The main legal point established in the judgment is that the date of allotment of the flat is considered as the date of acquisition of the immovable property for the purpose of computing capital gains, based on the principles outlined in Circular No. 471 and relevant court decisions.

R. Sudhakar, J.

1. This Tax Case (Appeal) filed by the Revenue as against the order of the Income Tax Appellate Tribunal comes up for admission and the Revenue has raised the following substantial questions of law:

“1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the date of allotment letter issued by the builder of the flat is to be considered as the date of acquisition of the property under Section 2(42A) of the Income Tax Act?

2. Whether on the facts and in the circumstances of the case for the purpose of computing holding the period of the property the date of allotment letter issued by the builder of the flat is to be considered or the date of delivery of possession of the flat is to be considered?"

2. The assessment in this case relates to the assessment year 2009-10. The assessee had purchased the undivided share of land of 2150 sq.ft. out of a large extent of 4 grounds and 400 sq.ft. situated in S.Nos.2766 and 67, RS No.1570/4 at No.1, Binny Road, Chennai. Prior to the purchase of this undivided share in land, the assessee had entered into an agreement with M/s. Vishranthi Homes Pvt. Ltd. (in short VHPL), Chennai for constructing the built-up area of 3465 sq.ft. including common area in the above-said undivided share of land. The agreement was for purchase of land as well as for construction of home by a project promoted by VHPL. The agreement was determined for a consideration at Rs.81,68,811/- to be paid by the assessee to the builder VHPL towards construction of the residential unit. Thereafter, the assessee sold the entire unit by a sale deed dated 10.4.2008 well after 36 months from the date of agreement dated 22.2.2005 and claimed the difference between the cost of acquisition and sale consideration as long term capital gains.

3. The Assessing Officer, however, took a view that the undivided share of land was registered on 4.8.2005 and since the property was purchased in the month of August, 2005 and sold in April, 2008, the capital gains arising from sale will be assessed as short terms capital gains only and accordingly, the Assessing Officer denied benefit of Section 2(29A) of the Income Tax Act and made addition. As against the said order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who placing reliance on Circular No.471 dated 15.10.1986 allowed the appeal filed by the assessee. Aggrieved by the said order, the Revenue has filed an appeal before the Income Tax Appellate Tribunal.

4. The Tribunal after going through the detailed order of the Commissioner of Income Tax (Appeals) and taking note of the two decisions of the Punjab and Haryana High Court, namely, 363 ITR 54 (Mrs. Madhu Kaul v. CIT) and 344 ITR 501 (Vinod Kumar Jain vs. CIT) and also on the basis of Circular No.471 dated 15.10.1986 came to hold that the date of allotment of the flat has to be adopted as date of acquisition of the immovable property when it comes to acquiring a flat from the promoter of the flat by way of executing construction agreement and not the date of the sale deed for purchase of the relevant undivided share in land. Accordingly, the Tribunal confirmed the order of the Commissioner of Income Tax (Appeals), dismissed the appeal filed by the Revenue. Aggrieved by the said order of the Tribunal, the Revenue has filed the present Tax Case (Appeal).

5. Heard Mr. M. Swaminathan, learned standing counsel appearing for the Revenue and perused the materials placed before this Court.

6. The short issue that arises for consideration is whether the asset which was sold by the assessee would be subject to short term capital gains in terms of Section 2(42A) or long term capital gains in terms of Section 2(29A) of the Income Tax Act. There is no dispute with regard to the purchase of the capital asset. In order to appreciate the claim of the assessee, the Tribunal has considered the following facts in paragraph 7 of the orde