TMI Blog1990 (5) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... on of capital gins under s. 54 of the Act. The said claim was not accepted by the ITO on the grounds that the assessee did not won the property for a period of two years and secondly she was not mainly occupying the house for residential purposes as the ground floor of the house was admittedly let out. In appeal the learned AAC accepted the contention of the assessee and directed the ITO to allow exemption under s. 54 of the act. The Revenue being aggrieved has come up in appeal before the Tribunal. 3. The learned Departmental representative, Shri A.k. Khaladkar, moved an application to raise an additional ground that the learned AAC ought to have upheld the order of the ITO on the ground that the correct status of the assessee was that of HUF and not of the individual and thus the claim made by the assessee in individual capacity under s. 54 of the Act was not justified. The learned counsel for the respondent/ass has very vehemently opposed the additional ground on the plea that question of the status of assessee as HUF or individual was never in dispute either before the ITO or before the learned AAC and thus a fresh plea cannot be raised before the Tribunal. He has further poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the identity of the members of a firm and of an AOP is established there cannot be a valid assessment altering the status declared in the return. The mandatory requirement of issuing notices under s. 153(2) of the IT Act, 1961, before making assessment under s. 143(3) of the Act cannot be lost sight of. He has further relied on the decision of the Hon ble Rajasthan High Court in the case of CWT vs. Ridhkaran Ors. (1972) 84 ITR 705 (Raj) in which too it was held that where the assessee filed returns in the status of Karta of undivided family the WTO is not competent to assess them in the status of individual without serving them with notices to filed fresh returns as individuals. Following the ratio of these decisions relied upon by the counsel for the respondent, we are of the opinion that at this stage raising of an additional to uphold the order of the ITO holding that the assessee was HUF and not an individual cannot be allowed to be raised. 6. The learned counsel for the respondent has also raised an alternative argument without prejudice that even if the plea is accepted, still that plea is not available in the present case as the assessee had never been holding the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that she was living with her husband during his lifetime and that period should be treated as a period of her occupation, does not help her as then she was living only as a member of the family and the real occupation could be said to be of her husband and not that of hers. The learned deep has further pointed out that admittedly ground floor is rented and the first floor can at the most only be said to be occupied by the assessee. It is not much in dispute that the construction of the first floor was a little less than the ground floor as the galleries were covered on the ground floor while they were open on the first floor. Thus, he has stressed that the assessee was not mainly occupying the house, but part of the house while the major portion has been let out. Thus, on that ground too she is not entitled to the benefit of s. 54 to claim exemption from capital gains tax. For these arguments, the learned departmental representative has relied on the decisions of Karnataka High Court in the case of Smt. Vijaya lakshmi vs. CIT 1975 CTR (Kar) 84 : (1975) 100 ITR 64 8 (Kar) in which the lady who was the owner of the house had leased it out to her husband who was an employee in a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. He has pointed out that in fact on the ground floor it is only the shop which has been let out while the entire portion and the construction is in fact used by the assessee for residential purposes and the word mainly connotes that if the major portion is used by the assessee for own residential purposes, it attracts the provisions of s. 54 of the Act and the learned AAC has rightly granted the said benefit and the said order should be upheld. He ahs also relied on the decision of ITO vs. Sunitbhai Subodhbhai (1988) 68 CTR (Trib) (Ahd) 19 in which it has been hell that it would be sufficient compliance with the requirements of section if there is a continuous use of the property mainly for residential purposes by the assessee for a period of two years it being immaterial in which capacity such user is involved. He has further relied on the decision of the Bombay Bench of the Tribunal in the case of ITO vs. Anwar K. Porbandarwalla (1984) 8 ITD 658 (Bom) in which too it was held that from a perusal of s. 54(1) in order to get the benefit of this section it is not a condition precedent that assessee must necessarily reside in the house as an owner for two years immediately pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng company were held by the assessee; (ii) in respect of capital assets other than those mentioned in cl. (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf;" Explanation to s. 49(1) provides that the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in cl. (i) or cl. (ii) or cl. (iv) of this sub-section. 11. The reading of s. 2(42A) and the Explanation of s. 49(1) show that the ownership of the previous owner where it has been inherited, will be deemed to be a continuous ownership for the purpose of determining the cost of acquisition. If this principle is applied to this particular case, then the ownership of the previous owner from whom the property had been inherited by the present assessee will also be accounted towards the period of two yers to arrive at a particular conclusion as to whether it is a capital gains or a short-term gains as admittedly the property is being owned since 1968. We are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion had been let out and this is why it was held that it could not be said that the building was mainly occupied by the assessee. 12. The next points is as to whether the occupation of the assessee alongwith her husband will also be treated to be an occupation by the assessee to calculate the period of two years to entitled her benefit of exemption under s. 54 of the Act. In the case of Sunitbhai Subodhbhai it was held that on partition the assessee got a house property in which he used to reside alongwith the other members of the HUF. The house property so got was sold by him within a period of two years, it was held that the occupation by the assessee alongwith other members as the HUF, i.e., brother and mother for a long period which was more than two years was sufficient compliance with the requirements of section as a continuous use of the property mainly for residential purposes by the assessee. The same view was also followed byy the Bombay Bench of the Tribunal in the case of Anwar K. Porbandarwalla in which the same position was upheld in which even the capacity of the tenant was that of only a tenant but it was held that as it was occupied by the assessee it was suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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