CA Sandeep Kanoi
P&H High Court in a ruling in the case of Vinod Kumar Jain Vs. CIT held that Assessee gets title to the properly on the issuance cf an allotment letter and the payment cf instalments is only a consequential action upon which the delivery of possession flows and in calculation of holding period the period from the date of allotment and upto the date of possession will also be counted.
Brief Facts :- Facts as narrated in the appeal are that the assessee filed its return for the assessment year 1989-90 wherein a note had been given by him that capital gains on account of sale of residential flat in New Delhi were exempt from tax. The assessing officer asked for the details and reasons from the assessee for claiming exemption. It was also sought to be furnished as to when the possession of the flat that had been sold on 6.1.1989, had been handed over to him. The assessee furnished the desired information and documents, including the copy of allotment letter besides stating that he was entitled to exemption as per the provisions of Section 2(29A) of the Act. The assessee had claimed that he purchased another flat at New Delhi on 31.1.1989, for Rs.3,80,000/-, and as such the capital gains were exempted from tax. It was pointed out by the assessing officer that the assessee was allotted a flat No. 73 on 12.3.1986 in category-II under the Wazirpur Phase-III-Residential Scheme of DDA. The cost of the flat was Rs.1,49,060/- which was sold by him on 6.1.1989 for a sum of Rs.2,25,000/- and as such, there was a capital gain of Rs.75,940/-. The assessing officer observed that the assessee had claimed exemption under the provisions of Section 2(29A) of the Act which deals with the matters of long term capital gain but he could not have the benefit of the said provisions as his case fell under the category of short term capital gain and was governed by the provisions of Section 2(42A). It was on this basis the assessing officer did not exempt the long term capital gain and disallowed the deduction claimed by the appellant- assessee.
Issue Under Consideration
The sole point for consideration in this case is, whether the capital gain arising on allotment of flat under the scheme of the DDA on 27.2.1982 of which actual flat number and delivery of possession took place on 15.5.1986 and the flat having been sold on 6.1.1989, was a long term capital gain; and consequently, whether the assessee was entitled to set off the same under Section 54 of the Act.
Contention of the Assessee
The assessee relied upon judgment of this Court in Commissioner of Income Tax v. Ved Parkash and sons (HUF), (1994) 207 ITR 148 (P&H) and Circular No. 471 dated 15.10.1986 [162 ITR (st.) 41] to contend that allottee gets title to the property with the issuance of allotment letter and payment of instalments is only a follow- up action and taking of the delivery of possession is only a formality and no right as such accrues thereon. According to the assessee, the transaction stood completed on 27.2.1982 and the flat having been sold on 6.1.1989, the same amounted to long term capital gains and benefit of Section 54 was available to the assessee. The counsel further relied upon the provisions of Section 2(42A) of the Act to contend that it was holding of the property and not the ownership of the property that was germane for determination of the question regarding long term capital gains and since the assessee had held the flat for approximately seven years, he was entitled to adjustment of long term capital gains under Section 54 of the Act in respect of the property purchased by him.
Learned counsel for the revenue, with the aid of judgment Commissioner of Income Tax v. Smt. Beena K. Jain,  217 ITR 363 (Bom) supported the order of the Tribunal.
Held by High Court
The provisions of ss. 2(14), 2(29A) and 2(42A) encompasses within its ambit those cases of capital asset which are held by an assessee. Once that is so, adverting to the facts of the present case, the assessee was allotted the flat on 27th Feb., 1982 on payment of instalments 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 15th May, 1986. The right of the assessee prior to 15th May, 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.