RAVI KUMAR NARULA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following question has been referred for the opinion of this Court by the Income -tax Appellate Tribunal, Delhi Bench "D", Delhi (in short, the "Tribunal"), under s. 256(1) of the INCOME TAX ACT, 1961 (in short, the "Act") :

(2.) THE dispute relates to the asst. year 1974 -75. The factual position, as indicated in the statement of the case is as follows : The assessee during the assessment year in question sold a plot of land measuring 1,000 sq. yds. in Greater Kailash -II on 4th Jan., 1974. He had purchased the plot by a sale deed which was registered on 24th Dec., 1973. The ITO considered that the period between the purchase of the plot and the sale thereof, that is, the period of ownership of the plot, was less than 60 months and, therefore, the gain arising from the sale transaction was to be treated as short -term capital gain and not a long -term, capital gain as claimed by the assessee. The assessee's stand was that the right to have the plot was acquired from one Shri S.P. Sehgal on 25th Aug., 1965, by making payment of Rs. 21,000 by the assessee's father. The said price of Rs. 21,000 was also included in the DLF price of the plot of Rs. 18,000. The original purchaser Shri O.P. Malhotra, who had the original receipt No. GK II of 1973, dt. 17th May 1960, had endorsed the same in favour of the Shri S.P. Sehgal and Shri S.P. Sehgal handed it over to Shri R.C. Narula, father of the assessee, against payment of Rs. 21,000. The assessee's stand was that on 25th Sept., 1969, a letter was addressed to the Secretary, DLF Housing Construction (P) Ltd. (hereinafter referred as "DLF"), enclosing therewith an affidavit of Shri R.C. Narula, praying that necessary endorsement may be completed on the receipts, which were also enclosed. The affidavit filed stated that Shri R.C. Narula had agreed to purchase the plot in question for a sum of Rs. 17,100 and that DLF had agreed to sell it to him. It was further stated in the affidavit that the assessee was the son of Shri R.C. Narula and the latter desired to get the sale deed executed and registered in favour of his son. The matter was carried in appeal by the assessee before the Appellate Assistant Commissioner (in short, "the AAC"). The AAC held that since the capital asset in question was held by the previous owner for a period of more than 60 months, the capital gains arising from the sale thereof is to be taken as long -term capital gains. The Revenue preferred an appeal before the Tribunal. The stand of the Revenue was that the title of the plot remained with the assessee for a period of 11 days only. It was noticed by the Tribunal that a gift -tax return was also filed by the father of the assessee showing the value of the gift at Rs. 17,100 and the Department had considered that what was gifted to the assessee was the right of ownership of the plot to the assessee, which was valued by the Department at Rs. 80,000 for the purpose of charging gift -tax in the asst. year 1970 -71 by taking the date of the gift as 29th Sept., 1969. In the wealth -tax proceedings for the year 1970 - 71, the assessee had valued his right in the plot at Rs. 21,000. It was his stand that the plot having not been registered in the assessee's name, it was only the value of the right, namely Rs. 21,000 which called for being assessed. The WT authorities did not accept the assessee's stand and considered that the DLF could not exercise its right to revoke the transactions and further that it could not refuse to give the assessee possession of the plot. Accordingly, it was held that the assessee had a right in the plot in question and the same had to be evaluated on the basis of the market valuation. The right in question was valued at Rs. 80,000. The assessee's stand was that the said right was thus a capital asset and the capital asset having been held by the assessee or by the previous year in terms of S. 49(1) for a period of 61 months, the capital gains could be assessed as long -term capital gains and not as short -term capital gains. The Revenue's contention, on the other hand, was that only when the sale deed was registered, the assessee acquired the title in the plot and what the assessee had got transferred in January, 1974, was the title in the plot and not the right to acquire the plot and further that execution of the sale deed did not relate back to the date of acquisition of the right to have the plot. The Tribunal accepted the Department's stand. It also observed that the payment of the Rs. 21,000 remained a deposit only till the plot was allotted to the assessee and the sale thereof was also registered by the sale deed. The title in the property was got by the assessee only when the sale deed was executed and registered in December, 1973. There were endorsements only on the original receipt granted by the DLF in respect of the original deposit made by the original buyer and that the further endorsement on the receipts showed the transfer of the right only, but not of the plot. On being moved for a reference, the question, as set out above, has been referred for opinion of this Court.

(3.) THE factual position, as highlighted above, clearly shows that the period between the purchase by the assessee and the sale by him was less than 60 months. Even if it is taken that there was a gift on 29th Sept., 1969, and the date of the gift is taken to be the date of acquisition, then also by the date of transfer on 4th Jan., 1974, the period of 60 months was not over. That being the position, the Tribunal was justified in its conclusion in holding that the assessee had made a short - term capital gain and not long -term capital gain. Our answer to the question referred is, therefore, in the affirmative, in favour of the Revenue and against the assessee.