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Gains
Loss on Sale of Capital Assets
The Gujarat High Court in the case of
Kishorebhai Bhikhanhai Virani v. ACIT 367 ITR
261 held that the loss on sale of Capital Assets
which is covered by section 10(38) cannot be
set off against Capital Gains assessable under
section 45. Hence, the loss arising out of sale of
such an asset and covered by the clause would
likewise not be includeable in computation of
income of the assessee for the year under
consideration.
Capital Gain or Business Income
The Rajasthan High Court in the case of Vimal Singhvi v. ACIT 370 ITR 275
held that in respect of agricultural land there was no evidence with the
assessee to substantiate claim of carrying out agricultural operation and that
the Sale Deed clearly showed the assessee as the absolute owner of
residential land having converted its use from agriculture. Hence, the surplus
was assessable as business income and not as Capital Gains.
Possession on Part Performance
The Karnataka High Court in the case of CIT v. Ved Prakash Rakhra 370 ITR
762 held that when a party is put in possession of property in part
performance of an agreement as contemplated under section 53A of the
Transfer of Property Act, 1882, the person who is in possession in such
capacity has to be treated as the owner from the date on which he was put
in possession. In this case the brief facts were that on 5th November, 1975,
the Bangalore Development Authority allotted property in favour of the
assessees father on lease-cum-sale basis and put the allottee in possession
of the property.
In the meantime, the assessees father died and, thereafter, the Authority
executed a registgered sale deed in favour of the assessee and his two
brothers on August 8, 1987. The assessee put up construction and a
compound wall to the property. The assessee for the assessment year 200102, while computing the capital gains from the property, claimed the benefit
of indexation of the cost of acquisition with reference to the date of original
allotment by the Authority. The allotment had been made and put the
allottee in possession in the year 1977. The assessee was entitled to a onethird share on the property.
Since the allotment had been made and the allottee put in possession prior
to April 1, 1981, the fair market value as on April 1, 1981, was taken into
consideration for arriving at capital gains of Rs. 8,53,000. On the ground that
the term transfer under section 2(47) had undergone change with effect
from April 1, 1988, by insertion of sub-clause (v) to section 2(47) which
provides that any transaction involving allowing of the possession of any
immovable property to be taken or retained in part performance of a
contract of the nature referred to in section 53A of the 1882 Act, will also
come within the ambit of transfer of the property as on April 1, 1981, and,
accordingly, entitled to indexation while computing the capital gains.
Time of Transfer
The Kerala High Court in the case of CIT v. Cochin Stock Exchanges Ltd. 363
ITR 382 held that Capital Gain whether Long-term or Short-term is to be
determined with reference to transfer of immovable property. Where the
agreement for sale of land to the developer was done in April 2003 and part
of consideration was paid as also the buyer was in possession of the land in
April 2003 itself and that buyer was given Power of Attorney to sell portions
of the land. The Honourable judges of the High Court held that the transfer
took place in April 2003. Hence, the gain will be Long-term Capital Gain.
Allotment of Flat and Payment of First Installment
The Punjab and Haryana High Court in the case of Mrs. Madhu Kaul v. CIT
and Another 363 ITR 54 held that where the allotment of a flat is made to the
assessee and the payment of the first installment made, in such a situation
the allottee obtains a right to hold the property and the period of holding is
to be reckoned from the date when the allotment was made.
Date of Execution of Conveyance Deed to decide Capital Gain
In the case of CIT v. K. Ramakrishnan 363 ITR 59 the Delhi High Court held
that in a situation where the assessee acquires possession of the plot of land
on 12th December 2005 and sells it through a Registered Sale Deed dated
9th January 2008, it was held that as the assessee has acquired the
beneficial interest in the property and at least 96 per cent of the amount was
paid by the assessee by 3rd October 1999, hence the Sale proceeds were to
be considered as Long-term Capital Gains.
Conversion of land from leasehold to freehold and transfer thereof
The Allahabad High Court in the case of Amar Nath Agarwal v. CIT and
Another 371 ITR 183 held that where land is held on lease for more than
three years and the same is later on converted into freehold and thereafter
transferred, in such a case for the purposes of Capital Gain, the Gain would
be Long-term Capital Gain. Hence, the conversion of the land from leasehold
to freehold might bring an improvement of the title but would not have an