TMI Blog2003 (4) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the capital gains arising from the sale of land and building should be determined separately?" The brief facts relevant for the purpose of this case are as follows: The assessees (mother and daughter) had jointly purchased 10 cents of land on July 15, 1981. A residential house was constructed on the said land and the construction was completed in February, 1982. The land together with the building was sold on August 1, 1984. In the assessment for the year 1985-86 they claimed that the capital gains arising from the sale of land and building should be determined separately and as the land was sold more than 36 months after its purchase, the gain arising from the sale of land should be treated as long-term capital gain and that the gain from the building alone should be treated as short-term capital gain for the purpose of assessment. This was not accepted by the Assessing Officer, as according to him, though the land was purchased in July, 1981, since a building was constructed thereon in February, 1982, the nature of the asset was changed into one of house property, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly contemplates the separate valuation of the land and building as separate capital assets. Counsel on that basis submits that both the appellate authorities were justified in directing the assessing authority to separately assess the capital gains on land and building. Counsel also relied on the decisions of the Rajasthan High Court in CIT v. Vimal Chand Golecha [1993] 201 ITR 442, the Madras High Court in CIT v. Dr. D.L. Ramachandra Rao [1999] 236 ITR 51 and in CIT v. T.C. Itty Ipe [2001] 249 ITR 591 (Mad) in support of his case. The facts are not in dispute. The assessees had jointly purchased ten cents of land on July 15, 1981. The building was constructed thereon and it was completed in February 1982, and the land together with the building was sold on August 1, 1984. Section 2(14) of the Act defines "capital asset" to mean property of any kind held by an assessee, whether or not connected with his business or profession. The remaining portion is not relevant and hence not dealt with. Section 2(42A) defines "short-term capital asset" to mean a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer. Going by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of acquisition of the asset and the cost of any improvement thereto. Section 53 of the Act provides for exemption of capital gains from a residential house. It provides that capital gain arises from the transfer of capital asset (other than a short-term capital asset) being buildings or land appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property", the capital gain arising from such transfer shall be dealt with in accordance with the following manner: (a) in a case where the full value of the consideration received or accruing as a result of the transfer of such capital asset does not exceed two hundred thousand rupees the whole of the capital gain shall not be charged under section 45 and (b) in a case where the full value of such consideration exceeds two hundred thousand rupees, so much of the capital gain as bears to the whole of the capital gain the same proportion as the amount of two hundred thousand rupees bears to such consideration shall not be charged under section 45. Under the proviso this section shall not apply to a case where the assessee owns on the date of such transfer any other resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset), and the assessee has, within a period of six months after the date of such transfer, invested or deposited the whole or any part of the net consideration in any specified asset (such specified asset being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the further provisions contained in the said section. From the aforesaid two provisions it would appear that if the capital asset which is transferred is a long-term capital asset an assessee will be entitled to the special deductions provided under section 80T and also exemption from assessment to capital gains tax under section 54E in case the requirements of the said section are satisfied. As already noted, ten cents of land and building were sold by the assessees and the capital gains arising from the sale of the said capital assets was sought to be assessed under the Act. If the land on which the building is situated is treated separately the same will have to be treated as a long-term capital asset since the same was sold after 36 months after its acquisition and the assessee will be entitled to deduction provided under section 80T and also the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two capital assets has been charged at one consolidated price, then the assessee is entitled to bifurcate the same. It is also observed that a situation may arise where a gain from one of the capital assets is a short-term capital gain while from the other it is a long-term capital gain as in the present case and, in such a situation, the benefit to the assessee cannot be denied in respect of the gain arising from the sale of an asset which could be considered as a long-term capital gain. This was followed by the Madras High Court in CIT v. Dr. D.L. Ramachandra Rao [1999] 236 ITR 51. The High Court observed that the land can be regarded as a capital asset as per section 2(14) of the Act and in accordance with the scheme of the Act, land would be considered as a separate capital asset, even if a building is constructed thereon. It was also held that where the land has been held for more than the prescribed period, the gains arising from the sale of the land could be considered as long-term capital gains, though the building thereon was a new construction held for a period of less than 36 months. The Madras High Court in CIT v. T.C. Itty Ipe [2001] 249 ITR 591 followed the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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