Courts Including The Judgment Of This Court In Case Ofcommissioner Of Income-Tax, Bombay City I v. Tataservices Limited[1]. Reliance Was Also Placed On Cbdt Circulars

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1459 OF 2016 Pr.Commissioner of Income Tax-3, Mumbai.… Appellant V/s. Vembu Vaidyanathan… Respondent --- Mr.Sham Walve for the Appellant.Dr.K. Shivram, Senior counsel with Mr.Rahul Hakani for theRespondent. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : JANUARY 22, 2019. P.C.:- 1.This appeal is filed by the revenue to challenge thejudgment of Income Tax Appellate Tribunal. We have consideredthe following question presented by the revenue:- “Whether on the facts and in the circumstances ofthe case and in law, the ITAT was justified intreating the gain arising from the sale of capitalasset as Long Term Capital Gain withoutappreciating the fact that mere letter of allotmentdoes not lead to creation of proper and effectiveright over the capital asset sought to be acquired,but only on execution of an agreement spellingout all the exact terms and conditions foracquisition?” 2.This question arises in following background. Therespondent-assessee is an individual. The assessee had filed thereturn of income for the assessment year 2009-10 and claimedlong term capital gain arising out of capital asset in the natureof a residential unit. During the course of assessment theAssessing Officer examined this claim and came to the conclusionthat the gain arising out of sale of capital asset was a shortterm capital gain. The controversy between the assessee and therevenue revolves around the question as to when the assesseecan be stated to have acquired the capital asset. The assesseeargued that the residential unit in question was acquired on thedate on which the allotment letter was issued by the builderwhich was on 31[st] December, 2004. The Assessing Officer howevercontended that the transfer of the asset in favour of the assesseewould be complete only on the date of agreement which wasexecuted on 17[th] May, 2008. 3.CIT appeals and the Tribunal held the issue in favour ofthe assessee relying on various judgments of different High Courts including the judgment of this Court in case ofCommissioner of Income-Tax, Bombay City I Vs. TATAServices Limited[1]. Reliance was also placed on CBDT circulars. 4.Having heard learned counsel for the parties, we noticethat the CBDT in its circular No.471 dated 15[th] October, 1986had clarified this position by holding that when an assesseepurchases a flat to be constructed by Delhi Development Authority(“D.D.A.” for short) for which allotment letter is issued, the dateof such allotment would be relevant date for the purpose of capitalgain tax as a date of acquisition. It was noted that such allotmentis final unless it is cancelled or the allottee withdraw from thescheme and such allotment would be cancelled only underexceptional circumstances. It was noted that the allottee getstitle to the property on the issue of allotment letter and thepayment of installments was only a follow-up action and takingthe delivery of possession is only a formality. 5.This aspect was further clarified by the CBDT in its later Priya Soparkar 425 itxa 1459-16-o circular No.672 dated 16[th] December, 1993. In such circularrepresentations were made to the board that in cases of allotmentof flats or houses by co-operative societies or other institutionswhose schemes of allotment and consideration are similar tothose of D.D.A., similar view should be taken as was done in theboard circular dated 15[th] October, 1986. In the circular dated 16[th] December, 1993 the board clarified as under: 5.This aspect was further clarified by the CBDT in its later Priya Soparkar 425 itxa 1459-16-o circular No.672 dated 16[th] December, 1993. In such circularrepresentations were made to the board that in cases of allotmentof flats or houses by co-operative societies or other institutionswhose schemes of allotment and consideration are similar tothose of D.D.A., similar view should be taken as was done in theboard circular dated 15[th] October, 1986. In the circular dated 16[th] December, 1993 the board clarified as under: “2.The Board has considered the matter and hasdecided that if the terms of the schemes ofallotment and construction of flats/houses by theco-operative societies or other institutions aresimilar to those mentioned in para 2 of Board'sCircular No.471, dated 15-10-1986, such cases mayalso be treated as cases of construction for thepurposes of sections 54 and 54F of the Income-taxAct.”decided that if the terms of the schemes ofallotment and construction of flats/houses by theco-operative societies or other institutions aresimilar to those mentioned in para 2 of Board'sCircular No.471, dated 15-10-1986, such cases mayalso be treated as cases of construction for thepurposes of sections 54 and 54F of the Income-taxAct.” It can thus be seen that the entire issue was clarified by the CBDTin its above mentioned two circulars dated 15[th] October, 1986 and 16[th] December, 1993. In terms of such clarifications, the dateof allotment would be the date on which the purchaser of aresidential unit can be stated to have acquired the property.There is nothing on record to suggest that the allotment inconstruction scheme promised by the builder in the present case Priya Soparkar 525 itxa 1459-16-o was materially different from the terms of allotment andconstruction by D.D.A.. In that view of the matter, CIT appealsof the Tribunal correctly held that the assessee had acquired theproperty in question on 31[st] December, 2004 on which theallotment letter was issued. 6.Learned counsel for the revenue has also argued that in anycase the assessee was not entitled to exemption under Section54F of the Income Tax Act, 1961 (“the Act” for short). Since theassessee had held multiple residential units which woulddisqualify the assessee from claiming the exemption on it as washeld by the Assessing Officer. From the record we notice thatbefore the CIT appeals the assessee had produced additionalevidence to suggest that the other units previously held by theassessee were discarded earlier and that at the relevant timethe assessee did not hold any other residential unit. Quite apartfrom it being a pure question of fact, we do not find anyindication in the impugned judgment of the Tribunal though therevenue had argued such a contention in its appeal before theTribunal. Priya Soparkar 7.In the result, the Income Tax Appeal is dismissed. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) ….