* IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on: 18.02.2014

Pronounced on: 14.03.2014

+

ITA 55/2014, C.M. APPL. 2383/2014 & 2384/2014

SH. GULSHAN MALIK

…..Appellant

Through:

Sh.

Prakash

Kumar

and

Sh.

Sheel

Vardhan, Advocates.

Versus

COMMISSIONER OF INCOME TAX

…..Respondents

Through: Sh. Rohit Madan, Sr. Standing Counsel.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT

HON'BLE MR. JUSTICE R.V. EASWAR

MR. JUSTICE S. RAVINDRA BHAT

%

1.

This is an appeal filed against the order of the Income Tax

Appellant

Tribunal

(“ITAT”)

in

ITA

No.

161/Del/2012

dated

27.02.2013, which upholds the order of the Commissioner of Income

Tax (Appeals) (“CIT-A”) confirming the assessment order of the

Assessing Officer (“AO”). The short question of law that arises is

whether on facts, capital gains are taxable as long-term or short-term

capital gains. The brief facts are as follows:

2.

The appellant (the assessee) and his wife had booked an

apartment vide an application dated 31.07.2004, by payment of a

booking amount of ` 2,00,000/-on 3.08.2004 and consequently, it is

claimed, acquired rights or interests in the same. The builder DLF

Universal

Limited

(“DLF”)

issued

a

letter

dated

6.08.2004

provisionally allotting the apartment and two parking spaces, stating

specifically the receipt of ` 2,00,000/- (Annexure 3). Consequent to

this, regular payments were made per the payment plan of the

builder. A buyer’s agreement was executed on 4.11.2004 between

DLF and the allottees i.e. the appellant and his wife. Per the payment

schedule, a total payment of ` 87,12,500/- was made from

31.07.2004 to 03.08.2006 towards the purchase of the apartment.

Following this, the appellant and his wife entered into an agreement

to sell dated 2.11.2007 to sell their booking rights/rights or interest in

the apartment to Smt. Srilekha Nayak for a sum of ` 1,44,87,500/-.

The period between acquisition and sale of the booking rights in the

apartment is claimed to be 39 months and 2 days, thus greater than

36 months, i.e. from 31.07.2004 to 02.11.2007. The appellant

subsequently filed return of income on 31.3.2009 for the assessment

year 2008-2009, with income declared to be ` 3,84,874/-. In the

computation of income, the appellant had declared a long term

capital

gain

of

`

31,35,740/-

on

the

sale

of

booking

rights/extinguishment of rights in the apartment. An exemption was

claimed under Section 54 of the Act, 1961 as the same was invested

in purchase of another apartment in June 2008.

3.

After the return was processed under Section 143(1) of the Act

and the case was thereafter selected for compulsory scrutiny, an

order of assessment was passed under Section 143(3) of the Act on

30.12.2010 whereby an addition of ` 28,20,000/- was made by the

Assessing Officer (AO) to the income declared by the appellant on

account of short-term capital gain. No deduction under Section 54

was allowed since it is available only in respect of long-term capital

gains. The total income was thus assessed to be ` 32,10,145/-. The

appeal against the order of the AO before CIT-A was dismissed by an

order dated 25.11.2011, on the grounds that the rights in the

apartment accrued to the appellant only when the apartment was

purchased by the agreement dated 4.11.2004. It was also noted that

only rights in the property and not title were transferred vide the

agreement of 2.11.2007 as the assessee never had possession of the

apartment. The assessee’s second appeal before the ITAT was also

dismissed vide order dated 27.02.2013 on the ground that no rights

in the property accrued to the appellant/allottees on the date of

filing of the application for allotment i.e. 31.7.2004, as notes 1 and 2

enclosed with the confirmation letter dated 06.08.2004 received in

response to the allotment application states clearly that no rights to

the property would accrue to the allottees until the buyer’s

agreement was signed and returned; the buyer’s agreement was

executed only on 4.11.2004. Consequently, the ITAT found that the