Short Overview: Where assessee booked an apartment on 16-3-2005, making 5% payment on booking, the same right was sold during impugned assessment year which gave rise to capital gains in the hands of assessee and therefore, resultant gains were LTCG in nature.

Assessee had acquired the rights in the  property vide Reservation of Apartment letter dated 16-3-2005 issued by Swan Mills Limited upon payment of Rs. 3.94 Lacs which was stated to be 5% of the cost of the property. The assessee was required to make construction-linked payment in various installment. Assessee had acquired rights in a specific property and the property was clearly identified in the said letter and the said right was not conditional or uncertain. The relevant agreement for sale had been executed in assessee’s favour by the builder vide agreement to sale dated 31-12-2009. Assessee had sold the same vide deed of transfer dated 2-6-2010. Whatever rights were obtained by the assessee vide reservation of allotment letter date 16-3-2005, the same rights have been transferred during the impugned assessment year. The AO held that gains were treated as STCG and the indexation benefit was denied to the assessee. The same right was sold during impugned assessment year which gave rise to capital gains in the hands of the assessee and therefore, the resultant gains were LTCG in nature.

 It is held that the execution of stated agreement in assessee’s favour was nothing but mere improvements in the assessee’s existing rights in the property. Undisputedly, the right to own/obtain conveyance of immoveable property was a capital asset in terms of judgment of Bombay High Court. Therefore, the conclusion drawn by first appellate authority that the gains were long-term capital gains in nature as counted from 16-3-2005 would require no interference. The appeal stands dismissed to that extent.

Decision: In assessee’s favour.