Capital gain – Short-term or long-term – Sections 2(29B), 2(42B) and 45 – A. Y. 1990-91 – In case of allotment of flat, holding period commences from the date of allotment – Allotment of flat on 7th/30th June, 1986 – Payment of first instalment on 04-07-1986 – Sale of flat on 05-07- 1989 – Gain is long term capital gain:

A flat was alloted to the assessee on 07-06-1986, vide letter conveyed to the assessee on 30-06-1986. The assessee paid the first instalment on 04-07-1986. The assessee sold the flat on 05-07-1989. The assessee claimed that the capital gain is long term capital gain. The Assessing Officer rejected the claim. The Tribunal upheld the decision of the Assessing Officer:

On appeal by the assessee, the Punjab and Haryana High Court reversed the decision of the Tribunal and held as under:

“i) Admittedly, the flat was alloted to the assessee on 07- 06-1986, vide letter conveyed to the assessee on 30-06- 1986. The assessee paid the first instalment on 04-07- 1986, thereby confering a right upon the assessee to hold a flat, which was later identified and possession delivered on a later date. The mere fact that the possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. The payment of the balance instalments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter.

ii) The Tribunal has erred in holding that the transaction does not envisage a long term capital gain.”