TMI Blog1997 (2) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in law in directing to bifurcate the terminal gains into long-term capital gains pertaining to land and short-term capital gains pertaining to superstructure ?" The assessee is an individual. A plot of land was allotted to him in March, 1978, and the assessee started construction of the building during March, 1985, and completed the construction in 1987. The assessee sold the property on September 23, 1987, for a total consideration of Rs. 3,50,000. During the assessment year 1988-89, the assessee returned the capital gains arising on the sale of the land and building owned by him and claimed exemption under section 80T of the Act with reference to the capital gains arising on sale of the land. He claimed that the building was newly co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the decision of the Rajasthan High Court in ITO v. K. C. Itty [1993] 201 ITR 442, held that the assessee was entitled to exemption under section 80T of the Act with reference to long-term capital gain attributable to the sale of the land. In this view of the matter, it set aside the order of the Commissioner of Income-tax (Appeals) and restored the matter to the Assessing Officer with a direction to bifurcate and rework out the taxable gains after giving an opportunity to the assessee. The Department filed a reference application under section 256(1) of the Act, to direct the Income-tax Appellate Tribunal to state a case and refer the question set out in paragraph 1 (page 52) above. The Appellate Tribunal following the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the value of the land and "break-up value" of the buildings separately. He, therefore, submitted that it is not possible to bifurcate capital gain into two parts, one relating to the land and another to the building. Mr. S. Gurunathakrishnan, learned counsel appearing for the respondent, submitted that the Indian law recognises separate ownership of the land and building and this position has been recognised by this court in the case of Park View Enterprises v. State Government of Tamil Nadu [1991] 189 ITR 192, and he submitted that it is possible to separate capital gains into one relating to the land and one relating to the building separately. We have carefully considered the rival contentions of both parties. The expression "capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or accruing as a result of the transfer of the capital asset the following amounts, namely:--- (i) expenditure incurred wholly and exclusively in connection with such transfer ; (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto." Section 80T of the Act grants deduction in respect of long-term capital gains in the case of an assessee other than a company where the gross total income of an assessee not being a company includes any income chargeable under the head "Capital gains" relating to capital assets other than short-term capital assets. In the case of buildings or land, separate deduction is provided under section 80T(b) of the Act. It is relevant to note that when section 80T grants dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le capital asset, and it continues to remain an identifiable capital asset even after construction of the building and at the time of the sale of the house. Since the land was held by the assessee for a period exceeding 36 months, the land cannot be regarded as a short-term capital asset only by virtue of the construction of building thereon. Hence, we are unable to accept the contentions of learned counsel for the Revenue that it is not possible to bifurcate the capital asset into two, we are of the opinion that the Tribunal has come to a correct conclusion that it is possible to work out capital gain with reference to sale of building and land separately. The decision of the Supreme Court in State of Kerala v. P. P. Hassan Koya, AIR 1968 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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