Section 2(42A) – The holding period of an asset should be computed from the date of allotment letter.

6. Anita D. Kanjani vs. ACIT (Mumbai)

Members : D. T. Garasia (JM) and Ashwani Taneja (AM)

ITA No. 2291/Mum/2015

A.Y.: 2011-12. Date
of Order: 13^th February, 2017.

Counsel for assessee / revenue: Viraj Mehta & Nilesh
Patel / Omi Ningshen

FACTS 

During the previous year
relevant to the assessment year under consideration, the assessee sold an
office unit located in Mumbai vide agreement dated 11.3.2011.  The office unit was allotted to the assessee
on 11.4.2005, the agreement to sell was executed on 28.12.2007 and was
registered on 24.4.2008. The capital gain arising on transfer of this office
unit (flat) was returned by the assessee as long term capital gain. The
Assessing Officer (AO) relying on the decision of the Supreme Court in the case
of Suraj Lamps & Industries Ltd. vs. State of Haryana 304 ITR 1 (SC),
held that the flat transferred was a short term capital asset and therefore,
the gain arising on transfer was assessed by him as short term capital gain.

Aggrieved, the assessee preferred an appeal to the CIT(A) who
confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal
where two-fold arguments were made viz. that the holding period should be
computed with reference to the date of allotment of the property and
alternatively, the same should be computed with reference to date of execution
of the agreement and not the date of registration of the agreement because the
document on registration operates from the date of its execution.

HELD 

The Tribunal noted that the allotment letter mentioned the
identity of the property allotted, the consideration and the part payment made
by cheque before the date of allotment. 

The Tribunal held that issue before the Apex Court in the
case of Suraj Lamps & Industries Ltd. (supra) was different from the
issue in the present case.

It noted that the ratio of the following cases where this
issue has been examined, by various High Courts –

i)    CIT vs. A Suresh Rao 223 Taxman 228
(Kar.) – in this case, the court held that for the purposes of holding an
asset, it is not necessary that the assessee should be the owner of the asset
based upon a registration of conveyance conferring a title on him;

ii)   Madhu Kaul vs. CIT 363 ITR 54 (Punj. &
Har.) – in this case, the Court analysed various circulars and provisions
of the Act and held that on allotment of a flat and making first instalment the
assessee would be conferred with the right to hold a flat which was later
identified and possession delivered on a later date. The mere fact that the
possession was delivered later would not detract from the fact that the
assessee was conferred a right to hold the property on issuance of an allotment
letter. The payment of balance amount and delivery of possession are
consequential acts that relate back to and arise from the rights conferred by
the allotment letter upon the assessee;

iii)   Vinod Kumar Jain vs. CIT  344 ITR 501 (Punj. & Har.) – in this
case, the Court held that the holding period of the assessee starts from the
date of issuance of the allotment letter;

iv)  CIT vs. K. Ramakrishnan 363 ITR 59 (Delhi)
– in this case, it was held that the date of allotment is relevant for the
purpose of computing the holding period and not date of registration of
conveyance deed;

v)   CIT vs. S. R. Jeyashankar 373 ITR 120
(Mad.) – in this case also the Court held that the holding period shall be
computed from the date of allotment.

Following the ratio of the abovementioned decisions of
various High Courts, the Tribunal held that the holding period should be
computed from the date of issue of the allotment letter. Upon doing so, the
holding period becomes more than 36 months and consequently, the property sold
by the assessee would become long term capital asset and the gain arising on
transfer thereof would be long term capital gain.

The Tribunal decided the appeal in favor of the assessee.