TMI Blog1970 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... rence are few and may be briefly stated as follows. The assessee is a refugee from Pakistan. He purchased a house property at an auction held by the rehabilitation department. The price was Rs. 6,825 and it was paid by the assessee by way of adjustment of his claim for compensation in respect of properties left in Pakistan. This house property was used by the assessee, mainly, for the purpose of his own residence right up to 26th June, 1962, when he sold it for the price of Rs. 40,000. The sale of the house property resulted in a capital gain of Rs. 33,175. The assessee by utilising the sale proceeds purchased a piece of land on 30th July, 1962, and started constructing a building on it in August, 1962. The construction of the ground floor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the assessee since the assessee did not construct the new building within a period of two years from the date of sale of the old house property and, moreover, the new building was not constructed by the assessee for the purpose of his own residence as required by section 54. The assessee carried the matter in appeal to the Appellate Assistant Commissioner but the Appellate Assistant Commissioner took the same view and rejected the appeal. The assessee thereupon preferred a further appeal to the Tribunal and before the Tribunal the assessee was successful in his claim for exemption. The Tribunal held that, on a proper construction of section 54, it was not necessary that the new building in its entirety must be constructed within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms "54. Profit on sale of property used for residence. - Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of one year before or after such date, purchased, or within a period of two years after such date constructed, a house property for the purposes of his own residence. It is only if these two conditions are satisfied that the assessee can lay a claim to exemption, in respect of capital gain arising from the transfer of the house property. Now, it was not in dispute between the parties that the old house property sold by the assessee in respect of which capital gain was sought to be assessed by the revenue was used by the assessee mainly for the purpose of his own residence during the period of two years immediately preceding the date on which it was sold and the first condition was, therefore, satisfied. The only controversy between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts of the present case, that the assessee constructed the ground floor of the new building for the purpose of his own residence ? The answer can only be in the negative. The construction of the ground floor of the new building was completed by March, 1963, and immediately on completion of the construction, the assessee let out an area of 734 sq. ft. to tenants and retained with him an area of only 655 square feet for his own occupation. When more than 50 per cent. of the area of the ground floor of the new building was let out by the assessee to tenants as soon as the construction was completed, it is difficult to see how it can be said that the ground floor of the new building was constructed by the assessee for the purpose of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance with the requirements of the section. It was suggested on behalf of the assessee that he let out a portion of the ground floor to tenants since he did not require it immediately for the purpose of his own residence but he had minor children and, when they grew up, more space would be required and it was in order to provide for this anticipated requirement in future that he had constructed the whole of the ground floor, and, therefore, the entire ground floor must be held to have been constructed for the purpose of his own residence. This suggestion cannot stand scrutiny for a moment. When the section says that the house property must be constructed by the assessee for the purpose of his own residence, it refers to the immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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