It has been held by The Income Tax Appellate Tribunal, Delhi Bench that the “Right to obtain Titltle” of the apartment is considered a transfer for the purpose of imposing Capital Gain.
Since the assessee, Shiv Kumar Jatia:
- Paid the last instalment of the apartment on May 18, 2009; so, he acquired the right on the aforesaid apartment on the aforesaid date.
- However, the property has been sold on May 1, 2012.
So the gain shall be treated as short-term capital gain and taxation on the aforesaid property shall be imposed accordingly.
The Commissioner of Income Tax (Appeals) [CIT(A)] passed the ruling that the assessee has not acquired any right in property by making periodic payments from the year 2004 to 2009 to the developer of the apartment. Only after signing of conveyance deed, the rights of the assessee shall be the owner of the apartment. And for the asset to be included in the category of Long term capital asset, the asset has to be acquired by the assessee for more than 36 months(3 years) immediately before the date of transfer or conveyance of property.
As per section 2(14) of the Income Tax Act 1961, the definition of a capital asset includes any kind of property held by an assessee. Any right which can be called by the name property shall be included in the definition of ‘capital asset’. However, the Act does not describe/define the words ‘any kind’; however, it provides for the types of properties that shall be excluded from the definition of a capital asset. And any interest in an under-construction flat is not an exclusion. Consequently, Property encompasses within its purview bundle of rights and one of such rights is the capacity to transfer such property by the property owners to a third party.
Section 2(47)(v) and (vi), and Explanation 2 of the aforesaid Act gives a clarification that the possession and enjoyment of immovable property, as well as any interest in any asset, are all transferable as per “capital assets”. This explanation clears the doubt that “the transfer includes and shall be deemed to include parting or disposing of an asset or any interest in it or else the act of creating any interest in another such asset in any way whatsoever,
- absolutely or conditionally,
- voluntarily or involuntarily
- directly or indirectly,
through an agreement or otherwise. Consequently, rights or interests in a property are types of property that can be categorized as transferable capital assets.
It was held by the Coram of Dr. B. R. R. Kumar and Bhavnesh Saini that the rights to obtain title to the apartment or booking rights or rights to purchase the apartment comes within the purview of capital assets that can be further transferable. The ITAT passed its ruling that the right to acquire property via “agreement for sale” as per section 54 of the Transfer of Property Act is an actionable claim that is capable of being transferred. Consequently, it is a capital asset under section 2(14) of the Income-tax Act, 1961. The time of holding has to be counted from the date of the first agreement while computing the capital gain on the sale of aforesaid property.
