DATE RELEVANT FOR THE PURPOSE OF LTCG U/S 54 OF INCOME TAX ACT, 1961
Long term capital arises on transfer of a capital asset, being, buildings or land appurtenant thereto and being a residential house by an individual or Hindu Undivided family (HUF). This capital gain is exempt u/s 54 of Income Tax Act, 1961 subject to the following conditions-
- Asseessee purchased new residential house property one year before or two years after the transfer takes place; or
- Constructs a new residential house property within a period of 3 years from the date of transfer.
The unutilized amount of the capital gain shall be deposited before the date of furnishing the return of income u/ 139(1) of Income Tax Act, 1961.
Which date should be considered for the purpose of Long Term Capital Gains- Date of allotment or Date of possession?
PCIT vs. Vembu Vaidyanathan (Bombay High Court)
FACTS OF THE CASE:
The assessee is an individual filed the return for income for A.Y. 2009-10 and claimed long term capital gain arising out of capital asset in the nature of residential unit. The AO examined the claim of the assessee and came to the conclusion that the gain arising out of sale of capital asset was a short term capital gain. The assessee contended that the residential unit was acquired on the date on which allotment letter was issued by the builder on 31/12/2004.
HELD:
The AO held that the transfer of the asset in favour of the assesee completed only on the date of agreement which was executed on 17/05/2008 and therefore he denies the deduction to the assessee. The CIT (A) as well as Tribunal held in favour of the assessee.
The Honorable high Court while deciding the issue observed that the issue was clarified by the CBDT in two circulars i.e., the date of allotment would be the date on which the purchaser of the residential unit can be stated to have acquired the property. The High Court held that the date of allotment would be relevant date for the purpose of capital gains tax as date of acquisition.
Example- Suppose allotment letter is issued by the builder on 15/05/2011.
Date on which the agreement was executed is 12/02/2014.
Assessee filed return for A.Y. 2015-16 and claimed long term capital gain arising out of
Capital asset in the nature of residential house property.
Solution- As per the decision of High Court in the above case, the date to be considered for
Long term capital gains will be the date of allotment letter i.e. 15/05/2011.
Therefore the above transaction will be considered as Long Term Capital Gains and
deduction will be available u/s 54 of Income Tax Act, 1961.
