Holding period of booking rights of flats to be counted from date of agreement and not from date of allotment letter

The issue for consideration of the High Court was:

Whether booking rights of apartment accrued to the assessee on the date of application for allotment/confirmation of allotment (‘confirmation letter’) or on the date of execution of the agreement to sell, i.e., the buyer's agreement? 

The High Court held as under:

1)  Booking rights in apartment could be held as long-term capital asset only after the period of 36 months from the date of buyer's agreement with builders;

2)  The 36 months period under section 2(42A) was to be counted from date of buyer's agreement and not from the date of confirmation letter if it was mentioned in the letter that no right to provisional or final allotment would be accrued until buyer's agreement was signed and returned to the builder.

3)  Thus, the builders do not intend to convey any right of provisional/final allotment or any right to claim title under the confirmation letter.

4)  It would be impermissible to conclude that right to obtain booking rights emanated from confirmation letter. These rights might only be prescribed in the buyer's agreement, and, thus, the date of signing of said agreement was to be considered as the date of acquisition of the capital asset.- Gulshan Malik v. CIT [2014] 43 taxmann.com 200 (Delhi)