A single Bench of Mumbai Income Tax Appellate Tribunal (ITAT), in a recent ruling has directed to allow capital gain exemption considering the date of acquisition of property as per the allotment letter issued.
Assessee, Dilshad Ahmed Rangrej was an individual engaged in the business of Fruit Merchants and Commission Agents was subjected to scrutiny assessment. Then the Assessment Officer (AO) noted that during the year assessee had made sale and purchase transactions with respect to the property that he sold on 04/01/2014 which was acquired by assessee on 23/12/2011. Assessee furtherpurchased a property on 20/02/2014 and had shown long term capital gain claiming deduction under Section 54 of the Income Tax Act 1961.
The Assessing Officer found that the property sold by the assessee was a short -term capital gain for the reason that purchase agreement was executed on 23/12/2011 and project commencement certificate was issued by the municipal Corp. On 12/12/2011. Examining the allotment letter submitted by assessee issued on 2/7/2009, he found that the asset was not in existence on that date. As the property was not held for 36 months the gain arising therefrom was only a short- term capital gain and held that assessee was not entitled for deduction under Section 54 of the act.
Shahank Mehta, who appeared for the assessee submitted his contention referring the decision of Hon’ble Bombay High Court in Principle Commissioner of Income Tax-3, Mumbai versus Vembu Vaidyanathan. He further claimed that the allotment letter should be considered as the date of acquisition of the property.
Ujjawal Chavan who appeared for the revenue contented that the property was not in existence on 20/7/2009 as the construction was commenced only on 12/12/2011. He also contended that the transfer was only transfer of a short-term capital asset as the date of acquisition of property was on 23/12/2011 and date of sale was on 04/01/2014. He strongly opposed allowing deduction under Section 54 of the Act.
The Single Bench of Prashant Maharishi (Accountant Member) allowed the appeal relying upon principal Commissioner of income tax vs VembuVedhyanathan in which the honourable High Court after considering the circular issued by the central board of direct taxes held that the allotment letter by the builder would be the date of acquisition of the property as the period of holding for the purpose of determining whether the asset was a long-term capital asset or a short-term capital asset, was to be taken therefrom.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
