions issued by the Ld. DRP on 21.11.2024 computing the LTCG at Rs. 17,04,264/- is factually and legally unsustainable because the Ld. DRP has not considered the legal position as settled by various judicial precedents to the effect that the indexation must commenced from the date of acquisition or allotment /payment and not the date of the possession. Secondly, the Ld. AR argued that the Ld. AO and Ld. DRP erred in restricting the indexation benefit for the cost of acquisition from FY 2010-11 (year of possession) instead ....
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.... said 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 Dec., 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. 11. Ld. AR further relied on the judgment of Hon'ble Punjab and Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT, Chandigarh (ITA No. 89 of 1999) dated 17.01.2014, the judgment of Hon'ble Allahabad High Court in the case of Nirmal Kumar Seth vs. CIT (2012) 17 taxmann.com 127 (Allahabad) and the decision of Coordinate Bench of ITAT in the case of Ms. Renu Khurana vs. ACIT in ITA No. 1368/Del/2022 dated 17.02.2023. 12. Ld. AR referred page 7 of the paper book 2 which is agreement to sale and pointed out that Flat No. B-707 on 7th floor, is clearly mentioned in the agreement to sale and Ld. DRP has wrongly concluded ....
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....n of the construction. Thus, the Developer is bound to respect the same upon satisfying the conditions as laid down in the LOI. Accordingly, the letter dated 14-02-2011 is in essence the letter of allotment and not letter of intent. 11. He also drew our attention to various communication by the developer with the assessee requesting payment of money as agreed in the payment schedule on completion of the milestone as stated in the schedule of payment from the aforesaid communications, it is evident that the Developer had asked the assessee to make various payments on achieving milestones (as per the LOI). Also, such communications specifically mention the fact that these flats are earmarked. Further, the receipts along with the copies of the cheque were produced to evidence that the developer had received payment from the assessee towards the purchase of the impugned flats as mentioned in the respective receipts. In the aforesaid communication issued by the Developer there is a clause requesting the assessee to make the payments towards the amount mentioned in the said communication else the Developer has a right to cancel the earmarked flat. This means that if tim....
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....the Learned AO that the builder as on the date of LOI is uncertain of these aspects is misplaced. He further submitted that, clause 3 and clause 8 of the LOI states that the amendment in the sanctioned layout is only to ensure optimal use of the space or if specifically required by any relevant authorities (including the MCGM). Further, it is also stated that the developer shall ensure that even where the number of floors in the building are increased, there is no variation in the areal position of the flat being earmarked to the assessee. 14. Reference to the clause 10 of the LOI was made wherein it was stated that upon entering into the LOI, the assessee had acquired the rights in the Kalpataru Properties to be constructed and these rights shall continue to vest so long as the assessee continues to comply with the conditions of the LOI. The said clause is in the interest of the Developer to ensure that the assessee does not claim his right in acquiring the Kalpataru Properties without payment of consideration. Reference to Clause 11 of the LOI was made wherein it was submitted that the assessee had acquired the right to purchase the specific earmarked impugned flats and ....
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....bility of capital gains considering that such allotment is final unless it is cancelled or the allottee withdraws from the scheme and that it may be cancelled only under exceptional circumstances. Further, the Income Tax department had filed an SLP before the Hon'ble Supreme Court of India which is dismissed -Principal Commissioner of Income Tax-3, Mumbai v. Vembu Vaidyanathan [2019] 108 taxmann.com 339 (SC) In the case of Praveen Gupta v. ACIT (2012) 137 TTJ 307 the Hon'ble Delhi Tribunal observed that Explanation (iii) to section 48 and section 2(42A) of the Act requires a capital asset to be 'held'. It is not necessary that to constitute a capital asset, the Appellant must be an owner of the Capital Asset through registration of the conveyance deed. By entering into an agreement to allot a flat, the Appellant has identified a particular property which he intended to buy from the builder and that right of the Appellant itself is a capital asset. The builder is also bound to provide the applicant with that property by accepting certain advance amount and upon Appellant satisfying the terms of payment. Indexation must be computed computed on the ba....
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....ed that no right was vested to the assessee by said LOI and therefore, the AO has rightly taxed it as short term capital gain. 20. Before us the ld counsel during the course of hearing sought permission to file confirmation letter from the builder as to what was the date of allotment because the builder has clearly meant that impugned payment were to be allowed. Accordingly, he filed a letter dated 18.01.2023. Accordingly, the case was again put for clarification. 21. Both the parties were heard on this additional evidence on 03.03.2023. The reason for delay in filing of the letter is that the assessee was a non resident and was not available in India therefore, he has requested some time to file such letter which has bearing on the issues involved. 22. We have heard the rival submissions and perused the relevant findings given in the impugned order as well as evidence filed by the letter dated 18.01.2023. The core issue before us is, whether by virtue of letter dated 14.02.2011, can it be reckoned as a letter of allotment whereby the assessee had acquired the right of the flats allotted to him on the terms and conditions mentioned therein along with the ....
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.... allotment by the developer that is the reason why the assessee had made the payment and on the completion of payment the registration has been done on 20.12.2017, i.e., FY 2017-18. It was in this background the confirmation letter from the builder has been obtained by the assessee which has been filed before us. The builder in respect of the flats has stated that the virtue of letter of intent dated 14.02.2011; the flats were actually allotted to the assessee which was specifically earmarked in the said LOI. One. of the letter reads as under:- "Madam/Sir, 1. Kindly refer to the Letter of Intent dated 14/02/2011 issued by us in respect of above referred Flat No. 162 at Kalpataru Sparkle. Pursuant to the above Letter of Intent, as per the terms of the letter, you have paid a sum of Rs. 10,00,000/- (Rupees Ten Lakhs only) vide cheque no. 470517 dated 14/02/2011 drawn on HSBC Bank, the receipt of which has been issued to We hereby confirm that upon acceptance of our letter of intent by paying an initial amount of Rs. 10,00,000/-, you had accepted our offer and we had allotted the above flat to you on 14/02/2011 Further the said Flat No. 162 as allotted to you was sub....
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....erance of the said contract and the payment. Not only that, it has also been brought on record the entire 100% payment were made within 2- 3 years and even the occupancy certificate were also issued on 25.01.2016 and the registration was done almost after 2 years i.e. on 14.12.2017. In such facts the date of registration i.e. 14.12.2017 cannot be held as the date on which the assessee has acquired the immovable asset or the right because that right was already but vested upon the agreement of the contract by the developer and the assessee way back in FY 2010-11. 28. Hon'ble Punjab and Haryana High Court in case of Madhu Kaul vs. CIT 363 ITR 54 has held that on the allotment of a flat and upon payment of first installment, right to hold the flat has been conferred on impugned flat that passion of delivery letter does not detract from the fact that the allottee was conferred a right to hold the property of such issuance of allotment letter. Further, Hon'ble jurisdictional High Court in case of PCIT Vs. Vembu Vaidyanatha 412 ITR 248 had clearly held that for classifying long term and short term, what is required to be seen is the agreement spelling out the exact terms....
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....clarified this position by holding that when an assessee purchases a flat to be constructed by Delhi Development Authority ("D.D.A." for short) for which allotment letter is issued, the date of such allotment would be relevant date for the purpose of capital gain tax as a date of acquisition. It was noted that such allotment is final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow-up action and taking the delivery of possession is only a formality. iii) ITA No. 2291/Mum/2015 in the case of Anita D. Kanjani vs. ACIT dated 13.02.2017:- 9. With a view to resolve this dispute, we have firstly analysed the provisions of section 2(42A) which defines 'short term capital asset' as under:- "Section 2(42A) in the Income- Tax Act, 1961 (42A) "short- term capital asset" means a capital asset held by an assessee for not more than thirty- six months immediately preceding the date of its transfer": Perusal of aforesaid defi....
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....n the light of the expanded definition as contained in Section 2(47), even when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction 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 cooperative 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 particu....
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.... milieu of a country." Therefore, keeping the aforesaid principles in mind, when we look at Section 48, the language 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." Thus, from the aforesaid judgment, it is clear that for the purpose of holding an asset, it is not necessary that the assessee sho....
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....a property shall be effective only on registration of conveyance deed in view of section 54 of Transfer of Property Act. In our view, it is a settled proposition of law and there is no dispute on that. The absolute legal ownership of an immovable property shall take place in terms of various provisions of Transfer of Property Act which needs to be read with provisions of section 2(47) of Income-tax Act, 1961 for the purpose of computing tax liability arising on account of sale / purchase of immovable properties under Income-tax Act. But the issue here before us is different. As discussed earlier, the holding period is to be determined in terms of section 2(42A) of the Act which has been reproduced and discussed above. The issue of transfer of ownership is not the issue to be decided here for computing the holding period. Therefore, we find that application of the ratio of aforesaid judgment would not be appropriate here. 15. Thus, respectfully following the judgements of various High Courts wherein this very issue has been analysed in detail as discussed above at length, we find that holding period should be computed from the date of issue of allotment letter. If we do so,....
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....g support from the decisions cited before us during the course of hearing. The case law relied upon by the ld.DR in this case are distinguishable on facts and are not applicable to the present case, we therefore, respectfully following the ratio laid down in the above decisions relied on by the ld.AR hold that the assessee acquired the ownership right in the flat on the date of letter of intent when the assessee booked the flat and paid booking amount and not on the date of registration and thus held the property for more than 36 months and is entitled for indexation while calculating the gain. In view of the above observations, we are of the considered view that revisionary powers exercised by the PCIT for setting aside the order framed by the AO u/s 143(3) that the date of ownership is the date of registration of flat of in the name of assessee and not the date of allotment is wrong and therefore, we set aside the order of PCIT. The appeals of the assessee is allowed. v) ITA No. 1876/Mum/2015 in the case of Fatema Jaffer Ghadiali vs. ITO dated 17.02.2016:- 6.7. In addition to the above, in our considered view the holding period should be computed from t....
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....nnotation of this letter which reads "........Though your obligations to pay the consideration amount as per annexure A shall be liable to be complied with and discharged irrespective of whether the agreement for sale has been executed or not." Thus, the conveyance of right to hold the property is complete by the concluding lines when it is stipulated that the obligation to make the payment of consideration amount is absolute and not dependent on agreement for sale if executed or not. Further it is to be noticed that no separate allotment letter has been issued to the assessee and letter of intent dated 14.02.2011 embodies everything required to hold the capital asset for ascertaining "indexed cost of acquisition" as per explanation (iii) to section 48 of the Act. 15 The Ld. DRP in its conclusion seems to be confused between a right to hold and a right to acquire the capital asset and therefore has relied upon the case of Hon'ble Supreme Court in Suraj Lamp Industries Pvt. Ltd. Vs. State of Haryana and under that impression concluded that the period of holding for indexation purposes would be FY 2017-18 when the ownership and possession was acquired. The settled legal prin....
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....r of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases." Thus the observation of AO in the impugned order dated 18.12.24 in para 4.2 i.e. "Moreover, the order of the Hon'ble ITAT has not been accepted by the revenue and has preferred an appeal before the Hon'ble High Court", are not in consonance with the settled legal principles and followed legal precedents. 17. The Ld. Coordinate Bench in ITA No. 2489/Mum/2022 AY 2019-20 (supra) has already decided the same issue in favour of the assessee with respect to Flat no. C-161, C-162, C-163 and C-164 at Kalpatru Sparkals, Bandra East and the present case pertains to Flat no. C-165 in the same property and the concerned AY is 2022-23. The Ld. Coordinate Bench had decided the ground no. 2 in favour of the assessee observing "Thus, we hold that date of acquisition for the purpose of computation of capital gain for the impugned immovable property /flats has to be reckoned in FY 2010-11 i.e. from the date of the letter 14.02.2011". Therefore, we respectfully fol....