The order, pronounced on 23 April 2026 by ITAT Mumbai Bench “E”, strengthens the long-standing demand of taxpayers that the holding period for capital gains purposes begins when substantive rights in the property are acquired, rather than on the date of legal registration.

The Core Dispute

The central question before the Tribunal was: Should the date of allotment or the date of registration of the agreement be considered for determining whether the capital gain is long-term or short-term?

In the case of Kuntal Rasiklal Narechania vs. Income Tax Officer (ITA No. 6306/MUM/2025), the assessee had received an allotment letter for a flat in Kandivali Ashish Co-operative Housing Society on 30/31 January 2008. He and his wife made payments in instalments from 2007-08 onwards. The formal purchase agreement was registered only on 8 July 2016, and the flat was sold shortly thereafter on 9 August 2016.

The taxpayer computed his gain as Long Term Capital Gain (LTCG), claiming the holding period began in 2008. The Income Tax Department, however, took the registration date of 2016 as the date of acquisition, treated the gain as Short Term Capital Gain (STCG), and made an addition of over ₹82 lakh based on stamp duty valuation.

ITAT’s Ruling

The Tribunal, comprising Accountant Member Shri Om Prakash Kant and Judicial Member Shri Sandeep Singh Karhail, set aside the orders of the Assessing Officer and CIT(Appeals) and restored the matter for fresh adjudication.

In a detailed order, the Bench observed that the allotment letter issued in 2008 conferred enforceable rights in the property. It noted that payments were made jointly by the assessee and his wife over several years, and the allotment letter itself formed part of the later registered agreement.

Relying on the Bombay High Court judgment in PCIT vs. Vembu Vaidyanathan, the ITAT held that the allottee gets title to the property on the issue of the allotment letter, and subsequent payments and registration are only follow-up actions.

The Tribunal further noted that both husband and wife were named in the 2008 allotment letter, and the wife had also declared 50% of the capital gain in her return, claiming Section 54 exemption.

Key Observations of the Tribunal

“The material placed before us, including the allotment letter, payment receipts, and bank statements, prima facie indicate that rights in the property had accrued in favour of the assessee much prior to the execution of the registered agreement.”

The ITAT directed the Assessing Officer to re-examine the case, keeping in mind that the date on which substantive rights were transferred should be treated as the date of acquisition for capital gains computation. If the holding period qualifies as long-term, the assessee’s claim for deduction under Section 54 must also be considered.

Significance of the Order

This ruling assumes great importance because many buyers in cooperative societies and under-construction projects receive allotment letters years before the builder or society executes the formal registered agreement. Treating the registration date as the acquisition date often converts long-term gains into short-term gains, resulting in substantially higher tax liability.

The decision aligns with CBDT Circular No. 471 dated 15.10.1986 and multiple earlier ITAT rulings. It is expected to provide relief to taxpayers facing similar disputes across the country.

The matter has now been sent back to the Assessing Officer for fresh examination with directions to afford the assessee adequate opportunity of being heard.

Also Read: MHADA Waives Interest for 2005 Lottery Winner; Orders Action in Wrong Allotment Case

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A real estate investment is not only an emotionally intensive decision but also a financially heavy one. While investing in a property, an investor is in perpetual confusion about whether to invest in a ready-to-move-in property or an under-construction one. While a ready property allows for immediate possession, an under-construction property lets you take possession at a later stage and deposit the finances accordingly. Here is a low-down on why this is the best time to invest in an under-construction property.

Affordable Interest Rates

Despite the falling rupee value against the dollar, the interest rates in India have not risen exponentially. If you wish to invest in an under-construction property, the banking institutions are more than ready to disburse loan, subject to the financial conditions of the borrower. Affordable home loans are available within the interest rate range of 8-12 percent. While the tenure is 15 plus years or more, it puts no burden on the borrower and he/she can repay the loan in the long term.

No immediate Burden

Under-construction properties are very suitable if the finances are a concern. Unlike ready properties where the entire residential unit has to be paid upfront, the under-construction property allows a homebuyer to repay the easy home loan in regular EMIs. With a lot of financing options from banks or NBFCs, you can consider an under-construction property over a ready one.

Attractive Offers

While promoting their real estate projects, the realty developers provide attractive offers such as a rebate on payment of stamp duty, partial payments for booking, no-cost EMI facilities, payment starting after possession and upfront discounts for serious buyers. An under-construction property would not be too heavy on your pocket and you will have an asset of the lifetime.

Opportune Time

In the backdrop of the Coronavirus pandemic, the real estate sector is getting back on its feet. Real estate prices are not steep and still affordable as compared to their heydays. Serious homebuyers must make use of this once-in-a-lifetime opportunity for investment as once the sector is fully recovered, the prices would skyrocket and will render properties costly. Meanwhile, the projects which are under construction can be booked with only 10 percent of the cost in most cases. If you do not have a requirement immediately, an under-construction project is best for you.

New Construction

A key advantage of buying an under-construction property is that it gives you freshly constructed property. Unlike a property available for resale, you cannot estimate the quality of construction beyond a limit. In under-construction investment, the new construction ensures that the life of the building will be better than a property in resale.

Appreciation Potential

When you decide to book an under-construction property, you get the possession after 2-3 years in most cases. If you change your mind and wish to sell the property, the returns will be far better than a ready property as the construction would be new and the investors would be more willing to spend on this property than on an older one. Moreover, under construction command a better return on investment than the ready properties in general.

Conclusively, there cannot be a more opportune time to invest in under-construction real estate properties. The Covid-19 pandemic has resulted in the price correction to a great extent. However, it is also true that the prices will not go down further. This makes it an apt period to invest in an under-construction property. However, the buyers are advised to check for the RERA registration of the developer and other factors before investing.

About the author: Mukesh Goel, is Partner Auric Group.

Note: views expressed in this article solely belong to the author and do not represent the views of SquareFeatIndia.com

Also Read: CIDCO constructs 96 flats in 96 days

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