Right in the Property or possession

Querist : Anonymous (Querist) 12 February 2010 This query is : Resolved
Hi !One of my friend entered into sale agreement with a Builder in the year 1994- he paid about 80% of the amt by 2000. In the year he executed another agreement with a Builder for payment of stamp Duty and registration of document.

My friend sold the flat in the year 2002 to a third party- my friend showed the Gain on the ransacion as ong term capital gain and invested the amt in tax saving bonds

The ITO at the time of assessment treated the amt as short term capital gain computing the period of holding from the second agreement instead of 1st agreement citing the date of possession is the date from where the period o holding is to be counted.

The second agreement is verbatim reproduction of the 1st agreement, however no mention of this agrement is made in the second agreement-however the mention of the 1st agreement is made in the sale agreement executed in the year 2002.

My query is- if the stanad of ITO is correct.

I understand the definton of Capital Asset also inludes the right in the property- pl give some ctiation case laws to defend before appellate authorities.

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soumitra basu (Expert) 12 February 2010
It is not the question when the sale agreement was made or when the payment was made. The main question is when the property was acquired by your friend. If possession was taken before the registration of the flat, then the date of possession should be taken as date of acquire of the property. Otherwise the date of registration will prevail. On the basis of date of acquire of the property, the periodicity will be calculated.

Raj Kumar Makkad (Expert) 13 February 2010
The opinion of basu is accurate.

Kumar Thadhani (Expert) 14 February 2010
Your query is not clear at one time you are mentioning that sale of agreement is made in 1994 and also made other agreement in 2000 .Have taken possession in the year 1994 or in the year 2000.If itis in the year 1994 then the ITO has no stand inthe order as itis Longterm Capital Gains and had alreay invested in Tax savings Bonds . But if is 2000 then it is Short term Capital Gains since itis less than three years that you have soldd the property in 2004.

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