TMI Blog1981 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... m for deduction of Rs. 1,23,000 under s. 54(1) being the cost of the newly purchased house on the ground that the latter house was purchased in the subsequent assessment year. The assessment order was passed on the 30th August, 1975. On appeal, the AAC concurred with the view taken by the ITO. The assessee went up in further appeal before the Appellate Tribunal and the Tribunal directed the ITO to deduct the sum of Rs. 1,23,001 from the capital gains so determined. Thereafter, the assessee preferred a petition under s. 155(8) to the ITO on 26th February, 1977, to amend the order of assessment for exclusion of the capital gains since, according to the assessee, the cost of construction of Rs. 1,08,300 was also eligible for deduction under s. 54(1) of the I.T. Act, 1961. It may, however, be mentioned that the further construction of the additional floor of the house property was made before 27th March, 1976. The ITO rejected the claim of the assessee as he was of the opinion that under the law the assessee could, get a deduction for the cost of the purchase of one house or the cost of construction of one house only. There was an appeal before the Commissioner of Appeals who affirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefits under s. 54, that is, the purchase of a house within one year or making a further construction in the same house, within a period of two years from the date of sale of the old house. The Tribunal, therefore, came to a finding regarding the allowability of the assessee's claim that for the exclusion of Rs. 1,08,300, being the cost of the additional floor of the newly purchased house, was a debatable question of law and, therefore, the ITO was not within his power to invoke the provisions of s. 155(8) in which s. 154 has also been made applicable. The Tribunal was of the opinion that under s. 154, an order cannot rectified unless there was a mistake which was free from doubt. Accordingly, the Tribunal held that the I.T. authorities were justified in refusing, to allow the, assessee's claim for the exclusion of Rs. 1,08,300 from the capital gains so determined, though on a different ground. Upon these, the following three questions have been referred to this court under s. 256(1) of the I.T. Act, 1961: "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer did not have the power to invoke the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, (i) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be the cost shall be nil ; or (ii) if the amount of the capital gain is equal to or less than the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs prior to the date of the transfer. This is a mandatory provision in order to attract the provisions of s. 54. If a house was so used, then on, a transfer of that house, (1) one year prior to the transfer or one year after the transfer, (2) either purchased a house or within a period of two years after the date constructed a house property for the purpose of his own residence, then in respect of the value of the new asset, that is to say, the house property purchased or constructed he would be entitled to claim relief as contemplated in cls. (i) and (ii) of the section. In the facts and circumstances of the case, cl. (ii) would be attracted if the assessee's contention is accepted. Now, if an assessee is entitled to relief on fulfilment of either of the two conditions, that is to say, either purchasing a house property within one year or constructing the house within two years, in our opinion, it would be improper to read that on fulfilment of both the conditions, he would be disentitled to that relief. The mistake seems to be that the authorities below found as if two kinds of relief are contemplated in s. 54. It is the fulfilment of two alternative conditions that is contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract sub-s. (8) of s. 155, s. 154 would be applicable in its full force. That is not the case. The moment the conditions of s. 54 are fulfilled a mistake apparent from the record would be deemed by the fiction created by sub-s. (8) of s. 155, that is to say, where in the assessment for any year a capital gain arising from the transfer of any such capital asset as is referred to in s. 54 is charged to tax and within period of one year after the date of the transfer the assessee purchases, or within two years from that date constructs, a house property for the purpose of his own residence, the ITO shall amend the order of assessment so as to exclude the amount of the capital gain not chargeable to tax under the provisions of s. 54 and in such a situation the provisions of s. 154 shall, so far as may be, apply thereto, the period of 4 years specified in sub-s. (7) of that section being reckoned from the date of the assessment. We are not concerned with that from the point of view of the order made in this year. When sub-(8) of s. 155 states that the provisions of s. 154 shall, so far as may be, apply, it means that the power of rectification enjoined by s. 154 would be made applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject, on which they are used, one must try to harmonize the object, to be attained. In this connection, reference may be made to the decision in the case of Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate, AIR 1958 SC 353. The expressions used in a statute should ordinarily be understood in the sense in which they best harmonise with the object of the statute and which effectuate the object of the Legislature. (See in this connection also the observations of the Supreme Court in the case of New India Sugar Mills Co. Ltd. v. Commr. of Sales Tax [1963] 14 STC 316). It is, therefore, necessary to read s. 54 in the context of the subject-matter and its setting in the scheme of capital gains and the object of exemption and to ascertain the true import of the relevant part thereof. (See the observations of the Division Bench of the Gujarat High Court in the case of CIT v. Natu Hansraj [1976] 105 ITR 43 at p. 49). The main purpose of the statute is to give relief for the acquisition of a new residential house. In that context, it does not really matter whether the new residential house is partly constructed or partly purchased. In the premises, question No. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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