Anshu Dhawan Vs ITO (ITAT Delhi)
The Delhi Bench ‘A’ of the Income Tax Appellate Tribunal, Delhi Bench allowed the assessee’s appeal for AY 2022-23 and held that consideration received on transfer of rights in a flat under an allotment/buyer agreement is taxable under the head “Capital Gains” and not as “Income from Other Sources”.
The assessee’s late husband had booked a residential unit with Emaar MGF Land Ltd. in 2010. After his demise, the allotment was transferred in the assessee’s name. The assessee had paid substantial consideration to the developer and subsequently entered into a registered agreement to sell dated 15.07.2021, transferring her rights in the property to third-party buyers for ₹2.22 crore. In the return, the assessee claimed long-term capital loss after indexation of cost of acquisition and improvement.
The AO treated the transaction as mere relinquishment of allotment rights, held that there was no transfer of immovable property or possession, and taxed the surplus as income from other sources. The CIT(A) affirmed the addition.
The Tribunal reversed the lower authorities. Relying on the wide definition of “capital asset” under section 2(14) and “transfer” under section 2(47)(v) & (vi)—read with section 53A of the Transfer of Property Act—it held that rights arising from allotment/buyer agreements constitute capital assets, and their assignment or transfer amounts to a transfer for capital-gains purposes, even if a registered conveyance deed or physical possession was not executed.
The ITAT noted that the assessee had held enforceable rights in the property since 2010, had paid substantial consideration, and had transferred those rights through a registered agreement to sell. Accordingly, the transaction squarely fell within the ambit of capital gains, and the assessee was entitled to compute gains/losses after indexation. Since the indexed cost exceeded the sale consideration, the long-term capital loss was allowable.
The addition made by taxing the amount as income from other sources was deleted, and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
