Allotment Date and Not Registration Date Determines Capital Gains [Read Order]

The assessee, Anil Murarilal Agarwal, filed his return of income for AY 2016–17 on 15/10/2016, declaring a total income of ₹6,51,090. The return was selected for scrutiny. The AO noted that two flats (No. 1404 and 1405 at Rashmi Heights, Malad, Mumbai) were registered in FY 2015–16. The AO held that the assessee failed to declare Short-Term Capital Gains (STCG) from the sale of these flats and made an addition of ₹1,42,86,671 to income under STCG.

The assessee contended that:

• The flats were booked in 2005 and sold/transferred to his sons in FY 2009–10 (AY 2010–11).
• LTCG had been declared in AY 2010–11 by the assessee and his wife (joint owners) and accepted by the department.
• Registration in AY 2016–17 was only procedural; no taxable event occurred in that year.

The assessee claimed that flats were allotted in FY 2004–05 and transferred to sons in FY 2009–10. He submitted letters and memoranda of understanding dated December 2009 with the builder and sons regarding the transfer. He claimed LTCG had already been offered in AY 2010–11 and exemptions under Section 54 were claimed. As proof, the Assessee provided returns and computations of self and spouse for AY 2010–11.

On the other hand, the Department argued that flats were registered only in AY 2016–17, hence, capital gain is taxable in that year. Revenue Questioned the correctness of indexation, co-ownership claim, and quantum of reinvestment. Revenue further claimed that the agreements with Sons and the builder were unregistered and that the transfer was not complete in 2010.

ITAT Analysis and Order

ITAT accepted the assessee’s contention that the transfer of flats occurred in FY 2009–10, and capital gains were rightly declared in AY 2010–11.

The Tribunal acknowledged that Flats were allotted in 2004–05 and subsequently transferred in 2009–10, and there was Documentary evidence that corroborated the transactions.

The Registration of sale deeds was in 2016, which was procedural and did not constitute a fresh transfer.

The tribunal held that:

• The AO’s basis of taxing the same transaction again in AY 2016–17 was untenable.
• The AO failed to refute or invalidate earlier accepted returns.

Thus, Additions of ₹1,42,86,671 as Short-Term Capital Gain were deleted.