Commissioner of Income-tax-XV v. Rashid Khalid Kidwai
[Citation -2014-LL-1010-110]

Citation 2014-LL-1010-110
Appellant Name Commissioner of Income-tax-XV
Respondent Name Rashid Khalid Kidwai
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 10/10/2014
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags acquisition of capital asset • short-term capital gain • date of acquisition • agreement to sell
Bot Summary: Whether the Tribunal/ ITAT committed an error in holding that the transfer of capital asset effected by the respondent assessee did not attract short-term capital gain tax under the Act. The reference to acquisition by way of any agreement or any arrangement or in any other manner whatsoever establishes that it is not conveyance of property or the doctrine of part performance which result in enforceable rights, for the purposes of the Income Tax. The scheme of the Act puts it beyond doubt that even rights or interests in a property are kinds of property that are transferable capital assets. The judgment in Ved Parkash is also consequently of no assistance in this matter since the reasoning therein turns on whether capital asset refers only to title to property as opposed to other rights/interests in the property. In Ved Parkash, the assessee sought to claim that the date of acquisition of the capital asset was the date of entering into the agreement to sell with the builder, by which the assessee had also received possession of the property. The Department, on the other hand, claimed that according to the conditions of the agreement, no right, title or interest in the property would be conveyed to the assessee until all instalments due and payable under that agreement were completed. Such being the case, there is no manner of doubt that the right to hold the property had crystalised as on that date.


IN HIGH COURT OF DELHI AT NEW DELHI ITA 527/2014 COMMISSIONER OF INCOME TAX- XV ..... Appellant Through: Ms. Suruchi Aggarwal, Senior Standing Counsel. versus RASHID KHALID KIDWAI ..... Respondent Through: Mr. Vikas Srivastava and Ms. Varsha Bhattacharya, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE VIPIN SANGHI ORDER 10.10.2014 Caveat No.740/2014 1. Since caveator has put in appearance, caveat stands discharged. ITA 527/2014 2. Issue notice. Mr. Vikas Srivastava accepts notice. 3. In present appeal under Section 260A of Income Tax Act, 1961, order of Income Tax Appellate Tribunal (ITAT) in ITA No.3272/DEL/2013 has been challenged. following question of law is sought to be urged. ?Whether Tribunal/ ITAT committed error in holding that transfer of capital asset effected by respondent assessee did not attract short-term capital gain tax under Act.? 4. brief facts are that for AY 2009-10, assessee reported sale of residential flats in Mumbai on 25.11.2008 and claimed consideration to be capital gain exempt by making investment under Section 54 and 54F of Act. Assessing Officer (AO) was of opinion that possession of flats was given only on 19.10.2006, and consequently, period of 36 months had not elapsed, therefore, gains could not be capital gains tax exempt. He, therefore, included amounts and added amount of Rs.45,35,200/- and sought to bring it to tax. 5. assessee carried matter in appeal to Commissioner (Appeals), who set aside assessment order. Revenue?s further appeal to ITAT was rejected by impugned order. 6. It is urged that right to possession in this case was accrued sometime on 19.10.2006 and AO was justified in holding that this was point in time when assessee started to own, or hold property. Learned counsel highlighted that even though builder had allotted flat in 1994, no formal agreement to sell was executed by parties and intimation to assessee that flats were completed on 31.03.2004, did not help him since other formalities were required to be completed and possession was ultimately obtained only in 2006. assessee contends that concurrent findings of Commissioner (Appeals) and ITAT are sound and do not call for interference. 7. assessee?s counsel relied upon CIT Vs. Tata Tele Services Ltd., 122 ITR 594, and CBDT Circular Nos. 471 (dated 15.10.1986) and 672 (dated 16.12.1993), to say that allotment constitutes acquisition of rights in property. 8. It is also brought to notice of Court that in somewhat similar, if not identical situation, this Court had in two judgements ? Sh. Gulshan Malik vs Commissioner Of Income Tax, ITA 55/2014 decided by this Court on 14.03.2014; and Commissioner of Income Tax Vs. K Ramakrishnan, (2014) 48 taxmann.com 55 (Delhi), held that so long as right to hold property crystalises, in terms of Section 2 (42A) determinative date is that point of time if determined whether surplus obtained on sale of asset is long term or short term capital gain. 9. In Sh. Gulshan Malik (supra), this Court after noticing previous judgment in Commissioner of Income Tax Vs. Ved Parkash and Sons (HUF), [1994] 207 ITR 148, also took into consideration definitions of capital asset, asset, etc. under Section 2(47) and 2(42A). relevant discussion is extracted below: ?7. It is clear that ?capital asset? under Act is property of ?any kind? that is ?held? by assessee. Necessarily, capital asset must be transferable. Thus, to understand what kind of property can be considered capital asset, it would be apposite to refer to definition of transfer in Section 2(47) of Act. Section 2(47)(v) and (vi), and Explanation 2 make it adequately clear that possession, enjoyment of immovable property, as well as interest in any asset are all transferable ?capital assets?. reference to acquisition ?by way of any agreement or any arrangement or in any other manner whatsoever? establishes that it is not conveyance of property or doctrine of part performance (enacted through Section 53A of Transfer of Property Act) which result in enforceable rights, for purposes of Income Tax. scheme of Act puts it beyond doubt that even rights or interests in property are kinds of property that are transferable capital assets. Thus, there is no doubt that booking rights or rights to purchase apartment or rights to obtain title to apartment are also capital assets that can be transferable. However, even while this Court agrees with submissions of appellant, it is pertinent to note that this question does not arise in these facts. Neither CIT-A nor ITAT have held that capital asset can only be title to/ownership of apartment. order of CIT-A locates source of booking rights i.e. date of acquisition of capital asset as buyer?s agreement dated 4.11.2004, which finding is subsequently confirmed by ITAT by additionally relying on receipts at time of confirmation of allotment. Thus, in these facts, question of whether booking rights are transferable capital asset is not contentious. judgment in Ved Parkash (supra) is also consequently of no assistance in this matter since reasoning therein turns on whether ?capital asset? refers only to title to property as opposed to other rights/interests in property. xxxxxxxxxx 10. Ved Parkash (supra), in any event, can be distinguished from facts in this case. In Ved Parkash (supra), assessee sought to claim that date of acquisition of capital asset was date of entering into agreement to sell with builder, by which assessee had also received possession of property. Department, on other hand, claimed that according to conditions of agreement, no right, title or interest in property would be conveyed to assessee until all instalments due and payable under that agreement were completed. It was also sought to be argued that assessee became titleholder to property only once all instalments were paid, and that title to property was only capital asset that could be transferred. It was in context of these arguments that Court held first, that it is incorrect to say that assessee had no right or interest in property until completion of payment of all instalments under agreement as assessee was beneficial owner from date of signing agreement, having been put in possession of property as of that date and second, that Section 2(42A) of Act, in any event only uses term ?held? and not ?owned?, thus indicating that capital asset need not only refer to full title over any property. Ved Parkash (supra) can thus be distinguished on two grounds, first, that in instant matter, booking rights are sought to be sourced in allotment application/confirmation letter and not in agreement to sell, second, no right of possession or similar beneficial interest was conveyed to assessee in instant case when application for allotment was made/confirmation letter was received. agreement to sell was considered to be source of beneficial interest to assessee in Ved Parkash (supra) only because right of possession had been transferred to assessee along with agreement to sell. There cannot be any parity between allotment application/confirmation letter in instant case and agreement to sell in Ved Parkash (supra), since confirmation letter specifically states that no right of provisional allotment/final allotment will result from it to assessee.? 10. In present case, this Court notices that though allotment took place in 1994, Tribunal and Commissioner (Appeals) found that substantial portion of consideration, i.e. basic price of flats had been paid by March 2003. builder?s reminder of 03.05.2005 was taken into consideration. It had intimated that flats were completed as on 31.03.2004. Such being case, there is no manner of doubt that right to hold property had crystalised as on that date. Since sale in present case was made on 25.11.2008, clearly period of 36 months period had elapsed. 11. For above reasons, no question of law arises for consideration. appeal is, consequently, dismissed. S. RAVINDRA BHAT, J VIPIN SANGHI, J OCTOBER 10, 2014 B.S. Rohella $ 14. Commissioner of Income-tax-XV v. Rashid Khalid Kidwai
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