TMI Blog1988 (12) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... Madurai property and the cost of Purchase of the Coimbatore property was almost equivalent, the ITO on 10-11-1980 passed an order u/s 143(3) wherein he observed as under : " Capital gains : As the entire sale value of the residential house in Madurai is invested in purchasing a dwelling house at Coimbatore, capital gains arising from the sale is exempt u/s 54 of the IT Act. " Thereafter a notice u/s 263 was issued to the assessee, and the CIT passed an order on 4-11-1982 wherein he has observed that it appeared-- " (a) that only the house property in 29, Sandaipettai Street had been used as residence and the assessee had not returned any income in respect of door No. 30, and (b) the house purchased at Coimbatore, with the sale proceeds of the Madurai house property, had been let out. " Thereafter the CIT observed in paragraphs 3 and 4 of his order as under : " 3. Though the learned Chartered Accountants submitted that, given an opportunity, they would be able to substantiate the fact that all the conditions enacted for availment of the exemption u/s 54 were satisfied, there is no serious objection to the impugned assessment for A.Y. 1980-81 being set aside to enable th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the fact that the total amount of Rs. 3,006 at Rs. 471 p.m. would work out for 6 months and 11 days only, that is, from 19-9-1979 to 31-3-1980. Thus it is seen that my self-occupation was much earlier than the receipt of rental for a portion of the house, namely, by 12 days. Page 2(b) of the statement of income for Accounting Year 1979-80 (to be read as under) Self-occupied Let out (b) 28, Raja Annamalai Chettiar Road 7-9-1979 to 31-3-1980 Rs. 3,200 Rental received from 19-9-1979 to 31-3-1980 Rs, 3,006 Coimbatore. Sd/ 14-4-1984 " The IAC finally gave his directions by an order u/s 144B dt. 27-3-1985. The amount of capital gains, which was to be assessed in terms of this order was as under : Rs. " Sale price : 2,16,000 Less : Cost + Stamp duty Improvements Rs. 36,000 + 18,512 54,512 ------------------- Balance : 1,61,488 ------------------- This will be substituted for Rs. 1,80,000 adopted in draft order and 80T relief allowed accordingly. " The ITO passed his consequential order thereafter. In this order, the ITO accepted that only one property was sold at Madurai, i.e., No. 29/30, Sandaipettai St., Madurai. 4. The ITO referred to the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h we shall mention later. 6. The learned counsel, on the other hand, submitted that the provisions of section 54(1) were completely satisfied. He also relied on several judicial pronouncements which we shall mention later. 7. At the material time the relevant portion of the provisions of Sec. 54(1) read as under : '54. Profit on sale of property used for residence : (1) 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 (hereinafter in this section referred to as the original asset), 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r residential purposes by the assessee but only as residence for assessee's son and assessee just happened to live with the son is not in order. The Income-tax Officer will therefore, delete the following portions in his draft order while issuing the final order. " The section only requires that the house property should have been purchased for the assessee's own residence. On 7-9-1979 the house property in question was purchased for the purposes of the assessee's own residence. Factually the assessee also resided there with his wife. If, after the requirements of this section have been completely satisfied, the assessee chooses to let out his house, he cannot be divested of the exemption to which he has already become entitled. After satisfying the requirements, the gap before the son was allowed to stay in a small portion of the house on rent may have been only about ten days. But the gap is there and the exemption having been secured, the assessee cannot be deprived of the same, because the section does not state that the assessee should never let out the house. As a matter of fact, the assessee continued to reside in the house and a small portion thereof only was given to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). 9. In the view that we have taken, we do not consider it necessary to discuss the decisions relied on by the learned departmental representative in the following cases : (a) M. Viswanathan v. CIT [1979] 117 ITR 244 (Mad.) ; (b) Smt. Vijayalakshmi v. CIT [1975] 100 ITR 648 (Kar.) ; (c) CED v. K. Hilal [1981] 130 ITR 781 (Mad.). In none of these cases the facts are similar nor do we consider it necessary to discuss the cases relied on by the learned counsel for the assessee in CIT v. Natu Hansraj [1976] 105 ITR 43 (Guj.) and CIT v. Kodandas Chanchlomal [1985] 23 Taxman 579 (Guj.), because those cases deal with pro rata exemption, which also does not arise for consideration in the present case, though it was sought to be urged by the learned departmental representative that if the pro rata method was followed based on the Annual Letting Value, which, according to the assessee, was almost equal, only 50 per cent should be exempt as against the claim of the learned counsel for the assessee based on the square foot occupancy of 800 sq. ft. in upstairs with kitchen against 2,400 sq. ft. of the whole house, i.e., only 1/3rd of the capital gains could be taxed. 10. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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