To Compute Holding Period for Capital Gain, Considered Span is date of Allotment of Flat: ITAT
The rights of the assessee do not arise from the date of filing the application for the flat
To Compute Holding Period for Capital Gain, Considered Span is date of Allotment of Flat: ITAT
The rights of the assessee do not arise from the date of filing the application for the flat
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that for computing the holding period for capital gain, the considered span is from the flat’s ‘allotment’ date.
The bench of Aby T Varkey (Judicial Member) and Om Prakash Kant (Accountant Member) observed that the period should not be taken from the date of the ‘application’ of the flat. Thus, the rights of the assessee arise on the allotment and not by filing an application for the flat.
The assessing officer (AO) had noticed a Long-Term Capital Gain’ (LTCG) of Rs. 8,98,59,373 declared by the assessee on the transfer and assignment of provisional reservation rights in an apartment. It was booked by the assessee in BLU Estate & Club, Worli, Mumbai.
The AO disallowed the LTCG claim to the assessee on the transfer of rights in the flat and assessed it as a Short-Term Capital Gain (STCG). Since the flat was transferred by the assessee on 14 December 2016, he held the rights for over 36 months, treating the gain on the transfer of the right as LTCG. However, he referred to the 14 December MOU, which mentioned the flat was allotted to the assessee on 31 October 2015.
Thus, the apartment rights were less than 36 months (31 October 2015 to 14 December 2016). Therefore, the AO rejected the contention of the assessee and held the gain on the transfer of the rights as STCG.
The CIT (A) granted relief to the assessee, deleting all additions and disallowances.
The department raised the issue of whether the capital gain on the transfer of rights in a flat was LTCG or STCG.
The tribunal held that the flat’s allotment letter was a document signed by the buyer as well as the seller. Therefore, the holding period for the rights was less than 36 months. Therefore, the gain arising from the transfer was STCG.