ACIT Vs Keyur Hemant Shah (ITAT Mumbai)
Upon perusal, the undisputed facts that emerges are that the assessee has acquired the rights in a duplex flat on 1 2th & 1 3th floor front facing the road admeasuring 1961.75 Square Feets & terrace measuring 881.5 Square Feets as per the attached layout plan along with 4 car parking in building known as Tapovan vide Allotment Letter dated 26/02/2008 issued by DSD Builders & Developers Pvt. Ltd. for total consideration of Rs.371 Lacs. The said allotment is not a conditional allotment and do not envisages cancellation of the allotted property, in any manner. Therefore, the assessee has acquired right in a specific property which is clearly earmarked in the layout plan. The full payment of the same has been made by the assessee by 24/07/2008 which is evident from assessee’s letter containing payment details as placed on page no. 4 of the paper-book. Subsequently, agreement of sale has been executed by the builder in assessee’s favor on 25/03/2010 which was nothing but mere improvement in assessee’s existing rights to acquire a specific property and part & parcel of the same transaction.
The undisputed fact, in that respect, are that the assessee has made the payment within stipulated time as envisaged by Section 54F and the allotment in a specific property has been obtained by the assessee on 14/04/2012 which is evident from allotment letter as placed on page nos. 186 to 190 of the paper-book. Therefore, since all the conditions of Section 54F was fulfilled by the assessee, there could be no occasion to deny the benefit of deduction to the assessee. Therefore, no infirmity could be found in the impugned order.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2013-14 contest the order of Ld. Commissioner of Income-Tax (Appeals)-37, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-37/IT-886/ACIT-25(2)/1 5-16 dated 27/09/2017 on following grounds of appeals: –
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition on account of Short-Term Capital Gain stating that the right in a property is created once its title is allotted to the purchaser and more so, if full consideration is paid. As the assessee had received an allotment vide letter dated 26.02.2008 and paid full consideration by 24.07.2008. Therefore, the assessee got the title to the property on the issuance of the allotment letter by the builder / seller.”
2. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the deduction claimed u/s.54F of Rs.l,09,40,072/-, stating that the house was purchased within two years of sale, as required u/s 54F”
3. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the addition was made by the AO because it was clearly mentioned in the 2nd para of the allotment letter that the documents regarding allotment would be executed after the same was stamped by the buyers. As the assessee entered into an agreement for sale (for purchasing the under construction flat) on 25.03.2010 and the period of holding of rights from 25.03.2010 to 04.2012 is less than 36 months, thereby making the gain on transfer of rights as Short Term Capital Gain”.
4. “On the facts and in the circumstances of the case and in law, the Ld. -ClT(A) has erred in not considering that the allotment letter did not contain the flat number nor any unconditional rights to dispose of the property. It is clear that the allotment letter was only an offer and the right or interest in property was to accrue only on signing and stamping of the agreement. Only the agreement dated 25.03.2010 conveyed the right to acquire the property which was under construction on the date of agreement.”
5. “On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the assessee had not purchased the new property claimed u/s. 54F, but just made an advance payment to the builder. The assessee had not entered into any agreement with the buyer.”
6. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not appreciating the decision of Hon’ble Delhi High Court in the case of Gulshan Malik CIT in ITA No.55/2014, CM Appl 2383/2014 & 2384/2014 (2014) 43 Taxmann. Com 200 (Delhi)’wherein it was held that a right or an interest in an immovable property can accrue to a buyer only by way of an agreement.”
7. “The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.”
2.1 Facts in brief are that the assessee being resident individual was assessed in scrutiny assessment u/s 143(3) for impugned AY on 12/02/2016 wherein the assessee’s income was determined at Rs.401.78 Lacs after certain adjustments as against returned income of Rs.185.33 Lacs filed by the assessee on 31/07/2013. As evident from grounds of appeal, the subject matter of present appeal is to determine the nature of certain capital gains earned by the assessee in the impugned AY and the assessee’s eligibility to claim deduction u/s 54F.
2.2 During assessment proceedings, it transpired that the assessee sold a duplex apartment Flat No.1201 with 4 car parking in the building Natura of Tapovan Cooperative Society Ltd., Santa Cruz (W), Mumbai [flat] on 04/04/2012 for a sale consideration of Rs.1200 Lacs, the assessee’s share being 50% in the same. The assessee after adjusting the indexed cost of acquisition worked out Long-Term Capital Gains [LTCG] for Rs.288.73 Lacs and after claiming deduction u/s 54F for Rs.109.40 Lacs against the same, offered balance LTCG of Rs.1 79.33 Lacs to tax.
2.3 It transpired that the said flat was purchased by the assessee vide Registered Agreement for Sale on 25/03/2010 and counted from this date, the assessee’s holding period was less than 36 months which led to Ld. AO to treat the resultant gains as short-term capital gains [STCG]. The assessee defended the same by submitting that the said flat was purchased vide allotment letter dated 26/02/2008 and substantial payment of Rs.185.50 Lacs was already made by 24/07/2008 and therefore the holding period, as counted from the date of allotment letter, was more than 36 months and therefore the resultant gains were Long-Term Capital Gains.
2.4 However, upon perusal of allotment letter as extracted on para 4.4 of the quantum assessment order, Ld. AO noted that the same did not contain the specific flat number and it mentioned the fact that documents regarding allotment will be executed after the same is stamped by the buyer and therefore, the assessee did not have unconditional right to dispose of the property. Reliance was placed on the decision of Hon’ble Delhi High Court rendered in Gulshan Malik Vs. CIT [43 Taxman.com 200] while arriving at the conclusion that it was only the agreement dated 25/03/2010 which conveyed the right to acquire the property in favor of the assessee. It was also noted that the flat was at under construction stage on the date of agreement. Therefore, the resultant gains, in the opinion of ld. AO, were short-term in nature.
2.5 Proceeding further, as a logical consequence to above conclusion, deduction u/s 54F as claimed by the assessee was also denied. Another fact noted by Ld. AO to deny the same was that the assessee merely advanced certain sum of money towards purchase of the new property and did not actually purchased the property. Finally, the gains were treated as STCG and the indexation benefit was denied to the assessee. Also, deduction u/s 54F was denied to the assessee.
3.1 Aggrieved, the assessee agitated the same with success before Ld. first appellate authority vide impugned order dated 17/09/2017 wherein it was, inter-alia, held that right in the property was created once the title was allotted to the purchaser and the payment of instalment as well as delivery of possession was mere formality. Reliance was placed on CBDT circular No. 471 & 672 to draw the said conclusion. The ratio of the following judicial pronouncement was also considered while forming such an opinion: –
