Date of allotment or date of possession- To Compute Capital Gain?

The only issue that is to be decided is whether the date of allotment of the flat or the date of possession of the flat by the assessee should be considered as the date for computing the holding period of 36 months.

On perusal of the cited orders of the Tribunal (supra), we find that an identical issue came up for adjudication before the Tribunal in the case of  Meena A Hemnani vs. ITO vide ITA No. 5998/M/2010 (AY 2007-2008), order dated 17th January, 2014 wherein one of us (AM) is a party and the issue was decided in favour of the assessee by relying on various decisions of the Tribunal as well as the judgment of the Hon‟ble Gujarat High Court in the case of CIT vs. Anilaben Upendra Shah (2003) 262 ITR 657 (Guj). Relevant discussion is given in paras 3 & 4 of the said order of the Tribunal which read as under:

“ 3. There are couple of issues raised in this appeal. Rest of the grounds raised in the appeal are either consequential or general in nature. Accordingly, they are dismissed as general or consequential. The issues, which need to be adjudicated in this appeal are (i) if the capital gains earned by the assessee are in the nature of the short term as held by the AO or long term capital gains as offered by the assessee in the return. At the outset, Ld Counsel for the assessee mentioned that the assessee purchased a flat vide the allotment letter dated 9.9.2003 from the builder namely Prestige Estates Projects Pvt. Ltd. There was a construction agreement between the parties dated 1.12.2003 and the registered deed of the same was dated on 22.9.2006. The said flat was sold by the assessee to Bennet Coleman & Company on 10.11.2006. The assessee earned capital gains on this transaction and offered the same as long term capital gains reckoning the date of allotment i.e., 9.9.2003 for the purpose of determining the holding period of three years relevant for the long term capital gains. However, in the assessment proceedings, AO considered the date of registration i.e., 22.9.2006 the date of registration and determined the short term capital gains. Therefore, now the issue to be decided by the Tribunal relates to if the date of allotment should be considered for the purpose of computing the said long term capital gains. In this regard, Ld Counsel filed various decisions to suggest that the date of allotment must be considered for the purpose of computing the long term capital gains instead of date of registration. Ld Counsel filed the order of the Tribunal in the case of ACIT vs. Smt. Vandana Rana Roy vide ITA No.6173/M/2011 (AY 2007-2008) dated 7.11.2012, wherein one of us (AM) is a party, and stated that the “date of allotment” should be reckoned as relevant date for computing the holding period for the purpose of computing the capital gains. In this regard, Ld Counsel brought our attention to para 7 and 8 of the said order of the Tribunal to support his case. The said judgment was decided considering the judgment of the Gujarat High Court in the case of CIT vs. Anilaben Upendra Shah (2003) 262 ITR 657 (Guj) apart from other decisions of the Tribunal in the case of Jitendra Mohan vs. ITO (2007) 11 SOT 594 (Del) and also another decision of the ITAT in the case of Pravin Gupta vs. ACIT and the relevant propositions are extracted in para 7 of the Tribunal‟s order dated 7.11.2012. The said paras 7 and 8 from the order of the Tribunal in the case of Smt. Vandana Rana Roy read as under:

“7. We have heard both the parties, perused the cited decisions and we find that there is no dispute on the facts. The only issue that is to be decided is whether date of allotment of the flat or the date of possession of the flat by the assessee should be considered as date of holding for computing the holding period of 36 moths. In alternative, the “date of registration” should be the relevant date. On perusal of the said decisions relied upon by the Ld Counsel, we find that the decisions are relevant and applicable to the  facts of the present case. The conclusion of the Hon‟ble Gujarat High Court judgment in the case of CIT vs. Jindas Panchand Gandhi reads as under:

“Assessee having sold the flat allotted to him by a co-operative housing society after a period of 36 months from the date of allotment, capital gains arising to him were long-term capital gains despite the fact that the physical possession of the flat was given to the assessee much later and, therefore he was entitled to deduction from such gains as per law.”

7.1            The conclusion of the Hon’ble Gujarat High Court judgment in the case of CIT vs. Anilaben Upendra Shah reads as under:

“Assessee having held the shares and allotment of a flat in a co-operative housing society for a period of more than 36 moths the capital gain arising from sale of said flat was long­term capital gain and assessee was entitled to benefit of section 80T irrespective of the fact that the assessee did not get possession of the flat in question at the time of allotment and it was constructed later on.”

7.2.         The conclusion of Hon’ble ITAT, Delhi Bench in the case of Jitendra Mohan vs. ITO reads as under:

“On the facts of the case, assessee held the capital asset (shed) allotted to it on installment basis from 28th December, 1994, the date of payment of second installment and sale thereof on 15th December, 2000, gave rise to long term capital loss even though possession of shed was handed over by DSIDC to assessee on 28th May, 1998.”

7.3.         The conclusion of Hon ’ble ITAT, Delhi Bench in the case of Praveen Gupta vs. ACIT reads as under:

“Assessee can be said to have held the flat when he made the payment to the builder and received the allotment letter, and therefore, benefit of indexation of cost of acquisition of the flat has to be granted to the assessee from the date (1995) when he started making payment to the builder and not from the date of execution of conveyance deed in 2001.”

8. All the above decisions are uniform in concluding that the “date of allotment” is reckoned as the date for computing the holding period for the purpose of capital gains. The date of allotment in this case being 19.11.2001 and the date of sale is 23.8.2006, therefore, the holding period is much more than 36 months. In this case, the gains earned by the assessee on the sale of flat have to be computed as capital gains. Without prejudice, even if the date of possession, being 14.8.2003, is considered; the assessee is still entitled to the benefits of the Long Term Capital Gains. Therefore, in our opinion, order of the CIT (A) does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed.”

4. Considering the above settled nature of this issue, we are of the opinion that the assessee must succeed on this issue. Accordingly, the relevant grounds of appeal are allowed.”

From the above settled position of the issue, it can be safely concluded that the “date of allotment” should be reckoned as the date for computing the holding period for the purpose of capital gains. In the instant case, the date of allotment is 11.04.2003 (FY 2003-2004) and the date of sale of the property is 14.10.2007, therefore the holding period is more than 36 months. Therefore, the capital gains earned by the assessee on the sale of the flat have to be treated as „long term capital gains‟. The assesee paid the first installment on 11.4.2003, thereby conferring a right to hold a flat, which was later identified and possession delivered on later date. The Hon‟ble Punjab & Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT vide Income Tax Appeal No.89 of 1999, dated 17th January, 2014 held that the mere fact that possession was delivered later, does not detract from the fact that the aiottee was conferred a right to hold property on issuance of an allotment letter. Thus, the ld DR‟s arguments on non-existence of the flat at the time of issuing of allotment letter stands answered by the said judgment of the Hon‟ble High Court of Punjab & Haryana (supra). The same view was supported by various decisions of the Tribunal as well as the judgments of the Hon‟ble Gujarat High Court and the relevant conclusions were already extracted in the above paragraphs of this order. Regarding the judgments of the Hon‟ble jurisdictional High Court relied on by the Ld DR are distinguishable on facts. Therefore, considering the above settled nature of the issue as well as the following the principle of consistency, we are of the considered opinion that the ground no.1 raised by the assessee should be allowed.