When a flat owner desires or sells the flat , the one question which perplex him and his tax adviser is the counting of period of holding of the flat . The question which bothers everyone specially for a person who buys the flat or house from a builder is -which date -allotment date or Possession or Registration of Flat – should be taken for ascertaining period of holding so as to determine whether he/she has earned short term capital gains or long term capital gains. The answer to the question is very important because not only the tax rate will be less if it is long term capital asset , but even exemption like section 54 or 54EC can be claimed against such gains. This site had published several articles on this issue to state that the crucial date is allotment date of flat . Now there are some more.
2 More Favouravle High Court Decisions on Allotment Date Issues
First is Punjab & Haryana High Court decision in Mrs. Madhu Kaul vs. CIT 363 ITR 54 (P & H) in which the hon’ble high court held that period of holding for the purpose of determination of capital gains should be reckoned from the date on which the assessee was allotted a flat and teh first installment was paid.
The facts in brief was that the assessee was allotted a flat on June 7, 1986, by letter, conveyed on June 30, 1986. The assessee paid the first instalment on July 4, 1986 but the flat was identified and delivery of possession was given only on November 30, 1988. The assessee sold the flat on July 5, 1989 and treated the gain from such sale as long term. The claim of the assessee was rejected, and the same was treated as short term capital gain. The Commissioner (Appeal) and the Tribunal confirmed the disallowance stating that the specific flat was allotted on November 30, 1988 and allotment letter or payment of the first instalment did not entitled the assessee to claim that the gains were long term capital gains.
The High Court relied on its own decision in case of Vinod Kumar Jain vs. CIT  344 ITR 501 (P&H) and held that the assessee was allotted flat on June, 7 1986, by a letter conveyed on June 30, 1986. The first instalment paid by the assessee on July 4, 1986 conferred the right upon him to hold a flat. The mere fact that possession was delivered on a later date did not detract from the fact that the allottee was conferred a right to hold the property on issuance of an allotment letter. The payment of balance instalments, identification of a particular flat and delivery of possession were consequential acts, which related back to and arose from the rights conferred by the allotment letters. Thus the gain from the sale of the said property was long term and not short term as contended by the authorities below.
Second case is that of Delhi High Court in case of CIT vs. K. Ramakrishnan 363 ITR 59 (Delhi) in which the fact involved was that the assessee had booked the plot in question with the HUDA on 18.06.1986 and had deposited the earnest money.The plot of land was allotted to the assessee on 03.08.1999.The assessee had deposited further amounts on various dates and by the expiry of the period of sixty days from the date of allotment, i.e., by 03.10.1999, the assessee had deposited 96% of the tentative cost of the plot. As per the terms and conditions contained in the allotment letter, since the assessee paid the installment as demanded by HUDA, the assessee was to become the beneficial owner of the residential plot in question.As per clause 11 of the allotment letter, the right of the assessee in the allotted plot was an absolute right as owner thereof.
The Assessing Officer however treated the capital gain on transfer of asset as short-term capital gain and while doing so, had erroneously taken the date of execution of the conveyance deed in favour of the assessee as the relevant date, rather than the date of allotment of the plot to the assessee by HUDA.
CIT(A) and ITAT did not agree with the A.O.
When the department appealed against the order of ITAT , the Hon’ble Delhi High Court , by relying upon the decision of P & H in case of Madhu Kaul (Mrs.) vs. CIT  363 ITR 54 held that the date of allotment of plot to the assessee should be considered as relevant date for determining the period of holding of the property rather than date of execution of conveyance deed.
It is the date of allotment of flat or plot of land which is taken for counting the period of holding of the land or flat as the case may be for the purpose of computing the capital gains. If the installment payments are done as per the agreement of booking, the courts have held that the allotment date is crucial for deciding whether the asset is short term or long term on the date of transfer. The ITAT had noted in Ramakrishnan case that in that Section 47 of the Registration Act lays down that registration of a document operates retrospectively and further that in ‘Gurbax Singh vs. Kartar Singh’, 254 ITR 112 (SC), , Apex Court held that registration of a document would relate back to the date of its execution.