De-facto ownership of asset to be considered for computing holding period of capital assets, rules HC

Facts:

a)  The assessee, a Chartered Accountant, sold the property on 29.05.2008 for certain consideration. He worked out long-term capital gain and claimed exemption under section 54EC and section 54F;

b)  The assessing authority was of the view that the sale deed executed in favour of the assessee was on 27.02.2008 and he sold the property on 29.05.2008, i.e., within four months from the date of purchase and, therefore, the capital gains arising therefrom could not be construed as long-term capital gain;

c)  Accordingly, he disallowed the exemption claimed under Sections 54EC and 54F. On appeal the CIT(A) upheld the order of AO. Further, the Tribunal set aside said order. Aggrieved revenue filed the instant appeal

The High Court held in favour of assessee as under:

1)  For the purpose of computing 36 months holding period of a capital asset under section 2(42A), there is no requirement in section that holding period should only include the period for which assessee was the owner of the asset with a registered deed of conveyance conferring title on him;

2)  The words "held by the assessee" in section 2(42A) does not mean vesting of legal title in the property to the assessee;

3)  As Bangalore Development Authority allotted plot to assessee in 1988, due to legal disputes between it and the original owners of site, it cancelled the booking and allotted another plot in 2007 and that was also cancelled for same reason and fresh plot was allotted in 2008 and same was registered in assessee's name;

4) The consideration paid in 1988 was to be treated as consideration for the sale deed and capital gains resulting from plot sold in 2008, was long-term capital gains and eligible for benefits under sections 54F and 54EC – CIT v. A. Suresh Rao [2014] 41 taxmann.com 475 (Karnataka)