The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that the Booking Rights or Rights to Purchase Apartment or Rights to obtain title to the Apartment are “Transfer” to impose Capital Gain.
The Assessing Officer held that since the assessee, Shiv Kumar Jatia has paid last installment on May 18, 2009, he acquired the right on the property only on May 18, 2009 and since the property was sold on May 1, 2012, the gains are treated as short term capital gain and taxed accordingly.
The CIT (A) held that the assessee has not created any right in the property by making periodic payments from 2004 to 2009 to the developer. The right of the assessee would be created in any property only after signing of the conveyance deed. To be a long term capital asset, the asset has to be “held” by the assessee for more than 36 months immediately preceding the date of transfer.
As per the definition of capital asset under section 2(14), any kind of property held by an assessee would come within the definition of ‘capital asset’. Any right which could be called property would be included in the definition of ‘capital asset’. It does not define the words ‘any kind’ but provides for the types of properties which are to be excluded from the definition of a capital asset; incidentally, interest in an under-construction flat is not one of the exclusions. Property is a bundle of rights and one of the rights is the ability to transfer such property by the owners to a third party.
Section 2(47)(v) and (vi), and Explanation 2 clarifies that possession, enjoyment of immovable property, as well as and interest in any asset are all transferable “capital assets”. Explanation clarifies that “the transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement or otherwise. Thus, rights or interests in a property are kinds of property that are transferable capital assets.
The coram of Bhavnesh Saini and Dr. B. R. R. Kumar held that booking rights or rights to purchase the apartment or rights to obtain title to the apartment are also capital assets that can be transferable.
The ITAT ruled that the right to acquire property through an “agreement for sale” under section 54 of the Transfer of Property Act is an actionable claim which is capable of being transferred. Thus, it is a capital asset under section 2(14) as per the provisions of the Income-tax Act, 1961. The period of holding is to be reckoned from the date of the first agreement while calculating the capital gain on the sale of such property.
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