Date of Possession is Not Material for deciding the Period of Holding to Compute Short Term or Long Term Capital Gain: ITAT [Read Order]

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The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) has ruled that date of possession is not material fact for deciding the period of holding to Compute Short Term or Long Term Capital Gain.

The bench comprising of Judicial Member D.T. Garasia and Accountant Member Rajesh ruled while considering the case between ACIT, Circle – 21(2) vs Michelle N. Sanghvi against the order of the CIT.

The Assessee filed return of income processed under Section 143(1) of the Income Tax Act. During the proceedings AO found that on sale and purchase of a particular property assessee didn’t offer any capital gain on the said sale.

Thus the AO concluded that the assessee has received physical possession of the property on 19.01.2011 and sold the same on 11.05.2011 which took possession for a period of four months and drawn a conclusion that the gain on such sale is short term capital gain and the same is to be taxed.

The aforementioned claim of AO was by ignoring the evidences such as purchase agreement dated 18.12.2006 and the contention of the assessee that the property was held for more than 36 months as it was purchased on 18.12.2006 and it was sold on 11.05.2011.

Aggrieved by the order of the AO assessee preferred appeal before the CIT (A) and they allowed the appeal of assessee by directing AO to recomputed the long term capital gain taking the indexation for cost of acquisition as on 18.12.2006.

While dismissing the appeal by revenue, the Tribunal observed that, “the interest in the property is created the movement the agreement to purchase is entered into in favour of the assessee accompanying with part payment. The date of possession is not material for deciding the period of holding by the assessee for the purpose whether the gain is long term or short term”.

“Assets held by the assessee was long term asset and directed the AO to recompute the long term capital gain by allowing indexation on the cost of acquisition taking the date of purchase as 18.12.2006”, the bench also added.

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