Monday, March 20, 2017

Date of allotment letter to be considered and not date of sale deed registration to compute holding period of asset

Facts:

a) The assessee sold her office unit and claimed that she had earned long-term capital gain as the office unit was held for more than 36 months.

b) The Assessing Officer noted that though allotment of the said office was done prior to 36 months from the date of sale but the agreement to sale was registered during the period of 36 months only, therefore, he computed the holding period from the date of registration of the agreement. Accordingly, he held that the said asset was 'short-term capital asset'. Consequently, the resultant gain was assessed as short-term capital gain.

c) The Commissioner (Appeals) upheld the order of Assessing Officer. The aggrievedassessee filed the instant appeal before the Tribunal.

The Tribunal held as under:

a) A perusal of definition of section 2(42A) shows that the legislature has used the expression 'held'. It is further noted that in various other allied or similar sections, the Legislature has preferred to use the expression 'acquired' or 'purchased', e.g., in section 54/54F. Thus, it shows that the Legislature was conscious while making use of this expression.

b) The expression like 'owned' has not been used for the purpose of determining the nature of asset as short-term capital asset or long-term capital asset. Thus, the intention of the Legislature is clear that for the purpose of determining the nature of capital gain, the Legislature was concerned with the period during which the asset was held by the assessee for all practical purposes on de facto basis.

c) The Legislature was apparently not concerned with absolute legal ownership of the asset for determining the holding period. Thus, one has to ascertain the period of holding of asset from which it can be said that assessee started holding the asset on de facto basis.

d) Thus, it is clear that for the purpose of holding an asset, it is not necessary that the assessee should be the owner of the asset based upon a registration of conveyance conferring title on him.

e) Therefore, holding period of office unit should be computed from the date of issue of allotment letter and not from the date of registration of sale deed. - [2017] 79 taxmann.com 67 (Mumbai - Trib.)
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