Delhi H.C : In order to determine taxability of capital gain arising from sale of property, it is date of allotment of property which is relevant for purpose of computing holding period and not date of registration of conveyance deed

High Court Of Delhi

CIT vs. K. Ramakrishnan

Section : 2(42A)

Ravindra Bhat And R.V. Easwar, JJ.

IT Appeal No. 114 Of 2014

C.M. Appl No. 4959 Of 2014 (Delay)

March  18, 2014

JUDGMENT

S. Ravindra Bhat, J.-The Revenue claims to be aggrieved by the order dated May 17, 2013, of the Income-tax Appellate Tribunal (ITAT). The Revenue’s appeal questioning the deletion of Rs. 55,72,612 by the Commissioner of Income-tax (Appeals) was dismissed. It is urged that the findings of the Tribunal, in effect upholding the assessee’s contention that the amount sought to be taxed was in fact a long-term capital gains is not justified. The learned counsel invited our attention to the provisions concerned, i.e., section 54EC and submitted that given the circumstance of the case especially the relevant dates set out in paragraph 7 of the impugned order, it could not be said that the assessee had acquired interest of the kind that can enable him to say that he “held” the asset for more than 36 months to entitle him to the benefit of long-term capital gain.

2. In this case, the relevant facts relating to the acquisition of the capital asset, i.e., the HUDA plot and its ultimate disposal of the assessee was considered by the Tribunal and discussed as follows :

“5. The learned counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. Besides addressing the oral arguments, he has also placed before us a brief written synopsis. It has been contended that the Assessing Officer had wrongly treated the capital gain as short-term capital gain and while doing so, had erroneously taken the date of execution of the conveyance deed in favour of the assessee as the relevant date, rather than the date of allotment of the plot to the assessee by the HUDA ; that undisputedly, the assessee had booked the plot in question with the HUDA on June 18, 1986, and had deposited the earnest money ; that the plot was allotted to the assessee on August 3, 1999 ; that on receipt of the allotment letter, the assessee had deposited further amounts on various dates, as given in the chart contained in the written synopsis ; that by the expiry of the period of sixty days from the date of allotment, i.e., by October 3, 1999, the assessee had deposited 96 per cent. of the tentative cost of the plot ; that as per the terms and conditions contained in the allotment letter, since the assessee paid the instalment as demanded by the HUDA, the assessee was to become the beneficial owner of the residential plot in question ; that as per clause 5 of the allotment letter, a letter of acceptance was to be filed by the assessee along with an amount of Rs. 10,155, within thirty days, thereby having paid 25 per cent. of the total cost of the plot ; that this amount had to be deposited by the assessee in his capacity as the owner of the plot, on allotment, which was done, as evidenced by the receipt of payment ; that as per clause 11 of the allotment letter, the right of the assessee in the allotted plot was an absolute right as owner thereof ; that this clause prohibited the assessee from transferring the plot except with the permission of the HUDA ; that this clause stated that it was till the execution of the conveyance deed, that the assessee was not to be treated as owner of the plot ; that as per clause 12, execution of the conveyance deed was not made subject to the handing over of the possession of the plot ; that thus, right from 1999, when the plot was allotted to the assessee, the assessee was having absolute rights thereon ; that in Jitendra Mohan v. ITO [2007] 11 SOT 594 (Delhi), it has been held that it is the date of allotment which is relevant for the purpose of computing a holding period and not the date of registration of conveyance deed ; that section 47 of the Registration Act lays down that registration of a document operates retrospectively ; that in Gurbax Singh v. Kartar Singh [2002] 254 ITR 112 (SC), it has been held that registration of a document would relate back to the date of its execution ; that in Hamda Ammal v. Avadiappa Pathar [1991] 1 SCC 715 and M. Syamala Rao v. CIT [1998] 234 ITR 140 (AP), it has been held likewise ; that, therefore, the learned Commissioner of Income-tax (Appeals) has correctly decided the issue in favour of the assessee ; and that as such, there being no merit therein, the appeal of the Department be ordered to be dismissed.”

3. In this case, the assessee acquired possession of the plot on December 12, 2005, and sold through a registered sale deed dated January 9, 2008. This court is of the opinion that having regard to the findings recorded by the Tribunal, the assessee had acquired the beneficial interest to the property at least 96 per cent. of the amount was paid, i.e., by October 3, 1999. This court is supported in its findings by a Division Bench ruling of the Punjab and Haryana High Court in Mrs. Madhu Kaul v. CIT [2014] 363 ITR 54/43 taxmann.com 417.

4. In view of the reasons the courts is satisfied that the Tribunal’s impugned order does not disclose any error calling for interference. The appeal is accordingly dismissed.

[Citation : 363 ITR 59]