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The Tax Publishers Pradeep Kar v. Asstt. CIT [ITA No. 596/Bang/2014, dt. 11-5-2016] : 2016 TaxPub(DT) 2454 (Bang-Trib) Capital gains long term or short term--Right to property exists but possession not there--Duration of holding how reckoned. *Facts:* Assessee booked a flat in a co-op. housing society on 5-8-1993. Subsequently payments were made on various dates and finally possession of the flat came to him on 22-2-2003. Assessee sold the flat on 19-1-2006 and offered income as long term capital gains. Assessing officer and Commissioner (Appeals) held that the period of holding from actual possession was less than 3 years thus is short term capital gain. On further appeal: Held in favour of the assessee that the period should be reckoned from 5-8-1993 when the allotment of the flat was made by subscribing to the shares of the co-op. housing society. Definition of asset under section 2(14) is wide to cover rights to a property. It is the rights which are sold in this as by subscribing to the rights no divestment of rights can happen without selling the shares of the co-op. housing society. M/s Sanjeev Lal Etc. Etc. v. CIT in Civil Appeal No. 5899 & 5900 of 2014 arising out of SLP No. 16958 -59 of 2013 Supreme court applied as under: 20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27-12-2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word "transfer" is as under: "2(47) "transfer", in relation to a capital asset, includes, -- (i)................ (ii) the extinguishment of any rights therein; or ...................................." 21. Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset.

The Tax Publishers

Pradeep Kar v. Asstt. CIT [ITA No. 596/Bang/2014, dt. 11-5-2016] : 2016 TaxPub(DT) 2454 (Bang-Trib)

Capital gains long term or short term--Right to property exists but possession not there--Duration of holding how reckoned.

Facts:

Assessee booked a flat in a co-op. housing society on 5-8-1993. Subsequently payments were made on various dates and finally possession of the flat came to him on 22-2-2003. Assessee sold the flat on 19-1-2006 and offered income as long term capital gains. Assessing officer and Commissioner (Appeals) held that the period of holding from actual possession was less than 3 years thus is short term capital gain. On further appeal:

Held in favour of the assessee that the period should be reckoned from 5-8-1993 when the allotment of the flat was made by subscribing to the shares of the co-op. housing society.

Definition of asset under section 2(14) is wide to cover rights to a property. It is the rights which are sold in this as by subscribing to the rights no divestment of rights can happen without selling the shares of the co-op. housing society.

M/s Sanjeev Lal Etc. Etc. v. CIT in Civil Appeal No. 5899 & 5900 of 2014 arising out of SLP No. 16958 -59 of 2013 Supreme court applied as under:

20. The question to be considered by this Court is whether the agreement to sell which had been executed on 27-12-2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word "transfer" is as under:

"2(47) "transfer", in relation to a capital asset, includes, --

(i)................

(ii) the extinguishment of any rights therein; or ...................................."

21. Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset.