Urmila Jagdish Mehta Vs ACIT (ITAT Mumbai)
Allotment Date Decides Holding Period: ITAT Mumbai Treats Redeveloped Flat Gains as LTCG, Allows Sec 54 Relief
The Mumbai ITAT “F” Bench, comprising Smt. Beena Pillai (JM) & Shri Makarand Vasant Mahadeokar (AM), allowed the appeal of Mrs. Urmila Jagdish Mehta for AY 2014-15 and held that capital gains arising from sale of a redeveloped residential flat were long-term capital gains, not short-term, thereby deleting the addition of ₹2.11 crore made by the AO and sustained by the CIT(A).
The Assessee originally acquired a flat in 1988. Pursuant to redevelopment of the society, she became entitled to a new flat with enhanced area, supported by an allotment letter dated 24.11.2006 and a subsequent agreement with the builder. The AO treated the gains as STCG on the ground that construction was completed only in May 2012 and the last instalment for additional area was paid on 01.04.2013, holding that the asset was not held for more than 36 months.
Reversing this view, the Tribunal held that the date of allotment / crystallisation of rights is the relevant date of acquisition, and not the date of physical possession, completion of construction or payment of last instalment. Relying on the binding jurisdictional High Court decision in PCIT v. Vembu Vaidyanathan (Bom.), and CBDT Circulars No. 471 & 672, the ITAT reiterated that allotment confers title and subsequent payments or possession are only consequential formalities.
The Tribunal further observed that redevelopment is a continuation of existing ownership rights, and mere acquisition of additional area or staggered payments cannot postpone the date of acquisition. Accordingly, the Assessee had held the capital asset for more than 36 months prior to its sale on 31.12.2013.
Resultantly, the gains were directed to be assessed as long-term capital gains, and the addition of ₹2,11,44,607 assessed as STCG was deleted. The appeal of the Assessee was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], dated 19.09.2024, passed under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”], for the Assessment Year 2014–15, arising out of the assessment order dated 02.12.2016, passed by the Assistant Commissioner of Income-tax, Circle 33(3), Mumbai[hereinafter referred to as “Assessing Officer or AO”], under section 143(3) of the Act.
