ACIT vs Mohit Saraf

PER M. BALAGANESH, A. M.:

The appeal in ITA No.9/Del/2026 for AY 2015-16, arise out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 18.08.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.12.2017 by the Assessing Officer, ACIT, Circle-63(1), New Delhi (hereinafter referred to as ‘ld. AO’).

The revenue has raised the following grounds of appeal before us:-

We have heard the rival submissions and perused the materials available on record. The Assessee is an advocate by profession. For the assessment year 2015-16, the Assessee filed the return of income on 30-09-2015 declaring total income of Rs. 60,36,720. Subsequently, a revised return was filed on 30-03-2016 declaring total income of Rs. 60,19,220. In the return of income, the Assessee declared long-term capital loss of Rs. 17,47,499 to be carried forward. The Learned AO in the course of assessment proceedings inquired into the details of property transaction giving rise to the said capital loss. The Assessee purchased an apartment in Commonwealth Village, New Delhi. The Learned AO observed that the holding period of the property was less than 36 months and accordingly treated the gain arising on its transfer as short-term capital gain. Consequently, the Assessee's claim of long-term capital loss of Rs. 17,47,499 was denied and an addition was made on account of short-term capital gains to the extent of Rs. 2,62,04,868.

The Learned AO noted that the Assessee had entered into a buyer's agreement for purchase of flat during the financial year 2008-09 and the actual possession was obtained only in financial year 2012-13. Since the said flat was sold in financial year 2014-15, the Learned AO held that the period of holding was less than 36 months and accordingly treated the gain arising thereon as short term capital gain. The Learned AO also observed that the agreement executed in financial year 2008-09 merely conferred upon the Assessee a right to acquire the flat which was in the nature of a limited right. The right merged into the ownership of an immovable property only upon delivery of possession of the flat. As the Assessee had sold the flat itself and not the right to acquire it, the holding period could be reckoned only from the date of possession of the flat from financial year 2012-13 and not from financial year 2008-09 onwards. Further, based on the payment schedule submitted by the Assessee, the Learned AO inferred that the Assessee took possession of the flat around April-May 2012 when the final installments were paid. He also referred to the clause in the agreement stating that the flats were to be used for accommodating athletes during the Commonwealth Games 2010 pursuant to an arrangement between Delhi Development Authority (DDA) and M/s Emaar MGF Construction Pvt Ltd. The Assessee argued that he had agreed to defer possession in national interest so that the flat could be used for housing athletes during the Commonwealth Games and therefore the date of allotment i.e. 26-06-2008 should be reckoned as the date of acquiring the right in the property for the purpose of capital gains. The Learned AO rejected this contention by observing that the use of flats for the games was a precondition in the builder's agreement and not a matter where the builder sought the Assessee’s consent. Accordingly, the Learned AO concluded that the Assessee did not have the right to use or enjoy the flat prior to April-May 2012. Further, the Assessee submitted that the Delhi Development Authority had entered into a project development agreement with M/s Emaar MGF Construction Pvt Ltd. under which the latter was authorized to develop and construct residential apartments at the Commonwealth Games Village project and to execute buyer's agreements with the intending purchasers. Pursuant thereto, the Assessee had entered into an apartment buyer's agreement with M/s Emaar MGF Construction Pvt Ltd. on 25-06-2008 for purchase of residential apartment in the said project. It was explained that the application for purchase was made on 24-06-2008 accompanied by an initial booking amount of Rs. 40 lakhs. Thereafter, the Assessee was allotted residential apartment number T-29-06-02, vide allotment letter dated 26-06-2008. A second instalment of Rs. 35,16,000 was paid on 22-07-2008 and the allotment was duly confirmed in terms of the allotment letter. The Assessee emphasized that by virtue of the allotment, substantial rights in the property had accrued in his favor and the date of allotment ought to be reckoned for determining the period of holding. The Assessee further highlighted that almost the entire consideration aggregating to Rs. 391.86 lakhs i.e. around 95% of the total price of Rs. 414 lakhs was paid by February 2010 and only a balanced sum of Rs. 19.37 lakhs were paid on 4-5-2012. The Assessee stressed that the construction of the apartments had been completed by 2010 itself since the apartments were used to house athletes during the Commonwealth Games in October 2010 pursuant to the terms of the Project Development Agreement. As per the contractual stipulations, possession and associated freehold rights were to be handed over to the allottees within six months of the apartments being returned to the developer by the Organizing Committee after conclusion of the Games. On this basis, it was contended that the period of holding of the apartment had to be reckoned from the date of allotment i.e. 26-06-2008. The transfer having been effected during the assessment year under reference, the capital gain was therefore to be treated as long-term capital gain. The Assessee contended that the Learned AO erred in not appreciating the crucial involvement of the Delhi Development Authority in the entire project in ignoring the fact that the building was fully constructed and in use during the Commonwealth Games 2010 and in mechanically linking the holding period only to the date of possession in 2012. In these circumstances, the Assessee submitted that the Learned AO's approach of treating possession as the sole determinative factor was untenable and that the gains declared as long-term deserved to be accepted.

The short controversy to be decided in this appeal is as to whether the holding period is to be calculated from the date of agreement to purchase or allotment or from the date of actual possession or only from the date of execution registration of the sale deed. On entering into the buyer's agreement and allotment letter being issued to the Assessee on 26-06-2008, the Assessee had acquired a bundle of enforceable rights including the right to obtain conveyance and the right to deal with the property. These rights constitute ownership for the purpose of Income Tax Act and therefore the holding period must commence from the date of allotment or agreement. We find that the Learned CIT(A) had relied on the decision of Hon’ble Supreme Court in the case of CIT vs Poddar Cements Pvt. Ltd. reported in 226 ITR 625 in support of the proposition that meaning of ownership would include a person who is in possession of the property and had acquired rights in it, even without a registered deed. The Hon’ble Delhi High Court in the case of CIT vs Kuldeep Singh reported in 226 Taxman 103 and the Hon’ble Punjab and Haryana High Court in the case of Vinod Kumar Jain vs CIT reported in 344 ITR 501 held that the date of allotment confer substantial rights and must be considered the starting point for reckoning the period of holding of the capital asset for the purpose of capital gains. Similarly the Hon’ble Bombay High Court in the case of PCIT vs Vembu Vaidyanathan held that the allotment of flat gives the buyer title in the property and the holding period commences there from notwithstanding the fact that possession of registration may occur later. We find that the learned CIT(A) had granted relief to the Assessee by placing reliance on the aforesaid decisions. Respectfully following the said decisions, we hold that the date of allotment i.e. 26-06-2008 would be the reckoning date for the purpose of determining the holding period of the capital asset by the Assessee and accordingly the gains arising on sale of such flat would have to be construed only as long term capital gain. Accordingly, the learned AO is directed to treat the gain arising on transfer of the property as long term capital gain and accept the computation of the Assessee in this regard. The grounds raised by the revenue are dismissed.

In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 29/06/2026.